Sunspace, I’m really glad you got the assistance you needed. I actually was a client of my organization before I worked there! I was so impressed by how significantly they helped me that I wanted to put in my time giving back. Every time someone calls in and my patience is wearing thin, I take myself back in time to the day I tried to open a checking account and was unable to because I had been reported to checking systems for an unpaid overdrawn account. I will never forget how hard I cried when I climbed back into the car, how completely hopeless and lost I felt and how difficult it was to walk through the door of a credit counseling agency.
To start with Brynda, what we can do depends on exactly what the situation is, right down to the precise balance information, loan terms, and creditor policy of the debt in question. Generally we are able to negotiate with credit card companies (via written proposals) requesting reduced monthly payments for the client due to personal hardship. This often includes re-aging the account, reducing interest rates, and waiving late fees and overlimit charges. We are full-service so we work with more than just credit card debts… student loans, car payments, you name it (three exceptions: alimony, child support, insurance.)
A client who is enrolled on a Debt Management Program with us will expect to make some sort of monthly deposit directly to our company. We then distribute these payments to the credit card companies on the client’s behalf. It is essentially as if we keep a checking account for them, with a register and everything, and keep track of where their dollars are going and when. There is usually a monthly fee involved that is $50 or less – may sound like a lot, but when you factor in the drastic reduction of monthly payments, it’s really nothing. My monthly payments were cut in half, so the $50 was not a big deal… I was still paying out less money than before. We do waive the fee in cases of extreme financial hardship. Also, all counseling is free. If someone just wants help putting together a budget or wants advice on purchasing a home, they can see us free of charge. We do free workshops on the weekend in addition to being available, via appointment, to dispense general information about financial literacy. We provide referrals from government aid, legal aid, aid from other nonprofits. We do stuff through HUD. We also offer Bankruptcy counseling and the certifications required to go through the process.
Now, to thank Projammer for the seed–to address the misconceptions. One of the major misconceptions is that once you decide to sign on the bottom line, the calls will immediately stop and you will never have to deal with a credit card company ever again. People generally expect that magical fairies will come out and make everything all better in the blink of an eye. It doesn’t work that way. In fact, it’s probably going to take about 1-3 months before the collection calls stop–we are very up front about that but it’s usually ignored until the calls roll in.
The reason for the lack of instant gratification in this process is because things can get pretty complicated during the proposal acceptance stage. I want to make it clear that we consider ourselves mediators between creditor and clients… creditors are not The Enemy, but actually we have a pretty amicable and predictable relationship with prescribed protocol that is different for each creditor. Almost all of the creditors prefer that our point of first contact with them is with a written proposal sent directly to their Credit Counseling Group. This is usually a completely separate department from the credit card collections staff. We can’t just ring collections up on the phone and say, ‘‘Oh hey, this is AAA Debt Counseling. We’re totally sending over a proposal so you should stop calling Jane Doe.’’ That would be meaningless to them. Collections don’t usually care whether a proposal is on its way or not–a past due account is a past due account, and their commission is their commission. Certain agents will say just about anything to get a payment out of someone, up to and including, ‘‘We don’t accept proposals from Debt Management Companies’’ even if it is a blatant lie.
It usually takes between 30-90 days for a proposal to get accepted, at which point the debt is removed from collections and calls usually stop right away, as long as you make your DMP payments. Proposals are pretty routinely rejected for superfluous reasons like requesting a dollar more for payment, or a name not matching a statement perfectly. We fix the problem and resend, but this is time-consuming. One creditor in particular takes 60 days on their end to verify and approve debt management proposals. Another requires a recent credit report and a written explanation of the client’s financial hardship. Every single creditor is different, and we have to play by their rules.
And sometimes the client does have to interact with the creditor. There are times, even when we have accepted proposals on file, that we can’t get basic information like a payoff balance because someone in the CCG department of Credit Company X keeps misplacing the faxed authorization we’ve sent about 8,999 times, or we don’t have the exact address where the client lived 20 years ago. It happens. If you decide you want to try to negotiate a settlement, you’re going to have to make that call. We have a very specific role and while we’re more than happy to offer advice and support, we can’t take your place completely.
Finally, I think a lot of credit counseling agencies get a bad reputation because there are some out there who really do not care whether you can afford a DMP or not. They will sign up anyone and everyone who walks in their door. Where I work things are very detailed, customized, and direct. We’re not in the business of false hope. You are going to expect to sit down for an hour with proof of income, create an itemized, detailed list of all the monthly expenses you have, go over a recent credit report indicating your debts and the status thereof, and then the counselor will discuss the various options at your disposal, which may or may not include a DMP, depending on whether it looks like it would be a benefit to you. If you have a $1000 monthly deficit, you will not benefit from a DMP. We cannot create money out of thin air.
I do not envy our counselors, because they often have the hardest job in the world–telling people what they do not want to hear. Telling people they are too far behind on their mortgage to save the house, telling people they need to find a second job or consider renting out a room, essentially telling people the truth about where they are. We do this in the most compassionate and hopeful way possible, but we still have to do it.
To name just one example, one of the most unpredictable and difficult arrangements to make on a DMP are contracts with a 3rd party debt collector. If an account is so far past due that it has been sold to an outside source, and that source is demanding payment in full, there is maybe a 20% chance we will get an accepted proposal. In cases like that, we tell clients that we can continue sending payments to the creditor but the creditor will be able to legally pursue the debt at any point if they wish. Sometimes the client opts to settle (pros and cons of this are discussed), sometimes we pay on a debt for years without an accepted proposal and it is eventually paid in full, and other times the creditor will go after the client and they will show up in our office in tears with a court summons.
And this is where I think we really can shine – there’s nothing we can do to go back in time. We can’t take the court summons away, which is what some people are really hoping for. But what we can do is provide education that enables the client to understand that even at this point, they are not powerless. Before I started working for GreenPath I could think of nothing more dreadful than receiving a court summons, and probably a lot of people feel the same way. They have visions of wage garnishment, bank account seizure and all other kinds of horrors. What they don’t realize is that there is a legal process that must occur to get from point A (lawyer threatening to sue) to point B (wage garnishment.) In between a client generally has the option to file an answer to the summons and to appear in court before a judge and to draft documentation showing a history of payments and requesting they pay off the debt in like monthly installments. Since we don’t dispense legal advice, we never promise anything or tell the client what they should and should not do. But most people aren’t even aware this process exists. The advantage to paying on one of these debts through our company is that we keep meticulous records, so if worse comes to worst and that summons does have your name on it, we’ve got your back. I’ve seen more than a few judgments come out of litigation that honor the client’s stated request to continue making monthly payments through us.
My gosh that was long. Sorry. I think this is kind of therapeutic for me. We’ve been really busy lately!