Remarks on the State of the Credit Counseling and Financial Education Sector by
Susan C. Keating President and CEO
National Foundation for Credit Counseling at the
Association of Independent Consumer Credit Counseling Agencies Annual Meeting San Francisco, California
March 31, 2014
One Sector, One Voice: Working Together on Consumer Issues
I appreciate the opportunity to be here to talk to the AICCCA membership. I am so pleased to be able to spend time with you this afternoon. And I look forward to welcoming Dave Jones to our Leaders Conference next fall to speak to the NFCC membership.
I last spoke at this gathering in 2007. As you well know, our country and the credit counseling sector have been through significant changes in the years since then. But one thing hasn’t changed: Our two groups share common ground on helping consumers in financial distress and improving the level of financial literacy in this country. I’m optimistic that we can continue to work together on initiatives that benefit our sector and the clients we serve.
During the next few minutes, I’d like to share with you my perspective on where the credit counseling sector stands and how the NFCC and our members are addressing some of the key challenges we face. I’ll also talk about what I believe is the vital importance of working together as a sector and speaking with one voice on financial issues that affect consumers. I plan to save time to address your questions and get your feedback on what the NFCC is doing.
The U.S. credit counseling and financial education sector is at a tipping point. The needs of the Main Street Americans we serve are changing—and we must change with them. We must refocus our priorities and reengineer our services to ensure that the work we do remains relevant to consumers.
State of the Sector
In recent years, our focus has been on helping clients navigate one of the most difficult financial crises in the nation’s history and its effects on their personal finances. Now, the crisis is easing and some economic indicators are on the upswing. We’re seeing evidence that consumers are learning from their experiences during the economic recession. Many are looking for ways to keep from falling into the same circumstances again.
We’re seeing several signs that the economy is improving. Unemployment is at a five-year low and bankruptcy filings are down to their lowest level since 2007. The national mortgage
delinquency rate has dropped below four percent for the first time since 2008. And the credit card delinquency rate continues to remain much lower than historical norms.
At the same time, we’re still seeing news stories about people who feel left behind in what for them has been a lackluster recovery. Unemployment continues to hurt some more than others, including young adults, African Americans and those who’ve been looking for work for more than six months. Median earnings for middle-class workers are down four percent since the recession ended. A third of working-age baby boomers have no retirement savings and another third have savings equal to or less than a year’s salary. At a trillion dollars, student loan debt is now the second-largest form of consumer debt—and a growing crisis with more than seven million borrowers in default.
NFCC surveys and our members’ experiences give us more insight into what people are thinking and doing in this economic environment.
Our data suggest that close to one in five Americans still use credit cards to fund a lifestyle their income can’t support. A majority misunderstand the purpose of a budget, believing it’s to restrict their spending. A majority identify themselves as having problems with both spending and saving. Many have misperceptions about credit counseling agencies that prevent them from reaching out for the help they need. And when they do seek help, some of the top reasons they cite are poor money management and lack of financial understanding.
Yes, Americans are at a tipping point. Many are realizing that to move forward, they need a better understanding of and control over their finances—even as they struggle to figure out how to achieve those goals.
As consumers reposition themselves in this changing economic landscape, we need to reposition our sector to be relevant to their needs—now and in the future. How? By refocusing our efforts so that we can not only help consumers navigate crisis situations, but also keep them from getting into crisis in the first place.
That means providing the tools and education consumers need to manage their finances in today’s economy and prepare for a better financial future—particularly those still traveling a difficult road to recovery. And it means getting paid for providing those services.
It became clear to us at NFCC—as we observed the changing landscape—that it was time to restructure the process of how our sector serves consumers. As we see it, the answer is to offer a NFCC’s Approach: Credit Solution Plan
simple, effective set of solutions for clients with extensive debt in conjunction with quality financial counseling that enables them to achieve financial health over the long term. Our Credit Solution Plan™ is designed to accomplish that: simplify the process of putting eligible clients on repayment plans, expand and tailor solutions to meet the needs of today’s consumers, and increase the successful completion of repayment plans by implementing agency best practices. It’s designed to boost the demand for holistic financial counseling as Americans reposition in a changing economy. It’s also designed to ensure the sustainable funding that enables agencies to provide essential client services.
For more than two years now, we’ve been working with our members, our financial partners and other sector stakeholders to develop this plan. We’ve welcomed the participation of Dave Jones and Rick Bugado on the working groups we set up to address various aspects of the plan. Their contributions have been valuable.
Crafting the Credit Solution Plan has been a daunting task and a long, complex process. But we believe our deliberately collaborative approach has been the right and necessary way to proceed. Our purpose has been to be thoughtful and make sure we have a strong plan before we
implement it—because what we do now will create the foundation on which we can build future enhancements and assure long-term success.
Throughout this process, we’ve worked to factor many different points of view, priorities and constraints into the equation to provide the greatest overall benefit. It has been a collaborative effort to fashion a sector-wide solution that centers on the ultimate outcome we want to achieve for consumers.
So what have we been up to?
Through our working groups, agencies and creditors have been developing ways to drive more customers to financial counseling, increase debt management plan conversion rates and improve DMP retention. Our groups have been working on a number of opportunities, including
identifying best practices for improving processes. One example of best practice work is the ACH best practice survey, the results of which we shared with you last fall.
Last month in Delaware, we had an important meeting of the NFCC Advisory Council member organizations at which we identified significant steps to move from the concept and analysis stage to implementation of the Credit Solution Plan. Again, Dave and Rick participated on behalf of AICCCA and its members. We also had strong representation from financial institutions, including nine of the top ten creditor organizations.
During the meeting, we reviewed the work we did to validate the new Credit Solution Plan platform with a representative sample of agencies—both NFCC and AICCCA members—and participating financial institutions. We finalized the new Credit Solution Plan Protocol (which outlines agency counseling best practices and repayment plan tiers) and discussed a timeframe for implementing the plan. We also reviewed our progress on developing sustainable funding to serve our clients.
As a result of that meeting, we now have a consensus to move forward on implementation. Our next steps include discussions with stakeholders to finalize data flows and a design approach. That will lead to written user specifications that we can use to begin the system programming changes needed to put the plan into action.
Our goal is to begin implementing the plan before the end of this year. Our plan rollout will involve careful coordination across agencies, financial institutions and solution providers to ensure a smooth—and successful—phased implementation.
I believe that reengineering the core services our sector delivers is fundamental to our ability to serve our clients well. That is why nothing is more important for our sector right now than successfully implementing the Credit Solution Plan. Nothing will have a greater impact on our ability to provide the services that are most relevant to the needs of consumers today.
And what we do now will lay the groundwork for services the sector may develop in the future, including the less-than-full-balance payment program AICCCA has been pursuing. So I
encourage you to stay engaged in the effort to implement the Credit Solution Plan as we move forward. Your support is important to this effort.
Many of you know that cooperation between our organizations to benefit consumers and our sector has many precedents. I’ll mention just a few examples of NFCC initiatives we’ve collaborated on with AICCCA and other sector stakeholders.
One Sector—One Voice
Through our Debt Settlement Working Group, we did consumer research on debt repayment, consumer outreach and educational activities, and background work on a less-than-full-balance product. We also worked with the Federal Trade Commission as it fashioned its 2010
Telemarketing Sales Rule that provided significant consumer protections against predatory debt settlement practices.
As a result of the NFCC and AICCA’s collaboration on the NFCC Call to Action, a majority of the nation’s credit card issuers agreed to provide additional relief to consumers struggling to
repay their debts. Creditors implemented the changes necessary to provide more affordable DMPs for consumers with insufficient income to qualify for a traditional plan.
Our cooperative effort to improve operational efficiencies led to the Credit Counseling Resource Center, sponsored by MasterCard and offered through Peregrin. It now provides a central
repository for information on creditor policies, processes and contacts to help agencies serve consumers better. It also houses a secure communications channel for creditor and agency
communications. Today, Citibank, Bank of America, Chase and Wells Fargo are using it for their annual due diligence programs and other creditors are coming on board, resulting in resource savings for agencies
Through our Balance Verification project, also part of our efforts to improve efficiencies, we’ve improved the ability of agencies to obtain client balance verifications before debt management plan proposals are accepted. As a result, agency efficiency is increasing and proposal decline rates are decreasing.
We at the NFCC believe strongly in the value of financial literacy for all Americans and our vision is to create a national culture of financial responsibility. That’s the impetus behind the Credit Solution Plan and other initiatives you’ve worked on with us.
It’s the vision we keep front and center as we continue to make progress on issues that matter to our sector and consumers in areas such as financial education, housing counseling, federal housing funding, consumer protection and student loans.
It fuels our push to raise public awareness of financial responsibility through our national
communication and education efforts and Sharpen Your Financial Focus™, our new initiative to promote the need for sound money management.
Yes, it’s a pivotal time for consumers, for our respective organizations and member agencies, for the credit counseling and financial education sector. We’re at a tipping point. That’s why at the NFCC, we’re repositioning to make needed changes, creating solutions and driving change for the future.
We have the tools and talent within our organizations and across the sector to accomplish these things. Vitally important is that we coordinate our efforts and worth together.
Our best opportunity for success is to come together as a sector and speak with one voice—to consumers, to financial services companies, to government agencies—about what we can do to help Americans get to a better place financially.
The key to our success is synergy. Many of you have heard me say, our collective efforts will produce much greater results than any individual endeavors.
Henry Ford was an innovator who rethought traditional approaches and developed new strategies to fit the times. We can learn from something he said: “Coming together is a beginning. Keeping together is progress. Working together is success.”
Together. One sector. One voice. That’s the surest way for us to succeed.
I’m grateful for the opportunity to share with you today some of the work NFCC is doing on behalf of our sector and the consumers we serve. The financial counseling sector has been around for 60 years, and we want to make sure we have a sustainable service model and funding to support that model far into the future. We welcome your continued participation and, ideas in this important and needed effort.
I truly believe we are on the right path to reach more Americans with the financial tools and solutions they need today. As we move forward, I hope you will join us and work with us. Together we can make it happen.
I’ve kept my remarks brief because I wanted to leave plenty of time to have a conversation with you. I’m happy to address your questions and I’d love to get your feedback on what I’ve talked about this afternoon. So who has the first question?
