CREDIT COUNSELING CONFUSES CONSUMERS

Card Wire

January 9, 2004

Despite record-setting bankruptcy rates, most Americans have little or no knowledge of credit-counseling agencies, according to a survey released this week by the Consumer Federation of America and the InCharge Institute of America. Less than 30% of consumers say they know either a great deal or something about the agencies. Fifty-eight percent oppose an agency being closely associated with a for-profit company, while 66% oppose agencies that offer only a fixed repayment plan and little or no education and counseling. The director of the Federal Trade Commission recently testified to a Congressional subcommittee that some agencies indiscriminately enroll consumers in debt-management plans, but don't provide education or counseling (CardLine 11-21). The survey found that 80% of consumers believe creditors should not charge additional interest on the debt of consumers that have entered credit counseling. And 84% of consumers favor putting a limit on the fee an agency can charge for its services. Three-fifths of consumers said a monthly fee of $25 was reasonable while 37% felt $50 was reasonable. Of those consumers that are aware of agencies, 86% believe agencies provide several useful services, including how to manage their money and how to pay off their debts. Of those consumers that have used an agency, 77% found the service useful in paying down their debt, and 65% believe the agencies can help them increase their knowledge of credit and debt management. Bankruptcy filings in fiscal 2003 ending Sept. 30 hit 1.66 million, up 7% from 1.55 million in fiscal 2002 (CardLine 11-14). The InCharge Institute is the parent of the Profina Debt Solutions counseling agency. The survey of 2,030 adults was conducted in November.

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