Hollywood, CA

Wednesday, January 19, 2011

Harvey Warren, author of recently released Drop Debt: Surviving Credit Card Hell without Bankruptcy, has written an article calling for an overhaul of the debt collection process. In the wake of major financial regulations passed by the Democratic lame duck Congress and Obama Administration, Warren feels that important elements related to were not addressed properly. A long time consumer advocate, Warren is currently promoting his book nationwide while also giving seminars and lectures for non-profits, at libraries and others organizations. He is currently working closely with ACA, The Association of Credit and Collection Professionals, to get the word out regarding his recommendations for people dealing with debt problems.

Here is Harvey Warren's article, Time for a Radical Overhaul of the Debt Collection Process.

In recent months there have been numerous articles and media reports about aggressive regulation by both state and federal authorities to protect vulnerable consumers who are drowning in debt. The reports are often punctuated by stories about victims of "scams" and "bogus" debt relief firms. The consumers' only mistake in these stories was to nobly attempt to become debt free without resorting to bankruptcy. One would think that banking institutions would be actively encouraging that honest impulse in most consumers to "pay what they can" to avoid bankruptcy. Banks spent millions to pass the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 to slow down dishonest bankruptcy filings. Ironically, the new "consumer safe" landscape for debt relief has the perversely unintended consequence of leaving consumers with little or no help - except for bankruptcy.

As the regulatory road for debt settlement gets narrower and narrower, the gap between what consumers can pay and what the banks want to collect gets wider and wider. Collection departments are becoming less and less forgiving, emboldened by the new "consumer protection" regulations that have crushed their nemesis: debt settlement. Rather than direct consumers to the "best" choice based on their economics, some banks are referring consumers to full balance credit counselors that are best for the bank's bottom line with disastrous results for their customers and for their shareholders. The dysfunction in the collection and consumer assistance system is systemic, toxic and on the radar of a growing number of consumer protection officials.

The entire debt relief continuum from Credit Counseling Agencies to Debt Settlement Companies to Bankruptcy Attorneys presents a bewildering range of options that nearly every debt-crushed consumer is completely unprepared to navigate. When you compound a lack of financial literacy with panic borne of desperation, the beleaguered consumer is road kill in a volatile environment of self-serving debt relief marketing.

The New Jersey newspaper The Press of Atlantic City headlined on Christmas Day 2010,

"New Jersey's courts inundated with credit-card debt cases".

• The story talks about how aggressively Chase Bank is suing those customers who seek help from controversial debt settlement companies.

In light of recent news report and actions by the Federal Trade Commission to change the rules on how debt settlement providers may operate, that would seem fairly reasonable. However, at the other end of the spectrum is the class action lawsuit against Money Management, Inc (MMI) one of the nation's leading legitimate non-profit credit counseling agencies.

• MMI has agreed to return fees to thousands of consumers after attorneys successfully alleged that MMI did not properly represent them in their dealings with Chase Bank and in fact worked in the bank's – not the consumers' - interest.

In yet a third event involving Chase Bank, a half dozen non-profit credit counseling agencies are piloting a less than full balance underwriting approach in their effort to modernize credit counseling services to compete with debt settlement providers. Less than full balance programming through non-profit credit counseling is emerging as a critically needed alternative because of the depth of trouble in the economy. Designed to help delinquent customers who cannot afford the traditional full balance debt management plan, the less than full balance plans emerging in the credit counseling space are aimed straight at running competition to debt settlement providers. We would presume that card issuers, who have decades long positive relationships with the non-profit credit counseling industry, would be dancing in the aisles:

• Chase issued a warning to the entire credit counseling industry that if they assisted consumers with anything other than full balance repayment programs that the bank would remove their Agency from their approved provider list and cease financial support.

Chase went so far as to actually issue warning letters to Utah consumers to contact their Attorney General about these activities, asserting that the non-profit credit counseling agencies offering less than full balance services were really just debt settlement companies that should be reported to the state Attorney General. In the case of AAA Fair Credit Foundation in Salt Lake City, Chase's statement was completely at odds with the fact that the Utah Attorney General had reviewed the AAA Fair Credit Foundation less than full balance plan and had offered public support for the effort in a February 17, 2010 press conference.

With debt settlement collapsing and credit counseling falling under the economic influence of banking by inducement or threat, the consumer may find that their only option when they fall behind is to file for bankruptcy. In my opinion, this is a classic lose-lose-lose scenario driven by the misbegotten idea that a large and aggressive collection operation will "collect" more from a consumer in a dogfight with other creditors then they will in a well thought out and balanced plan that is fair to all creditors. Legitimate non-profit credit counseling has faced its own troubles with regulators in the last few years, but remains the troubled consumer's best chance at getting genuine assistance if it can offer a less than full balance program.

Arguably the bank has the right to direct its collection operations in any manner it sees fit; after all, it is the bank's money. However, when the collection process is driven by the medieval notion that the guy who hits hardest and fastest will get the most money, the customer is going to be the victim. This is a sad state of affairs, especially in light of the fact that legitimate non-profit credit counseling agencies are trying to modernize and use sophisticated underwriting tools that focus on the customer's economic facts not the creditor's collection fantasy.

There is some good news. Two of the major credit-counseling trade associations are engaged in working with the creditors to structure a viable win-win-win less than full balance scenario that helps the banks, counseling agencies and the consumers. So far, all that banks have been able to do on the consumer help side is to state what they are against: debt settlement. It is time banking listened to the good counsel of their trusted advisors in legitimate non-profit credit counseling. Obstructing the development of an alternative to debt settlement through non-profit credit counseling traps the bank's customer in draconian collection methods, hogties credit counseling from modernizing and robs the bank's shareholders both of better collections and the good will that comes from turning from hunter to helper in their customer's time of trouble.

Expert suggestion: If you are having trouble in the collection process go to www.askdoctordebt.com. This website is provided as a resource by the collection industry trade association ACA International. You can quickly find straightforward answers to your credit and debt questions from the folks doing the collecting.

About Harvey Warren:

Harvey Z. Warren is actively fostering a powerful national coalition of consumer advocates, lawyers, banking and collection leadership to establish guidelines for non-adversarial debt relief through non-profit credit counseling. A graduate of Ithaca College with a Master of Science degree from Syracuse University, Warren has worked with tens of thousands of debt-crushed consumers and appears frequently on radio and television commenting on the consumer debt crisis in America.

www.dropdebtbook.com

For Media Interviews Contact

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Irwin Zucker or Brad Butler

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Brad Butler

Account Executive

Promotion in Motion

Hollywood, CA

323-461-3921

First Url: Ask Doctor Debt

Second Url: Harvey Warren's Official Website