More area residents using credit counseling services

Credit card debt, unpaid medical bills and money management problems are causing increasing numbers of area residents to turn to Consumer Credit Coun-seling Services for assistance.

"Our first-time appointments this year are up probably 20 percent from last year," said President and Chief Executive Officer Mike Cherry. "We will counsel 500 new clients in any given month."

Consumer Credit Counseling Services, located at 1675 E. Seminole St., Ste. F, is a not-for-profit organization operating under the national umbrella of the National Foundation for Credit Coun-seling.

Besides Springfield, Cherry said, "We also serve Monett; Branson; Lebanon; Joplin; West Plains; Thayer; Pittsburg, Kansas; and Mountain Home, Arkansas."

Short at month's end

The company focuses on counseling and education, Cherry said. "We have several aspects to what we do." One focus is budget counseling "for people who make enough money to pay their bills, but end up short at the end of the month" because they don't know how to budget properly. "We sit down and make up a budget that will work for them," he added.

Then, Cherry said, there are people who simply don't have enough money to pay all their bills each month and pay off their credit cards. "We contact their un-secured creditors, and we'll work with them to get an interest rate reduction and have late fees and over-limit fees waived."

Budgeting

Cherry said the firm will work out a budget in which all monthly living expenses can be paid, and any money left is prorated among unsecured creditors. He gave an example of a client that makes $2,000 a month with $1,500 in living expenses. "There's $500 left over each month. If they owe $800 a month, we contact the creditors and work out a reduced payment plan. The client pays us the $500 and we pay their creditors," he said.

Consumer Credit Counseling Services currently pays the creditors of 4,300 active clients each month, he added.

Cherry said the biggest change his company has encountered recently is the reduction of the "fair share" it receives from credit companies when clients pay off their debt. In the past, companies such as his would receive about 15 percent, but now this share is down to 8 percent.

"Most of the people we help are headed for bankruptcy," he said. "So, for us to collect these payments used to be worth 15 percent to the companies. Now it's only worth about 8 percent. Of course, that has to do with their bottom line. But it's a reduction in income for us. Since we don't charge for our services, that's how we keep our doors open."

Credit education

Credit education is another focus of the company. Tracey Blaue, director of education at Consumer Credit Counsel-ing Services, said, "We've been doing educational programs in the public schools for many years." This year, she said, the company has purchased 5,000 books called "How Chuck Taylor Got What He Wanted and How You Can Too."

The book contains information not only about credit, but also about insurance, paychecks, taxes and banking services. "We're in the process of distributing the books free of charge to area high school seniors," Blaue said.

As Blaue distributes the books, she also gives a presentation and speaks with students. She said several schools are participating, including Forsyth, Bran-son, Clever and the five Springfield high schools.

Blaue said the company also provides two $500 scholarships for each of the five Springfield high schools. "Part of the requirement for the scholarship will be completing an essay about what they gleaned from the book," she said.

Classes

According to Cherry, the high school programs are designed to help students make the transition from high school seniors to college freshmen.

Blaue also works with students at the college level. "One of my major programs this fall has been through SMSU," she said.

All freshmen at Southwest Missouri State University are required to take an orientation class, IDS 110, which focuses on skills such as notetaking and time management.

One component of the class is money management, and that is where Blaue comes in. "We talk about how information can stay on their credit report and how that can affect them years down the road when they want to buy a home. I have a video that talks a lot about credit card debt."

The video, made by 60 Minutes II, is called "The Power of Plastic." Blaue said it explains how credit card companies pay universities to let them come on campus and solicit students.

Freshmen and credit cards

Cherry said, "Freshmen are inundated with credit card offers. They sign up and get a free hat or T-shirt, then the cards start rolling in." Students begin using the cards without realizing the consequences, he said. "Then their minimum monthly payments start increasing, and then late fees and over-limit fees start hitting."

According to Blaue, these fees get higher every year. "It's become normal to see $29 or $35 late or over-limit fees," she said.

Consumer Credit Counseling Services also offers adult education programs, Blaue said. "I do presentations at churches, civic clubs, businesses and community action groups."

Her presentations include budgeting, debt management, and credit education. She also explains what services are available for those who are in trouble with credit.

The company has a classroom on site, where an education course is offered for a $50 fee. The course, which is on the Ozarks Technical Community College class schedule, is entitled "When Credit is Due."

"It's a nationally recognized credit education course that teaches credit responsibilities," Blaue said.

Employee assistance

According to Cherry, employee assistance is another service the company offers. "Companies can put our literature in their paychecks so that people can contact us confidentially if they are having trouble."

Regarding the general economic picture and its effects on his company's business, Cherry said that in Springfield, "We're in a fairly good position; not tied too much to the national economy. But we are starting to see some trickle-down. For instance, suppliers to major manufacturers are being affected."

Layoffs are not a major problem at the moment, in Cherry's view. Two of the biggest problems that bring people to seek assistance, he said, are medical bills and divorce, "But excessive use of credit cards is the number one problem by a long shot."

Blaue said that trouble arises when credit cards are considered as additional income instead of debt.

"People look at their credit limit and add it to their income instead of realizing it is debt that they are going to have to pay back. It's an expensive way to borrow money," she said.

Rise in bankruptcies

Cherry said these kinds of financial problems have resulted in a rise in the number of bankruptcies. "We do a lot of bankruptcy counseling. Of course, some people get to that point where they cannot pay, and we send them on to receive legal assistance."

New federal legislation has been proposed that would require people to receive credit counseling within 180 days of filing bankruptcy and to complete a credit education course prior to being discharged in a bankruptcy, Cherry said.

"The legislation would not let people just walk away from their debt without receiving some kind of education about how they got there, and how they can avoid ending up there again."

Cherry emphasized that it takes time and education to get back on track financially.

"You see a lot of advertising on TV for credit counseling where they promise they can solve your credit problems in 20 minutes," he said. "People did not get into the trouble they're in in 20 minutes, and they're not going to get out in 20 minutes."