The Consumer Credit Counseling Services of Massachusetts, Connecticut, and Rhode Island will soon merge to form one organization, a move officials say will help the organization improve its services and efficiency. The imminent merger will create the Consumer Credit Counseling Service of Southern New England. The main difference for consumers is that service hours will be extended to include later evening hours and services on weekends. The Warwick office is now experimenting with a 24-hour service, which allows debt-saddled consumers to get help at all hours of the day. If the program is successful, it may be extended to serve consumers throughout the Southern New England region, said Steve Bucci, who, along with the presidents of the Connecticut and Massachusetts offices, will head the new regional organization.
Consumer Credit Counseling Services are affiliated with the National Foundation for Consumer Credit. About 1,500 affiliated Consumer Credit Counseling Service offices operate nationwide.
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The Consumer Credit Counseling service helps people get out of debt by working with them to set up a plan that enables them to repay their creditors while meeting their daily living expenses. The services collect payments from consumers and distribute them to creditors. In return, the creditors generally give a portion of the money back to the counseling service.
In years past, creditors – banks and credit card companies – have contributed 15 percent of the money that they received back to the counseling service. Recently, however, creditors many creditors have cut their contributions – which are voluntary – to 10 percent.
This has forced the counseling services to be more efficient and to find alternative sources of funding, such as financial support from business. And the merger will help the three offices take advantage of their economies of scale, Bucci said.
“This will give us a lot more ability to service our clients,” Bucci said.
In addition to helping people get out of debt, the counseling services help people make life changes that help them stay out of trouble. People learn to buy things based on the amount of purchase, not the monthly payments, for example.
The services and education that the credit counseling service offers seem to be needed more than ever, given that personal bankruptcies have skyrocketed in recent years. According to the American Bankruptcy Institute, a non-partisan group based in Washington, D.C., personal bankruptcies dropped in the first three months of 1999 compared to the same time period last year. That, however, comes only after bankruptcy levels hit record highs throughout the 1990s.
A record was set in 1998, as personal bankruptcies hit 1,442,549 – up 84.2 percent since 1990, the institute reported.
While it may seem paradoxical that bankruptcies are increasing at time in which the economy is expanding, Samuel J. Gerdano, executive director of the institute, said part of the reason for the economic expansion is that consumers have been buying more and going into debt to finance their spending. In fact, an increase in bankruptcy filings usually accompanies an expansion of the economy.
The problem, according to Bucci, is that many people become too optimistic about their financial future and get themselves into trouble by overspending. Another problem is that, while unemployment is low, many people are under-employed and have been unable to adjust their spending habits in time to avoid credit problems.
Beverly E. Tuttle, who heads the Connecticut organization, noted that many people do not want anyone to know about their debt problems, and by the time they seek help it is too late. Tuttle and Bucci say around 40 to 50 percent of people who declare bankruptcy could have avoided doing so if they had come to the Consumer Credit Counseling for help.
In cases in which clients have severe debt problems, the counseling service will advice them to seek the advice of a bankruptcy attorney, said Mel Stiller, who heads the Massachusetts organization.
Bucci said other Consumer Credit offices around the country are also considering a merger. But he added that Rhode Island, Connecticut, and Massachusetts are among the first to actually do so. He added that the merger will not cause any layoffs, and in fact will prompt the organization to hire even more workers.
The new regional counseling service will serve 15,000 people annually. Its toll free number is 1-800-208-2227. Bucci noted that, unlike the merger of BankBoston and Fleet Bank, this merger is not being done to increase profits, since the organizations are non profit groups. About 65 percent of their funding comes from creditors. The rest comes from the federal Department of Housing and Urban Development and from contributions from clients, who are asked to pay a one-time $10 fee. Those who can’t afford it can ask to have the fee removed.
Bucci added that the new organization is considering making its services completely free.
