Consolidated Credit Counseling – Beware!
Consolidated Credit Counseling Services of Canada operates without certified counsellors
One of Canada’s most recognizable not-for-profit credit counselling agencies does not employ any certified credit counsellors and industry sources claim counsellors are instructed to engage in practices that take advantage of clients mired in debt.
Consolidated Credit Counseling Services of Canada Inc., an agency routinely cited by journalists on topics including personal finance and consumer debt, has been operating since January, 2007, and is an accredited member of the Ontario Association of Credit Counselling Services(OACCS), which requires that members employ certified counsellors.
It has none, a fact that executive director Jeffrey Schwartz attributes to high staff turnover and the length of time and cost required to train and certify employees, who have three years to achieve certification.
“Our industry has been around for more than 45 years, yet counsellor certification is a fairly new requirement. As a newer organization in an industry with a long history, it has taken time and resources to grow Consolidated to the same level as many of our industry colleagues,” Schwartz wrote in an email after an interview with the Star.
“Likewise, it has taken time to build a team of counsellors with the qualifications and skills to meet our high client-service expectations,” he continued. “We are now at a point where many members of our counselling team are exceeding these expectations, which is why we have invested in their AFCCs (Accredited Financial Counsellor Canada) certification designation.”
Schwartz told the Star that three counsellors were nearing completion of the course materials and were preparing to write the exams in mid-February.
“Consolidated Credit always has, and always will put the needs and the best interests of consumers first,” Schwartz wrote. “We are a leader in our industry because of the professional and compassionate counselling we provide to every Canadian who reaches out to us for help.”
Counsellor certification was introduced by the Ontario Association of Credit Counselling Services in 2006 to bring uniform standards to the industry, according to executive director Henrietta Ross.
The cost of certification is about $1,000.
“It has been a concern of ours for a long time, in terms of qualified people working with the consumer,” Ross said. “For quite a number of years there was no special training with a specific curriculum for this sector.”
She said Consolidated Credit was “relatively new” in the industry.
At the not-for-profit credit counselling agency, Credit Canada Debt Solutions, which is one of the pioneers in the industry, 18 of the 25 counsellors are AFCC-certified and six more are in the process, according to Debra Dodge, director of program services.
Credit Canada Debt Solutions CEO Laurie Campbell said turnover among counsellors at her agency is low.
Lack of counsellor certification isn’t the only problem at Consolidated Credit, according to sources in the financial services industry, who spoke to the Star on condition of anonymity, because of their positions in the industry.
One source told the Star that counsellors at Consolidated Credit used to be paid bonuses based on the number of applications for debt management programs they sent out to prospective clients. Another source said the system rewarded counsellors when the first payment on a debt management program was made to the agency by a client.
Both said the bonuses were nominal.
“As for our counsellors receiving bonuses related to the outcome of counselling sessions, I can assure you that this is false,” Schwartz wrote in response to the allegations on Thursday. “I want to reiterate that our counsellors are compensated for following-up, taking care of the consumer and their accounts, helping them to understand the impact of their decisions and providing the right solution to the right person.”
The Star was also told that a prospective institutional client made calls to Consolidated Credit posing as a customer, and decided, based on the way the calls were treated, not to do business with the agency. The counsellors were ready to sign up prospective clients who could afford to pay off their debts without intervention and they weren’t properly disclosing the impact a debt management program would have on a person’s credit score, the source alleged.
Filing a debt management program results in an R7 rating, which remains on a client’s credit history for two years after the last payment is made, making it difficult or impossible for them to obtain loans, including mortgages and car loans, at reasonable interest rates.
Sources also said clients of Consolidated Credit who ended up with a surplus in their accounts — which in some cases amounted to hundreds of dollars — were asked to donate the surplus back to Consolidated Credit.
Schwartz agreed that clients are asked if they would like to donate surpluses to Consolidated Credit, but he said they are also told how to rebuild credit.
Documents filed with the Canada Revenue agency reveal Consolidated Credit generated total revenue of $8.4-million in 2011. It employed 17 full-time employees and 12 made less than $40,000. According to Statistics Canada, in 2011, the low-income cut-off for a family of four in Toronto was $43,292, before taxes.
Consolidated Credit paid out $1.7-million in professional and consulting fees in 2011, which Schwartz said included legal, accounting and technology fees, educational services, public relations and communications, and human resources.
A debt-management program involves consolidating a client’s debts into a single monthly payment for a period of up to 60 months. A more typical term is 48 months. Interest on balances owing are reduced or waived, but the client agrees to pay off the entire amount, including monthly fees to the credit counselling firm they filed with.
In addition to monthly fees from clients, credit counselling companies get $22 for every $100 collected on behalf of creditors.
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Re-Posted: Rebecca Schaafsma, Debt Relief Canada