The article "Planning for Change: Credit Counseling at the Threshold of Bankruptcy" (last month's ABI Journal) by Gordon Bermant and Ed Flynn of the EOUST elevates the dialogue about credit counseling agencies and their place in a new world of bankruptcy reform to a level of visibility our agencies haven't enjoyed before. Gordon and Ed have invited me to provide a fuller context of our process with our clients, since describing consumer credit counseling agency (CCA) underwriting philosophy was beyond the scope of the article.

The thought that CCA underwriting methods "...produce disposable incomes that are much more likely to put the debtor at risk of an abuse claim" could be taken to imply that we're funneling unknowing consumers into debt management plans when they are the rightful customers of the bankruptcy industry. In the pre-bankruptcy reform environment of today, we, of course, are not operating under the assumption that the consumer is looking to collect his counseling compliance ticket and advance to bankruptcy. Rather, consumers are looking to avoid it. This is an important philosophical factor to remember when discussing where credit counseling fits into the world of today and the value we bring.

Further, the article appears to assume that consumers come to us ignorant about the availability of bankruptcy as a fresh start. I assure you that is not the case. Bankruptcy attorney advertising is now up there with dot-com mania in the public consciousness. Okay, that might be an overstatement, but it's close.

We've said for the past few years that the majority of our clients would sail through any tests for bankruptcy relief, and even studied a small sample last year that supported that contention. Luckily, Gordon and Ed's excellent study again corroborated that. Our "industry" is actually very aware of the differences in cash-flow analysis between our current practices and the IRS expense guidelines that would probably become the means-testing standard under a new law. As far as I know, under the new law CCAs will not be required to use the IRS expense guidelines. Nonetheless, Gordon and Ed's article makes the excellent point that there's a gap in methodology, and under the new law, consumers will need to be told this. CCAs will find it advisable to disclose to consumers that even though they qualify for a debt management plan, it does not preclude them from bankruptcy. For the record, the Council on Accreditation for Children and Family Services, which audits and certifies this and many other Consumer Credit Counseling Service agencies, mandates in their service delivery standards that consumers be informed of all their options, and our network of accredited agencies provides educational materials on the subject of bankruptcy.

The hard-working, responsible people who come through our doors haven't yet gotten over the mental obstacle that bankruptcy is just not the right thing for them to do at that time (often though, it comes later). Another conclusion that could be made here is that it goes to show you can't means-test personal commitment.

Dianne L. Wilkman, President/CEO
Springboard Nonprofit Consumer Credit Management
(a.k.a. Consumer Credit Counseling Service-Riverside)