Consolidation in non-profit credit counselling industry inevitable

Canadians struggling with consumer debt spend millions of dollars to deal with their debt situation.  Some will take out a debt consolidation loan.  Some will hire a debt settlement firm.  Others will “go for credit counselling”.  Some will meet with debt consultants often referred to as “intermediaries”.  Finally, some will meet with a bankruptcy trustee, now known as a Licensed Insolvency Trustee (LIT), and make a consumer proposal or file for bankruptcy.

Make no mistake.  These debt relief service providers compete aggressively for these clients.  And a significant amount of revenues are at stake.  If you live in southern Ontario try listening to the radio without hearing an ad for a Licensed Insolvency Trustee or Consolidated Credit Services, one of Canada’s three largest non-profit credit counselling agencies.


Consolidation coming to non-profit credit counselling industry

The debt relief service industry is currently undergoing a period of consolidation.  We are already seeing this among Licensed Insolvency Trustees across Canada.  It is only a matter of time, however, before we will also see consolidation in the non-profit credit counselling industry.


The major players in the non-profit credit counselling

The Big 3 among Canada’s non-profit credit counselling industry includes Toronto-based Credit Canada Debt Solutions and Consolidated Credit Counseling Services, as well as New Westminster, B.C.-based Credit Counseling Society.  One might argue that the Credit Counselling Services of Atlantic Canada should also be included in this group.


3 Reasons Revenues for the Big 3 have flatlined

According to financial statements available on CRA’s website, the combined total revenues for the Big 3 have remained stagnant around $24 million since 2012, adjusted for inflation.  This is despite the fact that the Big 3 have spent, collectively, more than $4 million annually on Advertising and Promotion in taxation years 2012 through 2015.

  1. consumer proposals are becoming more popular
  2. higher household debt levels make DMPs less affordable
  3. bill collectors are less likely to “drive” consumers to non-profit credit counselling agencies


Consumer proposals are becoming a more popular alternative

One of the reasons that the total revenues for the Big 3 have hit a wall over the past several years is the increasing popularity of another debt relief alternative, the consumer proposal.

Consumer proposals are only available through Licensed Insolvency Trustees.  Under a consumer proposal a consumer will repay an amount–typically equal to 25 to 50 percent of their outstanding indebtedness–by making monthly installment payments over a period not to exceed five years.  In contrast, when a consumer enrolls in a Debt Management Plan he or she will repay an amount equal to somewhere between 100 percent and 120 percent of their indebtedness.

Licensed Insolvency Trustees routinely decline to do consumer proposals where the consumer has less than $10,000 in unsecured consumer debt.  Where a consumer owes more than $10,000 in unsecured consumer debt then a consumer proposal is three times less expensive to eliminate one dollar of debt.


Higher household debt makes Debt Management Plans less affordable

According to Doug Hoyes, Founder of Hoyes & Michalos, Licensed Insolvency Trustees, “Ten years ago a consumer who owed $10,000 could afford to do a Debt Management Plan where he or she repaid $1,100 by making monthly installments over three years. Today, however, higher household debt means that Debt Management Plans are becoming less affordable because either the monthly payments or higher or the Debt Management Plans are longer.”

According to Scott Hannah, President and CEO of Credit Counselling Society, the typical Debt Management Plan his agency sees is one where the consumer owes between $25,000 to $40,000.  He concedes that the higher the amount of money owing in a Debt Management Plan the more that affordability becomes an issue.


Consumers are receiving fewer collection calls from bill collectors

In the past anxiety generated by aggressive bill collectors to consumers with unpaid accounts were often sufficient motivation to persuade a consumer to contact a non-profit credit counselling agency and enroll in a Debt Management Plan.

Compared with ten years ago, however, bill collectors are much less likely to get a consumer who owes money on the phone to make a demand for payment.  Recent studies indicate that ninety percent of Canadians under 30 never talk on their cellphone.  In the future we should expect that bill collectors might get fewer and fewer consumers who owe money on the phone to make a payment demand.


Inevitable consolidation in the non-profit credit counselling industry

According to Scott Hannah, President and CEO of Credit Counselling Society, “in the next three years you will see some consolidation or mergers in the non-profit credit counselling industry.  I also expect that in the future that some of the smaller, community-based non-profit credit counselling agencies will no longer be financially viable in the marketplace.”


Share any relevant information with me and our readers

If you become aware of any information dealing with consolidation or mergers in the non-profit credit counselling industry then I would invite you to contact Mark Silverthorn at (519) 827-5513 or toll free at 1 (866) 996-9941 or via e-mail at

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