November 20, 2003

Statement on the Credit Counseling Hearing Held by The Subcommittee on Oversight of the Committee on Ways and Means

ROCKVILLE, Md., Nov 20, 2003 /PRNewswire via COMTEX/ -- The following is a statement by Steve Rhode, president and co-founder of Myvesta:

"The current discussions regarding the credit counseling industry are ignoring an important aspect. Credit counseling agencies are limited in providing comprehensive solutions to their clients because of rigid creditor policies and new state regulations that force reliance on those creditors for funding. The limited funding restricts the depth of help counseling agencies can provide.

"Because credit card companies are the primary funding source for counseling programs, they exert inappropriate control over the industry. Credit card companies dictate the way all credit counseling organizations function. They have silently forced the counseling agencies to perform like paid collection agents. Some even offer collection bounties for certain types of payments. Counseling agencies, in an effort to maintain funding and provide assistance, have been left with no choice other than to comply with the wishes of credit card companies collection departments.

"This leaves credit counseling with no power to negotiate on behalf of their clients. Credit card companies also dictate interest and payment reductions, if any. It is a take it or leave it situation that often leaves consumers facing bankruptcy as their only option.

"Credit card companies have gained this control because the current system does not require any funding or cooperation from other major creditors. For instance, mortgage companies, student loan lenders and auto lenders provide little assistance, yet those are often the largest debts that consumers owe.

"State lawmakers are adding fuel to the creditors' power machine by mandating that counseling organizations rely primarily on the credit card companies for funding. Counseling agencies are scrambling to follow creditors' ever-changing policies to the letter so they can continue to qualify for funding and remain in existence. This sad alliance leaves consumers' without unbiased advocates.

"If the goal is to provide real help to consumers in financial trouble, now is the time to have healthy discussions about creating a better system. Consumers deserve a financial safety net that gives them unbiased, comprehensive assistance. Logically, that system should allow organizations to receive funding from an independent source or from the clients themselves. That way there would be no question whose interests the agencies represent. That type of system would provide meaningful help to consumers, without fleecing them of even more money before inevitably driving them into bankruptcy court. Tens of thousands of consumers would have been better off if they had gone directly into bankruptcy and avoided fraudulent consumer counseling agencies"

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