The National Foundation for Credit Counseling is an organization and lobby group for the credit counseling and debt consolidation industry. However, they not only represent credit counseling and debt consolidation firms, they also represent the creditors themselves. They were the subject of an anti-trust lawsuit.
“In the late 1980s and early 1990s, the number of credit and debt counseling agencies in America increased significantly. An antitrust lawsuit was filed against the NFCC, arguing that the presence of creditors on the NFCC’s Board of Directors constituted monopolistic practices. As a result of this litigation, creditors agreed to fund non-NFCC member agencies as well.” – Wikipedia
“A credit counseling agency typically receives most of its compensation from the creditors to whom the debt payments are distributed. This funding relationship has led many to believe that credit counseling agencies are merely a collections wing of the creditors.” – Wikipedia
- Their main role is to steer consumers away from bankruptcy and foreclosure. Generally, credit counseling and debt consolidation has one of the higher customer complaint levels of all businesses.
- Even when following cutthroat and one-sided practices credit counselors try to obtain tax exempt status from the IRS.
- The NFCC has either no standards or very low standards for membership
NFCC offers a video on avoiding foreclosure, which is actually one of the best things a person underwater on their house can do. However, as the NFCC and its member counselors represent creditors’ interests, they are of course opposed to it.
Get your free creditor propaganda in the mail by contacting the NFCC.
Credit Counseling and New Bankruptcy Laws
In the new bankruptcy law of 2005, it now requires people filing for bankruptcy to hire a credit counselor, and to hire them 6 months prior to declaring bankruptcy. This greatly delays the bankruptcy process, as well as increasing the cost of declaring bankruptcy. We suspect the only reason for
this is because of lobbing on the part of the credit counseling
industry (bankruptcy is now more complicated and places legal liability on attorney’s, decreasing the attorneys that practice bankruptcy and increasing their costs.). They are represented by the National Foundation of Credit
Counseling. We will write more about the NFCC on a future post.
Conclusion
Credit counseling services and NFCC have far too cozy a relationship with creditors to be honest brokers. The way credit counselors represent themselves to customers is a misrepresentation of their actual behavior. Industry insiders consider them simply collection arms of the credit industry. Finally, the employees of credit counseling services are generally considered poorly trained.
In general, its unclear why credit counseling is necessary. By reading material individuals can take care of paying their bills themselves. What is needed is more freely available material, not another layer of fee oriented individuals to walk people through paying their bills. Secondly, all advice from a credit counselor is of dubious quality as they are unlikely to advice their customers of all the options available to the customer. However, the new bankruptcy law has made credit counseling a legal requirement. Creditors, credit counselors and the NFCC are drawing a net around debtors which requires they take “responsibility” for their actions, while the creditors themselves engage in all manner of malfeasance. This is an increadibly unfair system. Furthermore, the NFCC supported 2005 bankruptcy law actually influenced the housing crisis and in the following way.
“Before Congress passed the Bankruptcy Abuse Prevention and Consumer
Protection Act of 2005, households could erase their unsecured debts by
filing for Chapter 7 liquidation. That freed up income that distressed
homeowners could use to make mortgage payments.
The new law,however, forced better-off households seeking bankruptcy protection to file under Chapter 13. That chapter requires homeowners to continue paying their unsecured lenders.
The paper’s lead author, Donald P. Morgan, a research officer at the New York Fed, said last week in a phone interview that he was “99 percent confident” that the bankruptcy reform law was a major reason for the foreclosure crisis and the falling housing prices that have affected virtually every homeowner in the country.
One of the great lessons and ironies” of the new law, Treasury Department economist David P. Bernstein wrote in a recent paper, was that, by increasing the dollar value of assets susceptible to default, it has weakened many of the financial institutions that sought the new law in the first place.” – Kansas City Star
References
http://bankruptcy.findlaw.com/new-bankruptcy-law/new-bankruptcy-law-basics/big-changes.html
http://www.nfcc.org/
http://en.wikipedia.org/wiki/Credit_counseling
http://www.kansascity.com/105/story/976039.html
I erased a comment from a debt management firm which attempted to mislead my readers. The comment stated that he did not think they were fronts for anything, provided no evidence and then recommended firms with a BBB rating. I removed his comment, but I am leaving my response. I get a number of comments from the institutions that I criticize and they are always the same. So I am no longer approving them because they never provide any evidence, just the individuals’s testimonial.
Well I guess my question would be, after the evidence I have provided, why don’t you think they are a front? So we know that they are funded by credit card companies, and we know that they always side with credit card companies in that they look out for the interests of credit card companies over individuals and almost never recommend a default, and moving away from credit. Institutions that lie to their customers about their conflicts of interests and present the interests of someone else rather than those they are ostensibly setup to serve are called fronts. So saying that you personally don’t feel that they are fronts does not provide any evidence that they are not fronts. I am presenting evidence that they are fronts, so if you don’t believe they are can you help our readers by presenting any evidence that they are not?
I would not recommend BBB. BBB will not delist fraudulent businesses. Actually, why don’t you provide evidence that these companies are not controlled by the credit companies before you start “recommending.” Who are you by the way? It seems like you work for one of these corrupt fronts yourself because you are completely full of it.
A lot of Econ 101 is false. In fact the vast majority of economics practiced today is simply the institutional self-validation of whatever happens to please monied interests. This is a long story but has to do with how money influences curriculum and think tanks and so on. The only way I was able to come any truth is to completely unlearn what I was taught. And that is the point, the system is designed to get you to quote Econ 101, which is against your interests, but in the interests of people on top. Ask yourself, why was economics taken out of the philosophy department at the beginning of the century? Why did econ become so mathematical even though econometric models have been proven ineffective at prediction? Why don’t economists ever seem capable of predicting recessions? The more to investigate this discipline, the less you will find there. However, I will agree that protection of private property and the rule of law are important preconditions for an economic system to flourish. However, conservatives are not as serious about these uniform enforcement of these preconditions as I am. I don’t listen to what they say, but watch what they do and the policies they support. Doing this proves that they are not particularly dedicated to either concept. In fact can prove that conservative ideas about protecting private property are “flexible” beyond a shadow of a doubt. After the financial fraud that just occurred, how many people and institutions that caused it were prosecuted? Trillions of dollars were taken, private property was pilfered, but because it went in wealthy people’s pockets as Obama said “No laws were broken.” Now if someone knocks over a liquor store and get $300, then a law will be broken. Yes, Obama is in my mind a conservative because he is on the same payroll as his predecessor, and all of his economic appointments are conservatives. A real progressive like Nader could never get elected, and if he did, I am certain he would be assassinated by a “lone gunman.”
Conservative support for the rule of law is extremely tenuous. They generally favor “tough on crime” initiatives. However, when a conservative talks about the rule of law he means laws against people stealing there stuff, low level property crime. There are laws against illegal immigration, which takes property from average workers (their right to a living wage), however because illegal aliens increase business profits, the “rule of law” is not applied for some reason. We can’t possibly take them seriously regarding the rule of law as applied to them.
I hope not to offend, but conservative ideology is just plantation owner thinking and people like Newt Gingrich and Dick Armey would certainly own slaves if this were 1850 and would find a way to justify it. I mean why not, the negro can not manage their affairs, and it could be justified under the strong protection for private property. In this case the property happens to be a human. Nike already owns a massive slave farm, that happens to be in other countries. I find conservatives in general to have extremely weak arguments that very easy to beat. However, they have a massive propaganda apparatus, so the majority of Americans are conservative. However, they are just repeating things they have been basically told be believe.
So while conservatives may say certain things, by looking at their track record, its clear that they don’t actually believe them. It just sounds good to say.