Research and Statistics

Q&A: Credit counselor urges consumer education


Too few people know about or talk about debt, says the head of one of the major counseling accrediting agencies.

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 David Jones, president AICCCA

David Jones, president AICCCA


For the past 12 years, David Jones has been passionate about helping American families get out of debt, manage credit and improve financial literacy.

“I think it’s probably the most important issue that we have in this country but it doesn’t get much attention,” says Jones, president of the Association of Independent Consumer Credit Counseling Agencies (AICCCA). The nationwide group represents 36 nonprofit consumer credit counseling agencies that operate 178 counseling offices in 38 states. The agencies offer debt management advice, credit counseling and financial education to clients drowning in debt, trying to manage huge credit card bills or improve their credit scores.

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Jones, whose background is in marketing and communications, is a former CEO of a transportation software applications company. He has been AICCCA president since 2001, a position that frequently has him testifying before state and Congressional hearings about consumer protection laws and the need for financial literacy. He says lack of understanding about family finances is the source of much of the nation’s problems with domestic abuse, divorce and other family issues.

Few people are willing to openly talk about their finances or debt level, Jones says, adding that’s a big part of the problem in overcoming financial illiteracy. asked Jones for advice on what consumers should know about debt collection. Educating families about what it means to have good credit, knowing their rights and protections against abusive debt collection practices and seeking help from nonprofit credit counselors is essential, Jones says.

He says about debt: “It is hard to get out of; it’s worse than trying to lose weight.”

Q. How should consumers respond to debt collectors’ calls and letters?

A. If a consumer is in fact delinquent on a bill they should be expected to be called. Do not ignore the calls or letters from creditors or debt collectors. If in fact you cannot afford to pay the debt, which is often the case, you will find that most creditors will work out a payment plan. In addition, our members can help them as well and intercede for you to work out your debts.

Q. How have the recent mortgage foreclosures and bank credit card write-offs affected what you do?

A. In many of our agencies, the majority of work they do is mortgage counseling and foreclosure intervention. This is even more true for people with these adjustable rate mortgages. We have had the worst case of irresponsible underwriting. Lenders opened the flood gates and gave loans to people who had no chance of repaying the loans. We’re all going to pay for that in years to come. It’s a huge problem. It’s gigantic — even more so than credit cards in certain markets.

People in the Las Vegas area, California, Florida and Ohio are being affected more than other areas of the country. We’re seeing a lot of problems in Georgia because the laws in Georgia have very strict limits on response time to foreclosure notices. People that get into problems in Georgia have to deal with it very quickly. Obviously, these banks in many cases are overwhelmed. Congress is trying to do something.

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These banks are in business to make money, but they also have to be responsible to their stockholders. None of them want to be landlords and property owners and they’re willing to work with people. If consumers are having problems, they need to reach out to the creditors. Consumers should ask to speak to a supervisor if they are not getting what they want. They should not take any abuse whatsoever.

Q. What types of debt collection abuses should consumers be aware of?

A. You’re more likely going to see abuse when you get a third-party collector involved. If a debt goes over 90 days in arrears, those are often sold to a collection agency. They hope to get maybe 40 percent on the dollar. You’re more likely to see abuse from these people. They tend to hound people. Consumers should stand up for their rights and not be intimidated.

We’ve had a lot of horror stories. There are extreme levels of harassment. We’ve heard of debt collectors threatening foreclosure on people’s homes even though it was a credit card debt. They will use that.

"It's difficult for a lender to gain garnishment, but they can do it."They often threaten garnishment quite a bit and that’s something that scares consumers a lot. When you have a situation where a consumer has been recalcitrant for a long period of time, they can be subject to garnishments. It’s difficult for a lender to gain garnishment, but they certainly can do it. They have to go to court to do it. We see that a lot in educational loans more than we do on credit card debt. Obviously no one wants to get involved in that. It’s often an effective threat.

Consumers should do everything they can to work with their lenders and try to work out a situation to honor their commitments. If they need help, one of our members will give them help.

Q. What consumer education is necessary regarding debt collection?

A. People need to learn what it means to have a good credit score  and realize how to improve a credit score. Most people don’t have a clue about that. If people would stop and think about it, one of the reasons for a low score is if you have 45 credit cards. You will have a low score because you have too much credit available to you compared to your income and ability to pay.

They need to understand what it means to have credit and use credit. Unfortunately, we just don’t have adequate education in our schools today. There are a lot of educated people — stockbrokers, lawyers and doctors — who are in debt management plans. We see them with $70,000, $80,000 and $90,000 in credit card debt. It’s amazing the level of financial illiteracy we see in otherwise well-educated people. Most people think that all they really need to do is make the minimum payment on their statement. That’s one of the worst things they can do. That’s what the lending world counts on. If you’re just making a 2 percent minimum payment each month, it can take over 40 years to pay off that $10,000 debt. It’s a sobering thing for people to realize. We tell people if they have made minimum payments on their credit card bills for two months in a row, they are in very deep trouble and they ought to get counseling.

It’s important for people to realize that they do have rights. They should be reaching out to their creditors to try to resolve their issues and not have these debt collectors hounding them.

Q. Should consumers who are overwhelmed with debt consider bankruptcy?

A. If they can’t resolve their debts and they have serious problems, they ought to talk to someone about bankruptcy. We try to make sure that it’s a last resort because it’s very serious. Since 2005, when the bankruptcy laws changed, there’s a means test. Some people seem to think it’s more difficult. It’s certainly more expensive because lawyers have to do a whole lot more. If in fact you do go into bankruptcy, you have to show a certificate that you have tried to address your debts by going into credit counseling.

People who are having serious problems leading to bankruptcy have one of three things: they either have a divorce, they have serious job loss or something that has curtailed their income drastically or they have a medical issue and medical issues are quite expensive.

"Creditors today are thrilled to death to get ahold of someone who just emerged from bankruptcy."We’re seeing people reaching retirement age with as much as $60,000 worth of nonmortgage debt. And many of those people expect to live on fixed incomes. It’s a really serious problem. It won’t take much to put people in those kinds of situations over the edge into bankruptcy.

Today the stigma of bankruptcy is nothing like it once was. Creditors today are thrilled to death to get ahold of someone who just emerged from bankruptcy. They can’t file again for seven years, they don’t have any debt and they’ve already demonstrated that they have poor spending habits. This is an ideal person. That’s why Congress has mandated that these people get education so that they understand debt management, so they don’t fall into the trap again.

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