16 CFR Part 310 Telemarketing Sales Rule- Debt Relief Amendments #543670-00206

Submission Number:
President and CEO Christopher Viale
Cambridge Credit Counseling Corp.
Initiative Name:
16 CFR Part 310 Telemarketing Sales Rule- Debt Relief Amendments
Thank you for the opportunity to provide comment. This seems especially necessary, as the FTC's proposed role would fail to differentiate between legitimate non-profit credit counseling agencies (CCAs), such as Cambridge Credit Counseling, and the phony debt settlement/debt relief agencies that are the source of so many consumer complaints. We are particularly concerned at the FTC's suggestion that CCAs don't typically provide relief to the financially troubled individuals who contact us for assistance. This false assertion must be corrected. The data Cambridge gathered from clients over the last year demonstrates clearly that genuine relief is regularly provided. For example, our average debt management plan (DMP) client enrolls 6 accounts in his or her plan, representing $22,619 in accumulated debt. The average interest rate of those six accounts is 21.5%, generally the result of missed payments and/or credit overuse. As a result of the strong working relationships we've developed with willing creditors, the client's average interest rate is reduced to 9.25%. As the FTC suggests and many states require, Cambridge fully discloses in advance that specific account concessions are made at the discretion of the creditor. Prospective clients are aware that not all creditors will grant such concessions immediately, if at all. As a result of this proactive approach, our agency has received just two complaints in the last two years, a figure in stark contrast to the number of abuses perpetrated by debt settlement organizations. Cambridge's typical client was paying $405 dollars in interest alone at the time of their enrollment. After creditor concessions, that interest payment drops to just $174, a monthly savings of $231 and $2,772 annually. That is genuine relief, and is felt in the client's budget for the duration of their enrollment. Currently, 46% of Cambridge's clients complete the full term of their DMP. As their program winds down, a significant portion opts to directly pay off their remaining debt, often after receiving a tax return. Nine percent abandon their DMP for undisclosed reasons, while 8% experience additional hardship and opt to file bankruptcy. There are other factors to consider, of course. Roughly 85% of the individuals who contact Cambridge simply have questions about a particular aspect of their finances or wouldn't qualify for creditor concessions due to too much or too little income. Nevertheless, they receive the same financial analysis and Action Plan offered to Cambridge's DMP clients, and are also offered ongoing counseling, educational guides and web resources, free of charge. At the other end of the spectrum, 7% of our clients pay no fee for our services, and another 7% pay reduced fees based on their circumstances. The result? Cambridge's average initial fee is just $43.55, and the average monthly fee is just $25.03. The long-term benefits of credit counseling also demonstrate the differences between our services and debt settlement organizations. In the aftermath of a debt settlement, the presence of settled accounts on a credit report are clearly a danger sign to prospective lenders. Furthermore, the lack of educational services provided by debt settlers is an indication that their clients may need to resort to such drastic measures again in the future. In contrast, as was noted in the 2006 report, “Evaluating the Effects of Credit Counseling,” a co-production of the Consumer Federation of America, American Express, and Georgetown University Credit Research Center, effective debt management plans contain a meaningful educational component. The effect of this education was evidenced by “significantly improved credit profiles” and a reduced risk of bankruptcy filing, which the report attributed to “the DMP experience itself, e.g., budgeting to make regular DMP payments, continued interaction with and reinforcement from the counseling agency.