CBA Launches “About Debt Relief” Campaign to Educate Consumers on Available Resources

WASHINGTON, D.C. – The Consumer Bankers Association (CBA) today launched a new consumer education campaign, About Debt Relief. The campaign aims to educate consumers about the best available options when they are struggling to manage their credit card debt. In particular, the campaign highlights research from the Consumer Financial Protection Bureau (CFPB) and industry data regarding consumer risks relating to the use of debt settlement companies (DSCs). DSCs often advertise heavily to attract consumers but may be more costly and leave consumers with worse outcomes than other options. 

CBA President and CEO Lindsey Johnson issued the following statement on the campaign launch:

“About Debt Relief is our latest effort aimed at educating consumers on the options they have to manage their credit card debt. For-profit debt settlement companies spend heavily on advertising to certain consumers, and it can often be difficult for consumers to get objective information about their best options when they are struggling to manage their debt. 

“It is critical for consumers to have awareness and education about some of the risks of DSCs, and the alternative options that consumers may have that are less costly and that lead to better consumer outcomes.

“CFPB research highlights that many credit card companies have programs specifically designed for consumers concerned about managing their debt. Similarly, non-profit credit counseling firms can offer consumers holistic solutions for debt management, including negotiating lower interest rates with creditors, with much less risk than for-profit debt settlement companies.”

About Debt Relief

The About Debt Relief campaign aims to raise awareness for consumers about their different options should they run into trouble paying their debt – and inform consumers about the well-documented risks of debt settlement companies when considering solutions to addressing their finances.

The facts underlying the CBA’s website, syndicated column, and digital advertisements are all sourced from CFPB research on debt settlement companies, as well as other government reports on unsecured credit markets.

The campaign highlights that the CFPB recommends that consumers start by contacting their bank directly to discuss options to get out of debt. Many banks offer hardship programs, also called lender workouts, to help consumers by lowering payments or reducing fees.

The campaign also explains that consumers, particularly those seeking to manage multiple debts, should consider contacting a non-profit credit counselor.  These counselors can provide additional education and can even negotiate on the consumer’s behalf, which can result in consolidation of debts into one lower monthly payment. Although many consumers may confuse non-profit credit counseling firms with for-profit debt settlement companies, they involve significantly different risks and benefits.

Why DSCs Are Harmful

DSCs may sound like an attractive option to consumers because they may assert that consumers may not need to pay their debts in full, or purport to offer consumers the convenience of no longer having to deal with their creditors.

However, the CFPB warns that for-profit debt settlement companies can make a consumer’s financial situation worse by charging excessive fees that add up over time.

Consumers should be aware of the risks of working with DSCs, since they make money from consumers, not issuers. Indeed, working with a DSC could worsen a consumers’ financial situation.

• Working with a debt settlement company can cause consumers to incur higher balances and, as the CFPB warns, “can have a negative impact on your credit score and your ability to get credit in the future.” 

• The CFPB also notes that “[w]orking with a debt settlement company may lead to a creditor filing a debt collection lawsuit against you.”

• The debt settlement company industry concedes that 25 percent of debt settlement clients do not settle any accounts, costing consumers time and money.

In many cases, consumers could get the same or better solutions for their debt by working directly with their creditors, rather than paying a debt settlement company.

As explained by the CFPB: “Most issuers that work with DSCs reported that they offer DSCs the same settlement rates available to consumers who call the creditor directly to request settlements, but there is no charge to consumers who settle directly with the issuer. If a consumer settles through a DSC, they typically incur additional costs of 20 to 25 percent of the balance owed.” 

To learn more, visit AboutDebtRelief.com.