Tag Archive for Credit Canada Debt Solutions

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 markasilverthorn@gmail.com

Game changer: Credit Counselling Society enters debt settlement marketplace

 

This weekend I was doing a google search for the phrase “debt settlement” and I ended up on a webpage for the Credit Counselling Society.   This organization, headquartered in New Westminster, British Columbia, is one of the four titans of the Canadian non-profit credit counselling industry.  This organization has offices in every province west of Quebec.  According to its website, www.nomoredebts.org, the firm has 22 offices across a large part of Canada.

I almost fell of my chair when I read their webpage titled DEBT SETTLEMENT IN CANADA/ PROGRAM OVERVIEW.  You can find this webpage reproduced below.

 

CCSDebtSettlementpage

 

 

DebtSettlementpagesecondfromtop

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This webpage appears on www.nomoredebts.org, the website for Credit Counselling Society, one of the four largest non-profit credit counselling agencies in Canada.  Purple circle has been added.

 

 

Credit Counselling Society has the potential to become the largest provider of debt settlement services in Canada

Because of it substantial financial resources and its 22 offices across Canada Credit Counselling Society has the potential to become Canada’s dominanat debt settlement services provider.  Its advertising budget is greater than all of the other debt settlement service providers in Canada combined.

 

 

Creditors support non-profit credit counselling agencies offering Debt Management Plans

The creditor community likes non-profit credit counselling agencies because they are essentially warm and fuzzy collection agencies.  Non-profit credit counselling agencies assist Canadian creditors recover tens of millions of dollars each year.  When a consumer completes a Debt Management Plan with a non-profit credit counselling agency the major banks and credit card companies recover 80 percent to 90 percent of monies owing to them–depending upon the amount of the “fair share contribution” a particular creditor pays to a non-profit credit counselling agency.

 

 

The credtior community is not favourably disposed towards debt settlement service providers

The creditor community, however, does not like debt settlement service providers.  Debt settlement involves a consumer making a one-time lump sum settlement–for an amount signficantly less than the current balance owing–as settlement in full.  It is common for creditors to agree to settlements where the consumer pays anywhere between 20 percent and 50 percent of the outstanding balance.

 

 

Creditors would prefer non-profit credit counselling agencies restrict themselves to providing Debt Management Plans

The creditor community would prefer that non-profit credit counselling agencies stick to enrolling Canadian debtors in Debt Management Plans and recovering 80 to 90 percent of monies owing to creditors.  The creditor community does not look favourably on debt settlement service providers–of any type–because creditors are only recovering 20 to 50 percent of monies owing to creditors.

 

 

Creditor community may threaten to stop making “voluntary donations” to the Credit Counselling Society

I was surprised to see the Credit Counselling Society openly advertising the organization’s debt settlement services on its website because this could invite a devastating reaction from Canada’s creditor community.  The majority of Credit Counselling Society’s revenues come from Canada’s big banks and major credit card companies in the form of “fair share contributions”.

Frankly, I am going to be surprised if the creditor community does not threaten to stop making fair share contributions to the Credit Counselling Society if it does not immediately stop not only providing debt settlement services, but also offering debt settlement services.  The risk of the loss of fair share contributions from major Canadian creditors should give Scott Hannah, the President and CEO of the Credit Counselling Society, cause for concern.

 

 

Canada’s Big Four non-profit credit counselling agencies

The vast majority of Debt Management Plans in this country are done through four major firms, all of which are non-profit credit counselling agencies:

  • Credit Counselling Society
  • Credit Canada Debt Solutions
  • Consolidated Credit Counseling Services of Canada Inc.
  • Credit Counselling Services of Atlantic Canada Inc.

Debt Management Plans are financially lucrative to firms that provide them in large volumes.  These four firms all run high-volume Debt Management Plan operations. Furthermore, these firms all compete aggressively with one another for Debt Management Plan clients.  Finally, these four firms compete with bankruptcy trustees and firms that offer debt settlement services.

 

 

Possibibility that the other major non-profit credit counselling agencies may enter Canadian debt settlement marketplace

There is a real possibility that if the Credit Counselling Society is advertising its debt settlement services to Canadians six months from now that one or more of Canada’s largest non-profit credit counselling agencies will decide to follow suit.

 

 

Contact me if you have any information about a credit counselling agency offering debt settlement services

I would invite anyone with information about a credit counselling agency offering debt settlement services to contact me.  You are welcome to call me at (866) 996-9941 or at (519) 827-5513.  Alternatively, you are welcome to contact me, via e-mail, at mark@comprehensivedebtsolutions.ca

 

You are welcome to call Mark Silverthorn if you have any information about a credit counselling agency offering debt settlement services.

You are welcome to call Mark Silverthorn if you have any information about a credit counselling agency offering debt settlement services.