The Importance of Creditor Funded Credit Counseling

I’m happy to announce the 6th release of our Debt Relief Performance and Satisfaction Information Report.  The report is part of Cambridge’s Transparency Project, which is designed to let consumers know more about the outcomes of our services. Our latest report focuses on the benefits of personalized counseling and, specifically, how one-on-one assistance is crucial to restoring consumers to financial health. It also addresses what some consider a controversial topic: creditor donations to non-profit counseling agencies through what are known as “Fair Share” contributions and grants.

Let’s start with some of the highlights. In the first half of 2012, 87% of clients with tighter-than-average budgets were able to make their first three program payments, one basic indication that a debt management program was suitable to their circumstances. Cambridge audits all new client accounts at the fourth month of enrollment to make sure they’re running properly and have received the appropriate interest rate reductions and other benefits granted by their particular creditors. In 2012, more than 95% of new accounts were properly established by the fourth month, and clients who enrolled in our DMP saw their interest rates drop by an average of 14.5 points. As a result, the typical payment was $141.58 less than what the client had been paying on their own.  We know that many of the people who reach out to us are struggling, so in keeping with our charitable mission, Cambridge waived or reduced 27% of initial fees and 36% of monthly fees for clients enrolled during the first six months of 2012.

The core of our program is helping people stabilize their finances.  That often means helping them learn how to track their expenses and create a more accurate and effective budget. During the quarter, 94% of DMP clients who had begun budgeting found that it improved the way they manage their finances, while 89% reported that adopting the expense-tracking methods recommended by their counselor helped them identify expenses they could reduce. Overall client satisfaction with the counseling experience at our agency was 96.6% for the first half of the year, while satisfaction with the Client Services we provide was 95.1%.

A lot of people ask about their chances of succeeding on our program, and that’s our focus, too. We want to identify what we already do that works well for clients, and what we need to do better. Of our long-term clients – those who joined at the beginning of the recession back in 2007, 54.3% have either completed their debt management plan in full, or discontinued our services as they neared completion and felt they could make the last few payments on their own. 44% of those clients whose initial budget showed little or no room for savings also managed to complete their DMP. That’s a great accomplishment, and we’re especially proud of that group.

While the majority of our revenue comes from the small fees paid by our clients, which average just $24 a month, you may not be aware that some creditors also support non-profit counseling agencies for the educational services we provide.  Some critics consider this a conflict of interest, but in truth it reflects the contributor’s willingness to help struggling consumers regain control of their money and become more financially literate.  What are fair share donations used for? Well, at Cambridge, they’ve helped us provide counseling services to more than 300,000 consumers over the last 10 years, including the 73% who weren’t offered a debt management plan and never became a client.  Everyone who contacts our agency is offered one-on-one counseling, the chance to review their budget with a trained professional, and the opportunity to develop an Action Plan with strategies appropriate to their circumstances. As you can imagine, these services are not only comprehensive, but labor-intensive. An initial counseling session can last more than 90 minutes, and we conduct follow-up sessions to reinforce the importance of maintaining the established budget and Action Plan. Bear in mind: these services are provided at no cost to the public.

If it weren’t for fair share funding, we’d be unable to provide adequate counseling to the majority of the 30,000 consumers who reach out to us every year for assistance, and we wouldn’t be able to reduce or waive service fees for so many of our debt management clients.  Our community education programs would also suffer. Over just the last seven years at Cambridge, Fair Share contributions have also helped us educate more than 200,000 people through our public outreach programs, which are delivered at no cost to a variety of high schools, colleges, and non-profit social service agencies.  Unfortunately, these additional expenses have been overlooked by industry critics. The fact is, credit counseling agencies are working with consumers and with creditors, sharing the ultimate goal of helping distressed consumers regain their financial stability.

Credit counseling serves as a unique support system for people with financial concerns, offering effective one-on-one counseling, quality education, and proven results. Creditors donate millions of dollars each year to support these worthwhile efforts and the consumers who rely on them.  While this typically means requiring that the agency follow specific program policies, the same is generally true for most foundations that issue grants to non-profits. And like any other donors, the creditors who support credit counseling also have a responsibility to perform due diligence – to require agencies to be compliant with federal and state regulations, to insist that we maintain fiscal integrity, and, most important, to demonstrate that we’re fulfilling our mission. It would be irresponsible for any foundation to make significant contributions without stipulating that their funds be used in any other way. As Cambridge, we’re respectful of our clients, grateful to our donors, and mindful of the contributions both groups make to our agency.  Without such support, millions of Americans would lose a valuable resource in their struggle to maintain financial independence.

If you’re interested in reading the full text of Cambridge’s performance reports, I encourage you to visit www.cambridgecredit.org. Until next time, I’m Thom Fox for Cambridge Credit Counseling.

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About Cambridge Credit Counseling Corp.

Cambridge Credit Counseling Corp. offers its financial education to consumers throughout the United States. Our experienced staff is dedicated to helping people understand and manage their debts by providing personalized attention and a free, comprehensive review of each consumer’s financial situation. It is our objective that, as consumers become more educated about debt and the impact it can have on their lives, they can apply this knowledge to successfully manage their finances in the future.

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