Maryland
PIRG, along with other consumer advocates, has come to the legislature every
year since the passage of the Maryland Debt Management Act. The reason is always the same, to testify
that in Maryland
debt management should be limited to non-profit counseling in the same way that
counseling for bankruptcy and reverse mortgages is by the federal government.
HB947
once again attempts to legislate for the inclusion of for – profit companies in
the debt management licensing. We ask
that the committee report unfavorably on HB947.
This
year after the economic pain caused by the foreclosure crisis in America it is
hard to image why anyone would want to bring the same economic model to a
population who is already in trouble with their finances. For-Profit debt management companies not only
pay their employees a salary for debt management services but also a commission
for selling debt management products.
Citizens who are already in debt and paying up to 29% interest on their
carry over balances need to get out of debt as quickly as possible. This model though does not emphasis that
need, but rather pays employees commissions for selling product to debtors that
may help them with the future but for the present slows down their progress in
becoming debt free.
The
current economic models project the time frame for a consumer that needs the
service of a debt manager to come current with their debt, is years not
months. During that time the consumer
needs to focus on the debt not product.
The incentives though are for sales not the successful completion of a
payout by the consumer. Maryland Consumer Rights Coalition believes
that this is the wrong focus.
For-
profit debt managers also have something that the non-profits do not and that
is a marketing budget that can place their message on the electronic media when
the greatest percentage of possible clients are viewing or listening. Non-Profit debt managers do not have this
luxury. They advertise primarily through
PSA/’s the time slot for these messages is either late night or early morning a
time when a much smaller portion of possible clients will receive their
message. This ability to market in prime
time will we believe negatively affect the marketplace as it currently exist
and place additional negative pressures on the non-profits that have done the
job so far.
Finally,
in financial counseling jargon this is a “want” not a “need”. There is not now a need in the
marketplace. There is not a clamor in
the marketplace for more counselors. The
current need is being met. This is not housing
counseling. This is not financial
counseling. This is debt management and
from all current measures there is not a need that requires filling. There is only a want by a single for-profit
organization.
For the
above reasons we ask that you give an unfavorable report to HB947.
