Credit Counseling Firms Adjust To a New Normal

By Susan Tompor
Detroit Free Press.

Jane E. McNamara, president and CEO for GreenPath Inc., said the Farmington Hills-based credit counseling organization sees definite signs that the economic downturn is behind us. And now the name of the game for consumers is to re-group, clean up their credit and adjust to the new normal.

Not-for-profit credit counseling firms are adjusting to a new normal, too.

The Credit Card Accountability, Responsibility and Disclosure Act took effect in February 2010 and provided many changes that helped consumers get more control of their credit card debt.

Thanks to changes in the rules, the amount of late fees consumers pay was substantially reduced; over-limit fees on credit cards virtually disappeared; and the unfriendly practice of hiking interest rates on existing customers was curtailed.

While that’s good for consumers, McNamara said the changes are contributing to consolidations in the credit counseling arena, which works with consumers and credit card issuers to pay off debts.

After the financial crisis, credit lines and the number of people with credit cards declined sharply, driving down counseling and debt management activity across the sector.

As the housing situation impoves, fewer people need foreclosure prevention assistance, too. U.S. bankruptcy filings are down too over the past few years.

GreenPath noted in its annual report that it conducted 5.3% fewer debt counseling sessions in 2013 and set up 11.1% fewer debt management programs last year, compared with 2012.

GreenPath said it also conducted 11.3% fewer bankruptcy counseling sessions last year, compared with 2012.

Part of GreenPath’s overall strategy has been to try to reposition the operations.

GreenPath is exploring various merger and acquisition opportunities within the debt relief sector. GreenPath finalized an acquisition of Consumer Credit Counseling Service of Greater San Antonio in March.
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During the summer, GreenPath opened a satellite office in Escanaba.

In September, GreenPath launched a counseling office in Jacksonville, Fla.

In October, GreenPath will launch an office in Denver and another in Glen Ellyn, a western suburb of Chicago.

“It’s going to expand our footprint,” McNamara said.

GreenPath is a nationwide operation that assists consumers with credit card debt, housing debt and bankruptcy counseling.

Clients owe an average of $20,599 in unsecured debt, including credit card debt. Clients with student loan debt owe an average of $31,404 in student loans.

The average age when a client sets up a debt management program with GreenPath is around 46 years old. And 67.2% of the clients are women.

Consumers with financial troubles pay about $36 a month to be on a debt management program with GreenPath. Fees vary by state. In Michigan, the start-up fee is $25 and the maximum monthly fee is $75.

Unsecured debt on a debt management program is to be paid off within five years. That kind of timetable is possible because of concessions on interest rates and fees.

People also need to change their spending patterns and make a strong effort to tackle their old bills.

“It depends on whether or not they’re committed to repairing their debt,” McNamara said.

The program receives its money from client fees, creditor contributions, grants, and educational products and services.

McNamara, who started out as a counselor, became president and CEO in 1997. She knows that people can have a tough time changing their spending habits.

She admits she once tried to shop at Christmas without credit cards and using only a checkbook. But she found the shopping experience difficult. It’s quicker to get through check out lines with plastic. But she said people need to take extra care when they’re spending money for the holidays. It’s key to be able to pay off the credit cards and not build up more debt.

“Budget is a bad word to people,” she said. “Sometimes we refer to it as a spending plan because of it.”

Jane E. McNamara

Title: President and CEO

Hobbies: Boating, fishing, camping, loves to bake and go to plays and concerts

Grew up: Tippy Dam area between Manistee and Cadillac

Career: Began working in 1980 as a credit counselor at the Muskegon office for GreenPath, then known as Credit
Counseling Centers. She obtained her masters degree from Michigan State University in family economics and management.

GreenPath history: Founded in 1961 by the Michigan Credit Union League as a budgeting and financial education service. Became an independent 501c3, as Credit Counseling Centers, in 1967.

Annual budget: $19.6 million in contributions and grants; $41.4 million in revenue.

Number of employees: 470 employees, including 350 at the main office in Farmington Hills.

(c)2014 the Detroit Free Press
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