Getting To The Root Of The Financial Problem
Richard Dunwoody has 30 years experiences providing consulting services to the financial services industry through AFO Venture Group. On today's show Richard offers his opinion on how credit counselling agencies in Canada operate and what this means to consumers.
At our firm we work a lot with local, not-for-profit credit counselling agencies that meet face-to-face with clients using a "whole person" approach. I am a supporter of these kinds of organizations because they meet with people face-to-face, help people deal with the underlying causes of their financial difficulties and teach useful money management skills like creating a budget and finding ways to save money. In fact, I've had two local credit counsellors on this show: Heather Cudmore from Carizon in Kitchener and Sue Davey from Brant Family Counselling.
Richard's disapproval does not lie with these local not-for-profit agencies, but rather, the systems in place in Canada for credit counsellors regarding aspects like qualification and accreditation. He also expresses concerns that consumers are not asking the right questions when it comes to entering into a program like a debt management plan to deal with their debts.
Self-Regulated Accreditation Isn't Always Enough
Richard thinks it is critical that consumers ask the person they are speaking to about their individual background and credentials. In particular, he is concerned that many of the credit counselling agencies in Canada are self-regulated and that this is not rigorous enough in terms of the individual credit counsellor's training and qualification. In fact, he points out that
[of] the top two credit not-for-profit credit counselling organizations in Canada, one of them had zero employees that were certified, had any qualifications. And the second one, only had 67% of their counsellors had any certification.
To clarify, a not-for-profit agency uses their resources to help individuals within their community; spending little money on advertising or unnecessary expenses and meets face-to-face with their clients. Differently, national agencies tend to conduct their conversations over the phone and it can be unclear whether the person on the other end is qualified to provide advice. Richard makes his distinction between the two stating that,
when we talk about regulations and we talk about certifications of credit counselling organizations, I would suspect that most of these local agencies have very strong qualifications both in social work aspects, degrees or diplomas and in the underlying subject matter that they're involved in. This is not true in some of the large national companies.
His concern lies with the accreditation that credit counsellors are required to have when meeting with clients. He insists that their self-regulatory body, the Ontario Association of Credit Counselling Services (OACCS), should be setting standards for all of their members and relaying information about these programs to the public. In Richard's opinion,
...there isn't that regulatory oversight. It's a self-regulatory body that's governing them. They don't have to have any background credentials. They can walk in, sit down at a desk, answer the phone and start telling consumers how to manage their finances. And that's what's concerning.
Richard's proposed plan is that there needs to be a national program (such as the Financial Consumer Agency of Canada (FCAC) programs), outside of the self-regulatory body of credit counsellors, that is supported at the Federal or Provincial level.
Ask Questions & Know What You're Getting
Richard's second message to listeners and consumers is that it's important to be aware of exactly who you are dealing with and what the proposed program will look like from start to finish. Before you pay anything, ask:
What is the deal? What are my creditors agreeing to? ... At the end of the 48 months, what if anything am I going to be owing?
I agree with Richard that it makes sense to ask questions and to ensure that you're making the right decision for your personal financial situation. You need to make sure that the debt management plan that you enter into accomplishes what you want it to, once it has ended. He provides an example stating that,
if I go through bankruptcy, if I go through a consumer proposal, I know what's going to happen at the end. And at the end of that, I walk away and I know that everything is done.
Success Rate & National vs Local Credit Counselling
One of Richard's other concerns about the programs offered through national credit counselling agencies is their success rate. Richard points out that the director of a large national credit counselling organization stated that their debt management programs only have a 43% successful completion rate.
And that's where, when we look at some of the larger not-for-profits, they don’t provide the ancillary services. What they don’t provide to consumers as well, is what are the issues that come post commencement of a debt management program?
Richard believes small local agencies may have a better success rate because they are meeting face-to-face with the client, are probably better trained and experienced and are providing follow-up and ancillary counselling services to get to the root of the cause of their money problems.
5 Questions To Ask Your Credit Counsellor (and your trustee):
- What are your qualifications and experience?
- What are your objectives?
- What happens throughout the debt management plan?
- Has my creditor agreed to lower or eliminate interest on the debt during the program?
- Will all of my debts be eliminated once the program is completed?
Click here to read the full transcript Show 41- Credit Counselling in Canada Another Viewpoint
Resources Mentioned in the Show
- Ontario Association of Credit Counselling Services (OACCS)
- Financial Consumer Agency of Canada (FCAC)
Articles Mentioned in the Show
- Consumer Debt Counselling in Canada - Andrew C. Dekany (42.6% success rate, pg. 78)
- Global News - Smart Money (discussing limitation periods)
- Toronto Star - "Consolidated Credit Counseling Services of Canada Operates Without Certified Counsellors"
- Toronto Star - "Debt Struggles Spark Concerns"