Credit Counselling vs. Debt Reduction Companies: What’s the Difference?

Sue Davey is a credit counsellor with the Family Counselling Centre of Brant, a full service not-for-profit agency that celebrated its 100th anniversary in 2014.  As a full service agency the Family Counselling Centre of Brant can help people with money problems, but can also help with the causes of those problems, and can provide counselling for addiction, family and other issues.

Dealing with a debt reduction company is very different from credit counselling or working with a Licensed Insolvency Trustee.

Local credit counsellors meet with you in-person. They take the time to review your budget and make a debt repayment plan, that may or may not include a debt management plan. Large, national, credit counselling agencies may meet with you in person if you are in a large city however much of their work is done over the phone and their primary business is putting people into debt management programs. Either way, reputable, non-profit credit counsellors are going to be talking with your creditors on your behalf.

Similarly, licensed insolvency trustees are required by law to conduct an in-person debt assessment. Consultations are free and the objective of the assessment is to look at your debts, your assets and your income to determine what options can help you eliminate your debt. Trustees offer both bankruptcy and a consumer debt proposal program if you need formal debt relief.

Debt reduction companies almost always work over the phone. They’re not going to be in touch with your creditors, they’re not going to be negotiating on your behalf. You are often required to pay fees to the debt reduction company long before your creditors are contacted or approve any kind of debt reduction plan. They work as debt consultants and don’t have a formally recognized debt reduction program.

Both not-for-profit credit counsellors and for profit debt reduction companies charge a fee.  No-one can provide a service for free.  Someone has to pay.  As Sue explained, at her agency budgeting help and the initial consultation is free, and then their fee is typically a $50 one time fee when you start a debt management program, and you pay a fee of 10% of each monthly payment.  So if the creditor payment is $300 per month, you would pay $330 per month in total, including the fee.  In addition, most creditors also make a donation back to the credit counselling agency, which can be anywhere from 0% to 20% of the funds received by the creditor.

A debt reduction company will often charge an upfront fee that can be $1,500 or more, and that fee may be due even before they have an agreement from your creditors, so it’s a very risky alternative.  They will generally also charge a monthly fee, which can be 10% or more of your monthly payments.

A consumer proposal administrator, like Hoyes Michalos, is paid from the monthly payments that the creditors agree to accept.  You don’t start making payments until the proposal is filed, and you receive full court protection.  So, if your proposal is $300 per month, you pay $300, and Hoyes Michalos receives a portion of that $300.  The portion the consumer proposal administrator receives is set by the federal government, and applies to all consumer proposal administrators, and equals $1,500 plus 20% of the funds distributed to the creditors.

Everyone gets paid for providing a service.  Sue’s point is that a credit counsellor or a consumer proposal administrator or a bankruptcy trustee gets the agreement of the creditors up front,so at least you know what you are paying for.  A debt reduction company takes their fee up front, in most cases before the creditors have agreed to the settlement.  That’s a significant difference.

In all cases you should review your options, and decide which option is best for you.

Sue closed the show by giving some specific examples of people she has helped to become debt free.

Resources Mentioned in the Show

FULL TRANSCRIPT show #7 with Sue Davey


Doug Hoyes:  Welcome to Debt Free in 30 where every week we take 30 minutes and talk to industry experts about debt, money and personal finance. I’m Doug Hoyes. Today we are going to talk again about credit counselling and specifically I want to address what is it, how does it work, but what is it different from some of the other credit counselling type services that are out there. So I’m joined by an expert, who are you, what do you, where do you work?

Sue Davey:  Sue Davey. I work at the Family Counselling Centre of Brant. I am a credit counsellor. I’ve been there for 19 years.

Doug Hoyes:  Nineteen years. So you started when you were 10 so that is very impressive. So the Family Counselling Centre of Brant. Tell me a bit about them. Now, I will confess that I know about them because you and I are sitting here in my office in Branford recording this today. We are at 218 Brant Ave. Your office is just down the street from us. What’s the address?

Sue Davey:  We’re at 54 Brant Ave.

Doug Hoyes:  54 Brant Ave. So not a very long walk from where we are but tell me a bit about the agency. How long has it been around, what does it do?

Sue Davey:  Our agency has been around for a hundred years.

Doug Hoyes:  A hundred years?

Sue Davey:  Yes. We just celebrated our hundredth anniversary. So I understand, now, we’re on Brant Ave, we’ve moved a couple of different times but I think it originated in the center of the city years ago during wartime and they were put into place to assist the women who had been left behind. So food stamps and clothes were given to women and children during those difficult times. So I think that’s where it originated, and of course it’s evolved, we do lots of different services now. We’re a multi-service agency like a lot of other agencies in this city. One of the things that we is the credit counselling piece.

Doug Hoyes:  So that would’ve been the First World War you’re talking about if you’ve been around for a 100 years so that’s pretty impressive. So when you say you’re a multi-service agency, so I understand that there are some credit counselling agencies that just do credit counselling, nothing else. But your agency does a lot of other things so give me some examples of the types of other things that they would help people with.

Sue Davey:  So we do other kinds of counselling so we offer family counselling, individual counselling, couple counselling. We have groups for people who are struggling with certain issues. We have a women’s group. We do a self esteem group. We also have a developmental services department and we work with those families who have somebody in their home who may have a delay. We offer family relief for some of those families as well. We also do some children services. We have an office in Hamilton. So we also, in the department I’m working in, do credit counselling. So we help those families are struggling with their finances.

Doug Hoyes:  So do you find that there is an overlap, that somebody who your agency is helping in another area also then has financial problems?

Sue Davey:  Absolutely. Some of the people who work with the person who has a developmental delay, they may be on a fixed income, you know, ODSP or CPP Disability, Having a low income may mean that they struggle to meet ends meet so budgeting counselling may be in order. Some people who come in for couples counselling, sometimes money is one of those underlying issues that can muddy the water so sometimes an internal referral is in order so that we can help them with some of their marriage issues but also help them with some of the financial issues as well.

Doug Hoyes:  And I guess it’s a chicken and an egg thing that in some cases, the financial problems are what start off the marriage problems for example but in other cases, no, the marriage problems came first and as a result, financial problems lead. Is that how it works?

Sue Davey:  Exactly. When we see a lot of people who are struggling, I always say most people come to see us because of a reduction in their income. If you’re going through a separation, you probably are having some financial struggles. Some people are coming to use because they’ve had other issues and they compensate by overspending in certain areas. So sometimes it’s one before the other or the other way around.

Doug Hoyes:  And that’s the whole point I guess of a full services agency is that if someone goes to see you, you can diagnose that yeah, okay, there’s obviously a financial problem, that’s why you’re seeing a credit counsellor but there’s some other underlying issues, we’ve got people who can help you as well.

Sue Davey:  Yeah, exactly. And that just makes it easier for people because now they know where we’re located, they know where to park, they’re comfortable with the intake process and it doesn’t feel like such a scary  place to be going.

How Does Not-For Profit Credit Counselling Work?

Doug Hoyes:  Yeah, and you’re helping people out so let’s talk specifically about credit counselling then which is obviously the group that you’re in. Give us the quick overview. What is credit counselling, how does it work, what’s the process?

Sue Davey:  First of all, it’s self referral. You can call. You don’t need a doctor referral. You don’t need anybody else to call you. You just make that intake call. The intake is pretty easy, it’s pretty fast. It’s over the phone, and then they book you an appointment time to see a credit counsellor. They do some diagnosing over the phone as well because some people aren’t too sure what we do and how we do it so they talk a little  bit about that. People come in and we do a full assessment. We have a look-see at what kind of money is coming into your home.

We also do budgeting and we look at how much money you need, how much are your bills. We look at your top 10 priorities. How much is your rent or your mortgage or your heat, your hydro, your food. Those are the important things that you’ve got to maintain. We also then look at what kind of debt you’re bringing to the table because in a lot of cases, people have debt that they haven’t dealt with and they’re not too sure how to do it. Either they can’t afford it anymore or it’s old debt that’s coming back to haunt them and so they need a solution for it. That’s what we do is a full assessment.

My job is to help them come up with some solutions. What is in their best interest? Is it in their best interest to carry on doing what they’re doing? Sometimes it’s in their best interest to do a program through our office and we do have what’s called a debt management program. In real simple terms, what that means is instead of you paying each of these creditors, you pay us, we pay your creditors. We negotiate on your behalf. We ask those creditors to waive interest which can be the saving grace for a lot of people.

Doug Hoyes:  So let’s take an example then. So a person comes to you, they’ve got a bunch of debt, what would a typical amount of debt be? Obviously if someone has $10 million in debt, you’re probably not going to be able to help them. If they’ve got a $50 phone bill, then obviously you can give them some advice on how to catch up with that. What’s kind of the sweet spot where you are most able to help someone in terms of either the level of debt or the monthly payments or what’s the typical person kind of look like?

Sue Davey:  Well, a typical person that we might be able to help is one that probably has an income that they have some money left over. When we do that budget, they’ve got some money to address their debt. We do that first because we want to know, how much money do we have available to us to address the debt. There are some tweaking that can happen with a budget that we can maybe enhance that number and then we look at how much debt they’re carrying.

When I first started doing this, about 15 years ago I started specifically working in the credit counselling office. Ten thousand was a pretty average debt. Now that 10,000 is rare. We still can help the people who come with $10,000 worth of debt because if you’re on a fixed income, you’re on ODSP, that’s a lot of debt. That’s why it’s tough to say what’s average. It really depends on what money is coming into your home. We are often looking at a debt load of $30,000 to $40,000 where people are struggling but it’s not unusual for us to find an unsecured amount of debt that is in the $100,000. Those are far and few between because trying to put a program together and make it fit and work within their income and budget, is tough but that’s what we’re looking at normally.

Doug Hoyes:  And the key is we’re talking about unsecured debt here. Obviously if you have a mortgage or a car loan, well, if you stop paying your mortgage, you’d lose your house. If you stop paying your car loan, you lose your car. So in a typical debt management program you’re going to start by looking at their whole situation and a budget is a very important part of that and that’s something you’re very hands on with and if you determine based on the budget, obviously the person perhaps might have to do a bit of adjusting, you gotta cut back on this, cut back on that but you can afford $300, $400, $500 a month towards your debt. At that point then you go to the creditors. So it’s not something that the person in debt is. This is your job. You’re the one who is either picking up the phone or sending them a fax. Is that how you communicate with the creditors?

Sue Davey:  Yeah, so what happens is that once a person decides that yes, this is the best option for them and they want to do a debt management program, we sign them up and then we contact their creditors on their behalf. We ask them to accept a program on their behalf which means that they pay us and then we pay their creditors. So yes, we don’t pay anybody until we have acceptance and it is a voluntary program. It’s voluntary on the creditors’ behalf, the client’s behalf and our behalf. There’s a new contract that’s put together and so that’s basically how it works.

Doug Hoyes:  And it becomes a one stop shop and I make the payment to you and you deal with all the creditors.

Sue Davey:  That’s right. And now we’re set up because we’re a little bit savvy on the computers. You can do it, add us as a creditor so you don’t have to physically come into the office to do that. I’ve had people who have had to take jobs out west or had to go to Afghanistan to work and they still can make their payments online because they’re set up with online banking and we are set up that way as well. It’s pretty convenient. It is voluntary but it is something that we probably got acceptance from about, our averages are about 96 percent would accept a program on your behalf.

Doug Hoyes:  That’s a pretty good success rate.

Sue Davey:  Yeah.

Doug Hoyes:  So I’d like to talk a bit about some of the specific people that you’ve helped. We’re going to take a quick break and then I will be back with Sue Davey.

What Does It Mean to Be An Accredited Credit Counsellor

Doug Hoyes:  Welcome back to Debt Free in 30. My name is Doug Hoyes. I am joined today by Sue Davey from the Family Counselling Centre of Brant. Sue is a credit counsellor there.

In the first segment, you talked about what a credit counsellor is. You’re a not-for-profit agency but when I turn on the radio or look in the newspaper or go on the internet, there’s all these other places that are advertising that they’re also credit counsellors and that they can settle my debt for 20, 30 cents on the dollar. What’s the difference between you and those guys? What’s the difference between what you do and what they are purporting to do because they’re saying they’re credit counsellors? They’re saying they are the same as you so what’s the difference?

Sue Davey:  Well, first of all, we are not-for-profit and I think that’s important. A not-for-profit agency, we have to be accredited and what that means is that we have a group of people who come in and make sure that our agency is following a whole bunch of rules so as long as they’re abiding by policies and procedures and they’re following all those rules, they get accredited. We have to be accredited as credit counselling. So our department also has to be accredited by a team of people who want to make sure that our group of people are following rules and regulations that are set down by our bigger agency that is sort of our umbrella organization.

So there’s lots of things that we have to follow. One of the things is that the people who are employed there have to have a certain level of education so in order to be accredited at our agency, you have to have a university education and I also have to be an accredited credit counsellor which means I had to go to school and pass some exams and then have to keep up with my education so I have to have education points every two years. So there’s a lot of hoops that you have to jump through in order to get accredited.

Unregulated Debt Reduction Companies

Some of the debt reduction companies or whatever you want to call them, I don’t think they have the same level of accreditation because they’re not regulated. In the province of Ontario, there is no regulatory board that determines exactly what they need to do so what they have is a lot of good marketing dollars which we don’t have because of being a not-for-profit, but they also are not regulated, they don’t have the qualifications of the counsellors are not the level of qualifications that we have to have in order for us to work and for us to do the work that we do do.

Doug Hoyes:  Yeah, so I guess anybody can say they’re a credit counsellor. It’s not like saying you’re a doctor. There’s an actual course you have to take to be that. In order to be a credit counsellor to provide credit counselling under, for example, the Bankruptcy and Insolvency Act, if someone has done a proposal or a bankruptcy, there are specific courses you have to take and obviously you’re fully qualified to do that. But over and above that, the agency that you’re with and the umbrella organization that you’re apart of also mandates those standards. So anybody can start a debt consulting company I guess but not anyone can instantly become an accredited, not-for-profit credit counsellor because there’s a whole bunch of rules to go through so I think that’s important.

Sue Davey:  One of the things that we have to do is that we have to do the majority of our counselling has to be face-to-face. All of my counselling is face-to-face. One hundred percent of it is face-to-face. In these debt reduction companies, you have no idea where they even are setting up shop because most of the time you are not meeting them face-to-face. I would think the majority of the time it is just over the phone.

So you’re placing your debt in the hands of someone you’ve never met, who you are not too sure who they work for so that can be troublesome. The other piece of the problem I think is that you have to pay a lot of upfront fees so that these companies take their fees upfront and until your fees are being taken care of, they’re not going to be in touch with your creditors, they’re not going to be negotiating on your behalf.

In our case, first of all, we have to have approval before we even send money to them. We do send money to them and we do take a fee. We do have a fee. That’s how we stay in business but it goes every single payment that you make. We take a bit of a fee and the rest of it goes to your creditor.

Doug Hoyes:  So just to clarify then, how much are the upfront fees when I come in to see you?

Sue Davey:  To come and see me just to do an assessment is free.

Doug Hoyes:  It’s free.

Sue Davey:  It doesn’t cost you anything. If you do a sign up for a debt management the sign-up fee is $50.

Doug Hoyes:  Fifty dollars and so let’s say we meet, we decide yep, a debt management plan is what I need to do. I pay you the $50 to get it set up and then every month I’m making a payment. That’s what a debt management plan is. I’m going to settle all my debts. And so how much is your fee each month then?

Sue Davey:  It’s usually 10 percent of whatever your payment is.

Doug Hoyes:    So if my payment is $300, then the fee would be $30.

Sue Davey:  Correct.

Doug Hoyes:  And obviously you’d build it all in so I’d just be paying $330 a month. It would all be one number for me. And then you also get funding, your agency gets funding through many different places, the United Way. Is there funding?

Sue Davey:  Yes, we have some funding that is really earmarked for credit counselling because we’re able to offer a free assessment for anybody who needs to if they live in Brant County or work in Brant County because we are associated with United Way. That’s how we’re able to give that assessment for free.

Doug Hoyes:  That free assessment. And then what role do the banks play then because the banks are also providing some kind of assistance to you as well?

Sue Davey:  If we collect on their behalf, they do pay a donation. They make a donation back to the agency. So sometimes we are collecting on behalf of creditors who do not give us a donation. It is not mandatory that they give us the donation so you might be collecting for Rodgers or you might be collecting for Bell and a lot of people have a Rodgers and a Bell debt but they’re not obligated to make that donation.

So some of the banks, some of the credit card companies will, some of them won’t and so it’s all of those different forces that end up being your funding sources. Our funding sources are like you say, United Way is part of it. There is some fees that go along with setting up a program, sometimes we have some fees for going out into the community to do some speaking engagements and things like that.

Doug Hoyes:  Great. Thanks very much for joining me, Sue. We’re going to take a quick break. When we come back, I’m going to give all the links and everything so you can find Family Counselling Center of Brant and other credit counselling agencies. Sue, thanks very much for being here.

Sue Davey:  Thank you, Doug.

30 Second Recap

Doug Hoyes:  Welcome back. It’s time for the 30 second recap of what we discussed today. My guest was Sue Davey. A credit counsellor with the Family Counselling Center of Brant. A not-for-profit full service agency that has served the community of Brantford and area for over 100 years.

As a credit counsellor, Sue helps her clients determine their financial priorities and then helps them work on strategies to solve their money problems which may include a debt management plan which is a service offered by her agency.

In the second segment, I asked Sue to describe the difference between what she does and what a for profit debt consultant says they can do. Sue explained that her agency is accredited and all credit counsellors must have a certain level of education. All of her agencies counsellors have university degrees. Debt reduction companies are not directly regulated so you don’t know what you’re getting when you deal with them. That’s the 30 second recap of what we discussed today.

So what’s my take on the difference between credit counsellors and debt reduction companies? As I’ve said on previous shows, the purpose of this show is to explore many different strategies for becoming debt free. I’m not here to tell you that you should do this or that because every case is different. Obviously, as the co-founder of Hoyes, Michalos and Associates, I’m selling consumer proposals and bankruptcies so I’m biased and in favor of that solution. Sue Davey is a credit counsellor so she would like you to do a debt management plan.

The trust is that no one solution is right for everyone. For some people, a consumer proposal is a great solution. For others, it’s a bad idea. Credit counselling is the same. For some people, a debt management plan through a not-for-profit agency like Sue’s is the perfect solution. You have one monthly payment and reduced or no interest. As Sue said, her typical client has an income that can support the plan and total debt of around $30 or $40,000 but it could be higher or lower. If that’s you, credit counselling may be a great solution.

Of course, if your income is not high enough to allow for monthly payments in a DMP, a debt management plan is not the right solution. Over the last 10 or 15 years, I’ve referred literally hundreds of people to the Family Counselling Center of Brant and to other similar agencies for credit counselling and Sue and her team have referred many people to my firm and other firms like mine when our services are more appropriate. That’s what I like about Sue’s agency. I believe they are genuinely concerned about finding the right solution for their client.

It may be a solution they offer or it may require an outside referral but either way, in my experience, they always try to act in the best interest of their clients. That’s the kind of advisor you want. Someone who isn’t just in it to charge you a fee and send you on your way like some debt consultants do but instead is working in your best interest. If you can find someone like that, use them, whether they’re a trustee, credit counsellor or other advisor. That’s why the vast majority of my clients, that have also worked with the Family Counselling Center of Brant, speak very highly of their services.

That’s our show for today. This show is on the radio every week and it’s also available on our website and on iTunes so please tune into this radio station at the same time next week or subscribe to the podcast version of the show with special bonus content on iTunes. Full show notes are available at and I’d love to hear your comments which you can leave right on our website at

Thanks for listening, until next week, I’m Doug Hoyes. That was Debt Free in 30.

Bonus Segment

Thanks for listening to the radio broadcast segment of Debt Free in 30 where every week your host, Doug Hoyes, talks to experts about debt, money and personal finance. Please stay tuned for the podcast only bonus content starting now on Debt Free in 30.

Doug Hoyes:  We’re back. This is the bonus segment. The podcast only segment on Debt Free in 30. This won’t appear on the radio but we ran out of time. We’ve only got a limited amount of time on our actual radio show but I’ve asked Sue Davey to stick around and tell me some stories about people that she’s actually helped.

So Sue, let’s take a couple of different examples. Let’s start with perhaps a younger person because from what I understand, you do a lot of speaking engagements, you’re out there in the community. In fact, that’s one of the reasons that the Family Counselling Center of Brant exists is to be out there in the community helping people so you’re out speaking to groups of high school students, younger people. Give me an example of the kind of problems that they tend to get into and something you’ve been able to do to help them.

Sue Davey:  I recently met with a lot of different young people, just starting to work, and one of the things that I asked them is whose got a cell phone because everybody has a cell phone these days. The thing is that people can very quickly get into trouble with cell phones. I had a gentleman who had finished high school and he was working, he was over 18 so he can sign his own contracts at that point in time and he went out to get himself a cell phone. A lot of people do that.

The problem is that the bill came in and it was bigger than he thought it was going to be and he wasn’t able to manage it and then another month went by and again it was too big and he wasn’t paying the full bill. By three months, he realized that he wasn’t ever going to be able to pay this bill. He lost services. So he decided to do it again. So he went to a different cell phone company and got another cell phone.

The problem is that you enter into a contract with these and if you breach the contract which means that if you don’t pay your bill, you’re not only owing the amount of money that you have been charged, but you also have the contract fee which can be — it used to be a three year contract would be $400 anywhere up to $700 that you would owe. It depends on how long you’ve been in that contract. This gentleman did it a second time, a third time, by the time he came to see me he had seven different cell phone contracts.

Doug Hoyes:  Seven different cell phone contracts. Wow.

Sue Davey:  And he had over $7,000 worth of debt just cell phone. It’s a service that you use and it’s a form of credit and if you’re not careful with cell phone bills you can really rack up a huge amount of debt.

Doug Hoyes:  That’s an interesting comment. It’s a form of credit and we don’t think about that. We think okay, I go to the bank, I get a loan, I use my credit card, that’s obviously credit, it’s called a credit card but you don’t think of a cell phone. I get a cell phone; I gotta pay it every month. It’s not really credit but obviously yeah, if you sign for a one year, a two year, I don’t know if they allow the three-year contracts.

Sue Davey:  Not anymore. The rules have changed.

Doug Hoyes:  The rules have changed but I guess a two-year contract is the maximum now but you sign a two-year contract and you don’t pay, you’re on the hook. You in effect, borrowed that service for two years. So this guy comes to you, he’s got $7,000 on seven different cell phone contracts so roughly a $1,000 each one and these are obviously included the penalties for breaking them early and what not. But he was working you said? He did have a job.

Sue Davey:  He was working. He had a part-time job, still living at home so he didn’t have a lot of expenses so based on his assessment that we did, he was able to have some money left over at the end of each month to afford to do a repayment plan which was a debt management program through our office and he was able to make his payments on a monthly basis.

Doug Hoyes:  So you then contacted each of the different cell phone companies and said here’s the deal, yep, he will pay you back $7,000. He can’t do it all tomorrow so he ended up paying a few hundred dollars each month, is that how it ended up being?

Sue Davey:  Yes, exactly.

Doug Hoyes:  And as a result, all the cell phone companies agreed to participate?

Sue Davey:  That’s correct, yeah.

Doug Hoyes:  So it’s not just the credit card companies and the banks that will work in a debt management plan but cell phone companies will as well?

Sue Davey:  Yeah.

Doug Hoyes:  And what about Payday Loan Companies, will they go along with it?

Sue Davey:  Yes, yes. Payday Loan Companies, they’re a newer product. They’ve just been around maybe six or seven years. At first, they weren’t at all interested in working with us but now we’re they’re your friends because they will do a program with us. They’re regulated and so it’s become a little bit more acceptable for them to accept less than a 100 percent of the interest that they’ve been charging so a lot of the companies, the Payday Loan Companies will waive the interest or at the very least, reduce it down. So that means instead of having to repay these demand loans every single month, you’re paying a payment to us, we pay your creditors.

Doug Hoyes:  Yeah, because with Payday Loans, if you were to reup the loan every couple of weeks you’d end up paying five or 600 percent a year is what it would be so getting a break on that interest. So you’ve actually got a pretty good track record with Payday Loan Companies either reducing or eliminating the interest in the repayment plan.

Sue Davey:  Yes.

Doug Hoyes:  So credit cards, bank loans, cell phone companies, Payday Loans, you can deal with a whole bunch of different types of debt then obviously with this sort of thing.

Sue Davey:  Yeah. Sometimes we don’t have a lot of personal people on our list that are interested. Sometimes, however, we have. You’ve got your mom that you owe money to and she doesn’t care how quickly you pay it back but you feel like an obligation to pay her back so we have had personal people on the list. They have to sort of understand what we do and how we do it. They’re probably not going to make a donation to our agency but it is something at least you can sort of collectively get rid of all of it. Deal with all of it. Feel like you’re at least going to pay back what you owe to those people. Yeah.

Doug Hoyes:  And when someone comes into see you, you’re going to look at their situation, figure out what their monthly cash flow is, what their total debt is and some people you can help, some people you can’t. It’s as simple as that, right?

Sue Davey:  That’s correct. Some people come to see us just to help get organized. They just need to do some budgeting. They’ve never been taught that and it’s a skill. If you’ve never been taught, then sometimes you need somebody else’s help. Sometimes it’s just getting organized because you made an appointment to sit down; you’re forced to look at your finances. That’s a good thing. For some people, it is about the debt and so yes, sometimes we can do a program with them.

Sometimes I recommend that they need to keep doing what they’re doing. They can afford to pay it back on their own and that’s the only way they can maintain their good credit so they probably need to carry on doing that. For other people, the debt is too big. They can’t afford a program with us and then I would make recommendations about what their other options are. Whether they seek the advice of a trustee to look at doing a consumer proposal or a bankruptcy because sometimes they are more affordable options for people who have a larger debt load they’re not able to manage on the current income.

Doug Hoyes:  And so of the people that come into see you with debt problems, you’re only going to do a debt management program for a percentage of them?

Sue Davey:  That’s correct.

Doug Hoyes:  So less than half?

Sue Davey:  Yes, probably less than half. I would think maybe one in five that we might be able to do a program. Not everybody comes to see to do a debt management program. Sometimes they’re just coming to us because they’ve separated or they’ve had a reduced income and they need to figure out how much can I afford for rent, what should I  be targeting as far as my rent and my utilities and things like that. So some of it is just education pieces that we’re doing but not everybody is seeking a solution for their debt. But of those that are seeking a solution for their debt, probably about one in five that we would be able to help because of the affordability of it. I don’t want to set up anybody for something they’re not going to be successful at, that they’re going to fail at. I want them to be successful.

Doug Hoyes:  Yeah, and I think that’s a key point and my company, Hoyes, Michalos and Associates is the same. If I can help you, great but if I’m going to make your life worse, then it doesn’t make sense. I talked to a lady very recently who had a small amount of debt. She was starting a new job in a month and I said well, with your new job, you’re going to have no problem. It’s going to take you six months or a year perhaps but you’re going to be able to clear all this up so it doesn’t make sense to me that you’d go bankrupt today and have an impact on your credit report and some of the other negative repercussions when you’ve only got a small amount of debt to deal with.

So I think it’s critical and you have the same approach as I do obviously. Let’s look at the situation and let’s find the right thing for you to do whether it’s with me or without.

So we talked about a young person. Give me an example then at the other end of the spectrum. Perhaps somebody who is a bit older who had some debt issues, what was the story. Obviously don’t give me any personal details but what was the story and what ended up happening?

Sue Davey:  Well, I think with some of our seniors, they go through a reduction of their income strictly because they retire. You’ve got working income, you’re making this amount of money, you can pay the bills. You feel pretty comfortable. The problem is, when you retire or sometimes people are forced into retirement, some people have early retirement because of illness or sickness, things that we don’t always predict. They have a reduced income so for a lot of people, they don’t know how to manage that reduced income. They don’t adjust their expenses quickly enough and they end up with a debt load and it can be a debt load on credit card debts but for a lot of times when they’re on a fixed income, credit card companies aren’t going to boost their numbers or give them more credit cards so a lot of them are desperate so desperate people sometimes turn to whatever is available to them and sometimes that’s Payday Loans.

So we did have a gentleman who came into our office, exact same scenario. Reduced income, wasn’t too sure how he was going to pay his debt and what he had done is he had gone to several Payday Loans. In fact, he had over 20 Payday Loans.

Doug Hoyes:  Wow, 20 Payday Loans and this was a — was this guy retired?

Sue Davey:  Yeah.

Doug Hoyes:  So he didn’t even have a Payday but they gave him Payday Loans so that’s kind of scary. Okay. So he came into you, he had 20 different Payday Loans and I assume this was back in the day when it was a little easier to cycle one. Now they’ve got some rules that you’re not allowed to kite them in effect.

Sue Davey:  Well, the Payday Loans are now regulated by the government and they never used to. It’s all province wide. I think there’s still two provinces in Canada who are not regulated but in Ontario, we are regulated and they do follow some rules and regulations that restrict some of their lending practices.

Doug Hoyes:  Yeah, it’s more difficult to get multiple Payday Loans but it’s not impossible because if you just go from Payday Loan place A to B to C to D, so A can’t give you five in a row but there’s lots of other ones that can. So in this particular guy’s case, this was a little while ago back when it was a little easier to really rack them up so he ended up with 20 different Payday Loans and this was a senior who was on a fixed income, he was on a pension or whatever. So what was the upshot of it all? What happened after that?

Sue Davey:  Well, he did a program with us. He was able to do a debt management program. He was able to pay it back over the course of time. He was quite thrilled that there was an option for him because he didn’t see an option. He just felt the only option was going to another Payday Loan and another Payday Loan, it wasn’t working for him. Really all he was doing was just collecting debt. So digging himself a bigger hole. So it was time to stop digging the hole. Find another solution. We became a solution for him. So yeah, he did a debt management program and he’s paid it all off. He is now debt free.

Doug Hoyes:  So he’s not a client of yours anymore. He’s all good.

Sue Davey:  Success case.

Doug Hoyes:  Success case. That’s what we want. And I think you’re right, in the case of a Payday Loan, the interest rates are so high that the debt itself isn’t huge. You can’t borrow $10,000 from one Payday Loan place, but $500 here, $500 there adds up and with the high interest rate, what you really need in a lot of cases is a bit of a break. And this was a guy who was a perfect candidate because he had an income, it was a steady income, it was a pension. It was the same number every month, he just didn’t have enough to be covering all the interest. That’s a good story.

Sue Davey:  And he was quite happy. He felt like these Payday Loans were good to him. When he was in trouble, they were the only ones that would help him out so he was quite happy that he was going to be able to pay them back because he felt responsible for the debt load. On the other hand, paying it back was impossible unless he was able to make a month payment so doing a program with us worked for him.

Doug Hoyes:  A classic example of an honorable guy who perhaps should have thought it through a little bit more upfront but haven’t we all made those kinds of mistakes but at least he wanted to deal with it. This gave him a way to deal with it and he was able to.

Sue Davey:  Absolutely.

Doug Hoyes:  Excellent. I really appreciate those two stories, Sue, and thanks for sticking around for the bonus segment.

Sue Davey:  No problem, Doug. My pleasure.

Doug Hoyes:  Thanks, I appreciate it. Thanks. That’s Sue Davey from The Family Counselling Center of Brant. You can go to and get links to her website, phone numbers, addresses and everything else we talked about today. Thanks for listening to the podcast only bonus segment of Debt Free in 30. For more information on today’s show, please go to That’s and type the word podcast into the search box for more information on every episode of Debt Free in 30. Until next week, this was Debt Free in 30.

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2 comments on “Credit Counselling vs. Debt Reduction Companies: What’s the Difference?

  1. CanadianDaniel on

    Great show, particularly in light of the fact that people are at their most vulnerable when they seek help from a debt advisor.

    I was surprised to see on the Association for Financial Counseling Planning and Education website (which generally deals with accredited professionals) a ‘Find a Virtual Counselor’ link that lists a number of Canadian debt management counselors, coaches and consultants (Dr. Money Man in Calgary jumped out).

    Based on your experience as a professional bankruptcy trustee, do you agree with Sue Davey’s validity test that credit counselling should be face to face?

    • J. Douglas Hoyes, CA, Trustee on

      Thanks Daniel. As a general rule, yes, I agree with Sue Davey’s opinion that credit counselling should be face to face, in the same way I believe that medical advice from a doctor, or advice from any professional, is best delivered in person.

      At our firm most people in need of our services telephone us first, and we spend a few minutes on the phone quickly reviewing their situation. But that is always followed by a face to face meeting. In fact, we will meet with many clients two or three times before they officially “sign on the dotted line”. While there are advantages to talking on the telephone (it’s quick, and there are no travel delays), there is no substitute for being able to lock us in the eye and see that we truly have your best interests at heart. I know that Sue believes that she can best help someone when she can read their emotions and body language as well as just listen to their words, and that is best done in person.

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