EconSouth (First Quarter 2004)
Q & A
Coping With Credit
An Interview with Suzanne Boas of Consumer
Credit Counseling Service of Greater Atlanta
Educating consumers about debt is one of the missions of the Consumer Credit Counseling Service. Recently, EconSouth talked with Boas about her organization and about the state of consumer debt today.
EconSouth: How did you get into the credit counseling business?
Suzanne Boas: I spent 16 years at the retailer Macy’s South as vice president of credit and consumer affairs. That’s how I knew of the good work of CCCS and, in time, I joined its board of directors. Eventually, I was attracted to move into the nonprofit arena with CCCS. It’s been such a rewarding experience, meeting and helping people in need. I’ve also enjoyed being able to use my business skills in a humanitarian way.
ES: Is CCCS a truly nonprofit, community service organization?
Boas: Yes, it is. CCCS was incorporated 40 years ago by business and civic leaders concerned about the growth of unsecured consumer credit. The mission of CCCS today is the same as it was then: to serve distressed consumers and help them succeed financially. We spend each day providing honest, professional advice in a caring, helpful way.
Our organization contrasts with many of the commercial or pseudo-nonprofit credit counseling services that you see advertising so heavily on television and the Internet today. These organizations emerged after deregulation of the telecommunications industry drove down long-distance rates. Suddenly, it was cost effective to provide counseling over the telephone and to export services outside an organization’s immediate market. Unfortunately, operating remotely also made it possible to avoid the oversight of a concerned board of directors with an interest in serving their local community. As a result, many of these rogue nonprofit organizations today serve themselves and their employees far more effectively than they serve the consumers who turn to them for help. It is very disturbing to us at CCCS that these groups are marketing in a heavy-handed way to people who are very vulnerable, to people who are so stressed they cannot recognize that promises that sound too good to be true generally are.
ES: Briefly, how does the CCCS counseling process work for consumers?
Boas: Our counseling delivery is very much tailored to the individual consumer. We offer counseling on the Internet, by telephone, or in person and in English, Spanish, or American Sign Language. We have branch offices throughout north Georgia as well as in three locations in south Florida that are open during normal business hours. Our telephone and Internet operations are open 24 hours, every day of the year.
Essentially, we ask any consumer who turns to us for help to collect their financial documents—bills, pay stubs, a list of expenses—and fill out a financial history, much like a medical history. A CCCS counselor then tries to paint a complete and objective picture of the client’s current financial life.
Armed with this profile, we work with the consumer to find ways to increase their income, decrease their expenses—or both—and to develop a budget. Finally, we make practical suggestions on the best ways to reduce their debt. Typically, about a third of the people who come to us for help elect to enter a structured debt repayment plan with our agency. The other two-thirds of our clients, armed with advice from their counselor, are encouraged to try to resolve their debt problems without entering a repayment plan.
ES: What trends do you see in consumer debt today?
Boas: We’ve identified about four major trends among the clients we serve.
First, the average age of our clients continues to increase as older Americans take on more and more debt. Sadly, we are starting to see many couples carrying significant debt loads into retirement.
Second, the democratization of credit continues at a fast face, particularly in the mortgage lending arena. With low interest rates and the many special mortgage products that have been developed in recent years, more young people and minorities are realizing the American dream of owning their own home. According to the U.S. Census Bureau, the rate of homeownership in this country now stands at around 68 percent in the fourth quarter of 2003, up from about 64 percent in the fourth quarter of 1993.
Third, financial institutions have become increasingly willing to lend to riskier consumers. Consumers in the Southeast on average are higher credit risks than in other parts of the country. Experian, one of three national credit reporting agencies, ranks states by credit scores, and no Southeastern state currently ranks above 34th on an aggregate credit score basis.
Finally, there has been a continuing trend toward destigmatizing bankruptcy. That is particularly true in the southern crescent of the United States, where bankruptcy rates are consistently among the highest in the country.
ES: What are the biggest issues concerning consumers who find themselves in credit counseling?
Boas: The single biggest issue is unsecured credit, basically credit card debt. There are two types of debtors who come to us for help. One is what we term situational debtors; these clients may have good financial planning skills, but because of an unfortunate circumstance—divorce, job loss, an auto accident, or a death in the family—they have gotten into credit problems. The second type of financially challenged consumer has more of a behavioral problem. They may not know how to manage money or they may be people who see spending money and shopping as entertainment or who spend impulsively rather than after careful planning.
ES: If interest rates begin to rise, do you expect consumer credit problems to escalate?
Boas: Assuming any increase in interest rates is gradual and accompanied by improved employment, I don’t believe we will see a serious increase in consumer problems. People who have taken on more debt—both unsecured and housing debt—helped shore up the economy during the recent recession. Consumers remained very optimistic during that time, and they continue to be generally positive about their financial future. When interest rates start to float up, however, there will be some consumers who will get caught by the cost of increased payments. These are the people we worry about.
ES: Are we as a nation doing enough to educate consumers, especially young consumers, about sound personal financial management?
Boas: I am sure you are not surprised when I tell you that at CCCS we believe that our society places far too little emphasis on financial education. Not only do we need more education, we need to develop awareness of responsible behavior among consumers. True education involves not only information transfer but, as importantly, conforming behavior in healthy and constructive ways. Parents need to both teach their children the basics of money management and model financial responsibility for them.
Unlike smoking or, worse, drunk driving, there is generally no sympathetic victim in financial disability and ruin. Yet, when money is seriously mismanaged, there are silent victims. We all pay for bankruptcies in higher prices. And families are destroyed by financial problems every single day. In our opinion, serious financial troubles tear at the very fabric of community and family life.
ES: When your counselors see individual consumers, what kind of debt does your team find most troubling?
Boas: It’s less about the kind of debt and more about its impact on the people sitting across the desk from us. It is very hard for our counselors to look into the eyes of someone 64 years old who realizes for the first time he can’t retire and keep his home or to look at a young family being destroyed by arguments over money.
ES: If you had to give one capsule of advice to a consumer regarding personal debt, what would you say?
Boas: Live beneath your means.