WASHINGTON — Like doctors urging patients to prevent illness through exercise and a healthy diet, the Financial Services Roundtable is calling for improvements to credit counseling–improvements aimed at avoiding bankruptcy.
In a letter to the U.S. Department of Justice, the Roundtable emphasizes counseling based on financial literacy, general alternatives to bankruptcy and other informal work-out options.
Steve Bartlett, Roundtable president/CEO, wants to eliminate what the Roundtable sees as a dual system of credit counseling created by new laws requiring persons considering bankruptcy to receive counseling.
"The intent of the law was not bankruptcy counseling, but financial counseling," Bartlett indicated. "The current regulatory regime has created a dual system, but this segregation is not in the best interests of consumers."
The letter also proposes extending the validity of pre-bankruptcy counseling certificates to one year from the current six months.
A Government Accounting Office report released in April on pre-bankruptcy counseling calls for better measurement of the outcome of such counseling, and notes 10% of counseling certificates are not used.
"There were a number of good nuggets out of the GAO report," Bartlett told Credit Union Times. "It appears many people who go through pre-bankruptcy counseling end up making a different choice–and a better choice, we think.
"We believe that's good news for consumers. Anything that's good for consumers is also good for lenders. The purpose of counseling is to give the consumer knowledge of all available alternatives, and help the consumer put their financial house in order. As they put their financial house in order, people discover they really don't need to go into bankruptcy. I don't mean to make it sound easy, but it's also not as complicated as people make it."
Many times, he noted, people are pushed into bankruptcy by well-meaning neighbors or relatives portraying bankruptcy as the easy way out of financial problems.
"Bankruptcy isn't the easy way out," Bartlett stated. "It's hard. It creates its own set of problems. You need to solve the underlying problems."
Like those doctors emphasizing prevention, he stressed credit unions serve their members well when they refer them to credit counseling as early as possible. One resource is the Roundtable's consumer site, www.MyMoneyManagement.net, which offers financial management and planning tools as well as information on how to find certified credit counselors.
He noted some major banks such as Chase and Wells Fargo have programmed their computers to automatically refer to the Roundtable, customers whose accounts reflect signs of financial problems.
"I'm making the same deal available to credit unions," Bartlett said.
"We all have choices. Help members make better choices."
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