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Dealing with Debt Collectors: A Blog by CBA Executive Director, Dara Duguay

Credit Builders Alliance’s (CBA) non-profit members are on the front lines in helping consumers tackle their financial challenges. These counselors often review their clients’ credit reports in order to identify issues. Consistently, one of the biggest challenges is dealing with collection accounts. According to VantageScore, an unpaid charge-off that is placed at a collection agency can cause a credit score drop of between 165-185 points for someone with an 810 score and a drop of 105-125 for someone with a 680. The higher you start, the greater you fall. Irrespective of the extent of the drop, it is indisputable that having a collection account on one’s credit report causes much financial pain.

However, CBA’s members share that working to resolve a collection issue can often be just as painful. So, it was not a surprise to hear CFPB Director Cordray tell the CFPB’s Consumer Advisory Board on October 27th that, “Debt collection generates more complaints to the Consumer Bureau than any other financial product or service. We have seen great consumer harm and we know that much work remains to be done.”

Director Cordray went on to say that “Debt can overwhelm people and leave them feeling helpless and powerless as they try to fend off harassing debt collectors.” When consumers are in this state of mind, a third party intermediary (such as a non-profit financial counselor) becomes a critical partner. Precisely, because it is not THEIR debt, the counselor is removed from the passion and the angst that the consumer is feeling. This intermediary role is essential to helping consumers make rational decisions that are in their best financial interest.

CBA hopes that as the CFPB continues their discussion about the debt collection industry that they acknowledge the key role that non-profit financial counselors play in the debt collection trenches. Resolving outstanding debts is not a game for the faint of heart. Thankfully we have committed professionals who are willing to take on the challenge.