Monday, May 15, 2006
Credit Counselors Can't Pay Their Bills ...
No, it's not because the employees at the Consumer Credit Counseling Corporation are irresponsible spendthrifts. It's because the 2005 Bankruptcy Reform Act, which requires mandatory credit counseling before consumers can declare bankruptcy, is forcing thousands of people into credit counseling who are so deeply in financial crisis they can't even afford counseling!
Nice reporting from the excellent personal finance columnist, Liz Pulliam Weston:
Each pre-bankruptcy counseling session costs the agencies an average $50.96, Ensinger said, but the average amount collected is just $37.71. Losing $13.25 on each session is bad enough, but the agencies complain that a larger-than-expected number of applicants is forcing them to redirect resources to bankrupts that might otherwise be used to help consumers who still have a fighting chance to pay their debts.
The banks, legions of creditors hawking home equity loans in a rising rate environment, and the scads of shysters running payday loan and title loan shops created this mess.
One solution: Charge a $4 fee up front, cash, check, or money-order only, on all applications for consumer or business credit. These companies can collect up front or the company can pay the bill. That money can go to an industry-sponsored or quasi-government agency to cover the costs of credit counseling.
I would require the money up front before any credit accunt is activated other than zero-interest rollovers - via direct mail or the Internet (I'm talking to you, credit card industry!)
After all, if a consumer is in such trouble that he or she has to blink at $4, then the last thing he or she needs is another credit account.
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Nice reporting from the excellent personal finance columnist, Liz Pulliam Weston:
Each pre-bankruptcy counseling session costs the agencies an average $50.96, Ensinger said, but the average amount collected is just $37.71. Losing $13.25 on each session is bad enough, but the agencies complain that a larger-than-expected number of applicants is forcing them to redirect resources to bankrupts that might otherwise be used to help consumers who still have a fighting chance to pay their debts.
The banks, legions of creditors hawking home equity loans in a rising rate environment, and the scads of shysters running payday loan and title loan shops created this mess.
One solution: Charge a $4 fee up front, cash, check, or money-order only, on all applications for consumer or business credit. These companies can collect up front or the company can pay the bill. That money can go to an industry-sponsored or quasi-government agency to cover the costs of credit counseling.
I would require the money up front before any credit accunt is activated other than zero-interest rollovers - via direct mail or the Internet (I'm talking to you, credit card industry!)
After all, if a consumer is in such trouble that he or she has to blink at $4, then the last thing he or she needs is another credit account.
