Credit Counseling Research Articles

Socializing to Co-Produce

Success rates of behavior change counseling programs (e.g., weight loss, smoking cessation, and debt management), where consumers seek to overcome their destructive habits and enhance well-being, are very low. Characterized by extended and complex service encounters, the providers of these programs face the challenge of gaining consumers’ compliance to adhere to the programs’ requirements and turning these consumers into effective co-producers of the service outcomes. This study investigates the process of customer organizational socialization in these programs, how it may promote co-production behaviors, and thus enhance consumers’ well-being as well as satisfaction with the organization. The context of debt management programs is used to test the model. Data were obtained from 364 clients of a major credit counseling organization in the United States. The results reveal the differential effects of three aspects of socialization (role clarity, task mastery, and goal congruence) on three different types of consumer co-production behaviors (compliance, individual initiative, and civic virtue). Overall, compliance has the greatest contribution to well-being, while both compliance and individual initiative enhance satisfaction with the organization. Furthermore, consumers with a higher or lower ongoing dependence on the organization have different routes to well-being, with the high-dependence group relying on individual initiative, and the low-dependence group favoring compliance. This study contributes to the literature of co-production, organizational socialization, and consumers’ well-being by showing how these three streams are connected. Managerial and policy implications focus on the need for these organizations to include efforts to ensure that consumers are effectively socialized into the program.

Implementation of South African national credit act and its impact on home loans market: The case of First National Bank

Since it has been observed that credit granting is a serious problem across the entire credit market, South Africa introduced National Credit Act 34 of 2005 in order to regulate the credit industry and protect credit consumers from becoming over-indebted. The study highlights and examines the implementation of the Act in relation to the South African home loans market, focussing on First National Bank home loans portfolio. The study documents that the current state of consumer indebtedness shows that both credit institutions and consumers were responsible for over extending retail credit. The study noticed that credit industry has significantly managed to regulate the retail credit through the implementation of the Act. Furthermore, the study finds that a new stakeholder such as a debt counsellor has been introduced into the retail credit value chain for debt counselling for over-indebted clients. However, the study recommends that internal forums within banks as well as industry-wide forums should be used in order to ensure that the implementation of a regulation that impacts the entire credit industry is implemented with all stakeholders to limit any possible misinterpretation of key sections of a new regulation.

Financial Literacy Centres towards the Construction of a Financial Knowledge Society: A Kerala Experience

The present study analyses and evaluates the Financial Literacy Movements initiated in the Kerala Banking Sector and the potential of the same in the construction of a Financial Knowledge Society in the State. The initiatives taken in the Indian Banking Sector by RBI, the role of Credit counseling, the role of NGOs in financial awakening in India are also evaluated. But the focal area of the study is pertaining to Kerala State of India, because the State is declared as the first Total Banking State in India as a result of Mass Financial Inclusion Campaigns and Awareness Programmes initiated by State Level Banks. While comparing with all other Indian States, Kerala, with its good base of banking density and education, has built up sound systems and processes which have taken it to the forefront of the economic development process of India. That means, the State shows much potential for an emerging Financial Knowledge Society in India. Even though, the State is leading India in this respect, it has to go further by making more banking penetration by incorporating innovative, modern technology based banking products and services, modern need based banking systems and above all the Financial Education Systems and Financial Counseling etc. in order to financially enrich the marginalized sections of the society in the State. In spreading of these modern technology based banking products and services, the Financial Literacy Centres have to play a pivotal role by creating awareness of systems of operations and nature of these products particularly among the marginalized sections of the society and it should ultimately results in the creation of a Financial Knowledge Society in the State.

The prevention of over-indebtedness: The problem of interest and the Islamic response

The current system of lending and borrowing on interest is to a large extent responsible for the present economic woes of the Western capitalist world. In a credit agreement, there is invariably an inequality between the credit lender and credit borrower in an agreement for the loan of money. Given the considerable imbalance, many South African consumers have concluded unaffordable credit contracts, which have resulted in their over-indebtedness. As stated in this study, mechanisms such as the National Credit Act 34/2005 and the in duplum rule are not able to prevent over-indebtedness, because over-indebtedness is the result of borrowing at interest. The provisioning of debt counsellors by the National Credit Act results in additional cost for the already over-indebted consumer. Notwithstanding the existence of the National Credit Act and the in duplum rule, the industry was and remain largely unregulated and malpractices are rife. This situation has generated an interest in Islamic economics and has fuelled a debate about the possibility of survival for a modern economy without interest. The elimination of interest will act as a countervailing force against the cumulative debt problem facing all nations. The Islamic economy could make a useful contribution to the prevention of over-indebtedness. The practice of doing business on a non-interest basis has finally come of age. Key words: National Credit Act, In duplum rule, Mudarabah, Musharakah, Islamic Economic Empowerment, Interest, Black Economic Empowerment, South Africa.

Debt and disadvantage: the experience of unmanageable debt and financial difficulty in England and Wales

AbstractIn common with a number of other developed western states, the UK has seen significant growth of consumer debt over the past three decades. In tandem, there has been an associated increase on the demand for debt advice. Using data from the English and Welsh Civil and Social Justice Survey, this article explores how debt problems are experienced across the population and goes on to contextualize the distinct nature of debt problems and their relationship to other problems of everyday life. Findings reaffirm the increased vulnerability to debt problems experienced by socially excluded groups, such as lone parents, those with a long‐term illness or disability and the people with no academic qualification. Results go further to demonstrate that vulnerability is not constant but is also influenced by broader economic and social factors; in particular, findings demonstrate how problems directly associated with the economic downturn increase vulnerability to unmanageable debt and financial difficulty. Given this relationship, and the prolonged longevity of debt problems compared with other problem types, we would expect to see an increase in the experience of debt problems as the effects of the recession become fully apparent, and for some time thereafter. Discussion focuses upon the policy relevance of findings to frontline debt counselling and advice services operating within an increasingly tighter financial environment. Specifically, emphasis is placed upon potential benefits of offering debt counselling and advice as part of an array of other social welfare advice services, and even working across sectors to get better penetration into hard to reach groups.

Is Technology-Enhanced Credit Counseling as Effective as In-Person Delivery?

This paper compares outcomes for borrowers who received face-to-face credit counseling with similarly situated consumers who opted for counseling via the telephone or Internet. Counseling outcomes are measured using consumer credit report attributes one or more years following the original counseling. The primary analysis uses data from a sample of 26,000 consumers who received credit counseling either in-person or via the telephone during 2003. A second sample of 12,000 clients counseled in 2005 and 2006 was provided by one of the agencies to examine Internet delivery. Technology-assisted delivery was found to generate outcomes no worse - and at some margins better - than face-to-face delivery of counseling services.

Safe and Secure? Healthcare in The Cyberworld

Safe and Secure? Healthcare in The Cyberworld

Online identification and referral for debt and mental health issues

PurposeThis paper seeks to describe a new service developed by national debt charity Consumer Credit Counselling Service (CCCS) aimed at identifying clients within its online debt counselling tool who may be suffering from stress and anxiety and then referring them for advice and support, including computer‐based cognitive behavioural therapy (CCBT).Design/methodology/approachSince December 2010, clients using CCCS Debt Remedy, the charity's online debt counselling tool, have been asked four trigger questions which indicate whether the user is suffering from depression and/or anxiety. Clients who show these signs, after they receive a recommendation about how to deal with their debt, are offered the opportunity to complete a more comprehensive assessment known as CCCS Wellbeing. The CCCS Wellbeing assessment consists of 16 questions, nine relating to depression and seven to anxiety. The depression questions are based on the medically endorsed depression screener, PHQ‐9, and the anxiety questions are based on the similarly medically endorsed anxiety screener, GAD‐7. These two screeners are also the source of the four original trigger questions.FindingsOf the 36,618 clients who were counselled by CCCS Debt Remedy between the launch of the new service in December 2010 and the end of May 2011, 65 percent obtained a recommendation to undertake CCCS Wellbeing. The vast majority of clients who obtained a CCCS Wellbeing recommendation through the online debt counselling tool were showing signs of both depression and anxiety (74 percent).Originality/valueThe high propensity for people to be recommended to CCCS Wellbeing demonstrates the need for the service. This will inform future service development by CCCS, which is studying new ways to further identify and refer for help its clients who are struggling with their mental health.

20·30대 채무불이행자의 부채사용의도 : 합리적 행동이론을 중심으로

This study was performed to explore the factors that affect debt-use intention of young defaulters. In addition, this study compares three models that predict the intention to use debt by young defaulters: the theory of reasoned action and two variations of it. Specifically, this study proposes an extended theory of reasoned action by introducing Ao in place of the cognitive structure in the theory of reasoned action. In addition, this study proposes Ao as an independent variable that acts on BI rather than a dependent variable. Self-administered questionnaires were completed by 196 young defaulters attending a credit management education session held by the Credit Counseling & Recovery Service in Kwang-ju, Korea. Based on the study, the conclusions are as follows: the extended theory of reasoned action as proposed in this article most suitably explained the intention to use debt by young defaulters. It was also found that young defaulters were affected by attitudes toward debt, attitudes toward using debt, and subjective norms. It is therefore suggested that an attitudinal message would change the behavior effectively for young defaulters. The findings appeared to support the usefulness of the extended theory of reasoned action and the role of Ao as an independent variable as proposed in this article to explain the intention to use debt by young defaulters. These findings have an important theoretical meaning in that they modify two existing attitude theories in the context of consumer behavior.

Debtor Assistance and Debt Advice: The Role of the Canadian Credit Counselling Industry

A continuing theme of our work, and that of others, has been the failure of insolvency law to keep pace with the new problems faced by low-income debtors. Researchers have suggested that the cost of personal bankruptcy puts it beyond the reach of many of those in need of it, though it has proven difficult to demonstrate conclusively that large numbers of low income debtors would take advantage of bankruptcy if the price was lower. In this paper, we analyze another industry — the not-for-profit credit counselling industry — that has grown rapidly in recent years and that offers a different sort of remedy for financial distress. We begin in Section II with a brief history of the credit counseling industry in Canada and in the US. We show how the industry has evolved from a small set of government-subsidized and community-based not-for-profit groups into an industry that is heavily subsidized by credit suppliers and, for the most part, lacking any significant community connection. In Section III, we briefly set out the regulatory framework that seems to encompass credit counselling agencies (“CCA”), both for-profit and not-for-profit. We do not, however, reach any conclusions on the application of this framework to Canadian CCA. Instead, we describe the concepts underlying the framework in a coordinated way. In Section IV, based on a set of mystery calls to the largest CCA, we show that most simply have nothing to offer low-income debtors and that most do not do a good job of providing information concerning the alternatives available to them. Rather than introducing substantive legislative or legal rules to help low-income debtors, the Canadian federal government has chosen instead to promote financial education with its 2010 Task Force on Financial Literacy. In Section V, we briefly analyze the Task Force process, suggesting that it largely overlooked the needs of the poor.

The Success and Failure of Counseling Agency Debt Repayment Plans

This paper investigates whether success on a counseling agency-administered Debt Management Plan (DMP), as measured by the amount of original debt repaid, can be predicted at the time of counseling based on observable client and debt attributes. The paper utilizes a unique database of over 17,000 consumers who were counseled and recommended for a DMP by a large non-profit credit counseling agency during 2003. Of particular interest to counseling agencies and creditors is the finding that the magnitude of the interest rate reduction offered by creditors to consumers on a DMP has a significant, positive influence on debt repayment.

Financial Literacy: What Works? How Could it be More Effective?

This paper highlights the extent and effects of financial illiteracy among American households, reviews previous efforts to promote financial literacy, and discusses new directions for such initiatives. None of the four traditional approaches to financial literacy - employer-based, school-based, credit counseling, or community-based - has generated strong evidence that financial literacy efforts have had positive and substantial impacts. Nevertheless, the apparent success of financial planning efforts and of simplification initiatives suggests that there are both private actions and public policy strategies that can influence saving behavior. There is a key role for the private sector in enhancing financial literacy and the market is responding rapidly to try to fill the void. At the same time, there is an at least equally important role for the public sector, via a campaign that revolves around a comprehensive website, and through better coordination of existing policies toward saving. We conclude that improving financial literacy should be a first-order concern for policy-makers, and that gains could accrue not only to the affected individuals, but also to their family members and society at large.

Is Technology-Enhanced Credit Counseling as Effective as In-Person Delivery?

This paper compares outcomes for borrowers who received face-to-face credit counseling with similarly situated consumers who opted for counseling via the telephone or internet. Counseling outcomes are measured using consumer credit report attributes one or more years following the original counseling. The primary analysis utilizes data from a sample of 26,000 consumers who received credit counseling either in-person or via the telephone during 2003. A second sample of 12,000 clients counseled in 2005 and 2006 was provided by one of the agencies to examine internet delivery. Technology-assisted delivery was found to generate outcomes no worse – and at some margins better – than face-to-face delivery of counseling services.

Patients referred from a multidisciplinary pain clinic to the social worker, their socio-demographic profile and the contribution of the social worker to the management of the patients

Background and aims Social factors and social environment shape the pain behavior of patients. Social workers support pain treatment in a multidisciplinary pain clinic by altering the social environment of a patient. Even though a social worker in a multi-professional care team contributes to the care of select, severely pain-afflicted patients extensively, neither the patient socio-demographic status nor interventions by social workers have been systematically documented. Only individual case histories have been published. Developing social work activities, which have potential financial consequences, for example, requires charting the current situation prior to systematic research into the efficacy of individual social work interventions. Methods This study systematically details the performance and work volume of the social worker, as well as the socio-demographics of patients during a 16-month period in a multidisciplinary pain clinic of a university hospital. Results Fifty-five patients were included. Twenty-nine were women and 26 men. They were about 10% of all patients seen at the pain clinic during the same time. Most of the patients were at their middle age. The largest group of subjects worked in public or other services. The second largest group consisted of those working in stores, hotels and restaurants. Over half of the subjects worked in the service industry. Since the subjects had scant vocational education, they worked mainly in manual labor. Most of the patients had problems with making a living, signifying that a major number of the patients visited the social worker because of financial problems. About half of the patients were indebt and three were undergoing debt counseling. Of homeowners, 21% were indebt, while the portion of those living rented accommodation was almost two thirds. All patients seen by the social worker received some form of public assistance. Over half of the patients had participated in rehabilitation assessment. The social worker saw 39 patients once, one patient twice and 15 patients three or more times. The duration of a visit was typically 1–2 h. The issues of a patient are addressed by contacting authorities and negotiating with other health care staff. According to the used ‘SOSU’ classification data, the social situation was charted for 49 patients, while the benefits and assistance provided by the Social Insurance Institution of Finland was discussed with half of the patients. The social worker discussed employment based pension with about a third of the patients. Social assistance, the last-resort economic assistance under social welfare, was considered with one fifth of the patients. Psychosocial work was recorded for 19 patients, comprising longer-term, supportive discussion. Conclusions The majority of the patients is of active working age but their working capacity is often decreased. However, they have difficulties in getting compensation for reduced ability to making a living. Hence, they have economic difficulties of various types and need counselling and support. The main duty of the social worker appeared to be advising the patient in using the social welfare system, as the clients turned out to constitute a marginalized group.

<i>National Credit Regulator versus Dedbank Ltd</i> and the practice of debt counselling in South Africa

The National Credit Regulator approached the then Transvaal Provincial Division of the High Court in 2008 by way of a notice of motion. In this application the Regulator prayed in terms of section 16(1)(b) of the National Credit Act 34 of 2005 (the "NCA") for the proper interpretation of mainly sections 86 and 87 of the same Act. Due to uncertainty and confusion the Regulator lodged an application to obtain clarity on some of the difficulties that debt counsellors experience in practice. The matter washeard in the High Court (TPD) on 02/03/2009 and judgment was handed down by Du Plessis J on 21/08/2009.This article discusses the fifteen prayers and the impact of the orders granted by the Court under three logical headings, namely:those that deal with the NCA and the Magistrate’s Court; Order 1 (on section 86(7)(c)), order 2 (an obligation to conduct a hearing), order 3(the judicial role of the Magistrate’s Court) and order 4 (the application procedure of the Magistrate’s Court) defined the interaction between the NCA and the Magistrate’s Court Act (the “MCA”) very clearly. Since there is no sui generis procedure provided for in the NCA, it is submitted that the Court’s approach is correct. However, the end result is that the over-indebted consumer is not supported to the degree the NCA envisages. For example: a rule 55 procedure of the MCA can be cumbersome and costly, while the NCA envisaged a fast and relativelyinexpensive process. those that deal with the role of the debt counsellor in debt restructuring; Order 5 (costs), order 6 (statutory function) and order 8 (the unique role of the debt counsellor), granted under this heading, are important. They define the role of the debt counsellor to be different from the run-of-the-mill applicant in terms of rule 55. He/she is even protected against some cost orders due to a statutory function.Because of this special function a question arises: should this difference in treatment not be even greater than custom presently permits or proposes? Since this function brings great responsibility and much paper work, should it not affect the fees that a debt counsellor may charge?those that deal with the court procedures.Orders 7, 9, 10 and 11 in this section are welcomed, namely those that deal with the service of documents, the geographical jurisdiction and monetary limit of the court, reckless credit and the in duplum rule. However, the Court preferred to stay on the safe side with respect to emoluments attachments orders and the application of section 86(2) to section 129(1). The lack of direction on the question when formaldebt enforcement in fact begins, is regrettable.However, the declarator is a milestone in the history of the NCA. The orders impact significantly on the practice of debt review and will continue to shape the credit industry. Despite some disappointments it can be concluded that the declarator on the whole adds value to the practice of debt counselling in South Africa. It is now for the industry, the NCR, the legislators and scholars to take matters further.Keywords: National Credit Regulator; National Credit Act 34 of 2005; Magistrate’s Court Act 32 of 1944; Magistrate’s Court; Declaratory order; Judicial discretion; Jurisdiction; Service; In duplum rule; Emoluments; attachment order; Debt review; Debt counsellor; Consumer; Credit provider; Application procedure.

Comparing Foreclosure Counseling Policies in the US and UK

This article reviews recent developments in the US and UK in response to rising foreclosures, with an emphasis on the provision of advice or counseling to borrowers in mortgage default. Both nations have increased support for counseling programs despite the lack of evidence that counseling is effective. Based on a quantitative study in the US and a qualitative study in the UK, this article provides preliminary evidence that counseling strategies may be justified. However, the findings from both studies should be approached conservatively. This article also highlights the need for a range of outcome measures for assessing the impact of debt counseling. These studies shed greater light on the ways in which counseling might be beneficial beyond loan cures. Contextual differences between the two countries are identified, and common themes in their policy responses are noted. This article suggests that further insights may be developed through stronger comparative approaches in the analysis of foreclosure prevention policies.

Financial health and sense of coherence

Orientation: This article reports on a quantitative-relational study addressing the impact of sense of coherence (SOC), which is a psychological-wellness construct, on the financial-health profile of employees in an insurance company.Research purpose: The objective of the study was to explore the relationship between psychological wellness as operationalised in the SOC construct and in financial health.Motivation for the study: Financial pressure can be a major stressor in the workplace, affecting employees’ ability to function optimally. The debt crisis in South Africa is therefore necessitating employers to invest in the financial health of their employees. In light of the National Credit Act 34 of 2005, employers should, in fact, provide debt counselling to employees struggling with financial problems. In the South African context, however, studies investigating the potential influence of psychological-wellness constructs on financial health are lacking.Research design, approach and method: A cross-sectional survey design was applied and a quantitative-relational approach followed. From the 1 100 employees in a financial insurance company, 435 completed questionnaires were received.Main findings: The empirical results indicated a significant relationship between the variables, confirming that a stronger SOC impacts positively on employees’ financial health. A stronger SOC therefore relates positively to more effective debt management and retirement planning.Practical/managerial implications: The findings emphasised the importance of debt management and retirement planning being addressed and integrated into employee-assistance strategies and programmes.Contribution/value-add: This study is a significant step in addressing financial health from a psychological perspective.

Credit Counseling to Help Debtors Regain Footing

In‐depth interviews with 22 debt‐ridden consumers who are enrolled in debt management plans reveal the vulnerability they experience in various life domains. Additional interviews with 19 credit counselors and agency executives illustrate how the practices of a credit counseling agency can help indebted consumers regain their footing. This research sheds light on how consumers can recover from their vulnerable situations and what aids this process.

The debt counselling process – closing the loopholes in the National Credit Act 34 of 2005

According to statistics provided by the National Credit Regulator (NCR) 41.6% of the 17.57 million credit-active South Africans had impaired credit records in December 2008. This "impaired records" figure rose by 4% when compared to the quarter which ended in December 2007. Since December 2008 the number of consumers with impaired credit records has further increased. As at March 2009 credit bureaux had records for 17.61 million credit-active consumers. The data showed that the percentage of consumers with impaired records was 42.4% at the quarter ending March 2009. This was an increase of 0.8% when compared with the quarter ending December 2008 and an increase of 4% when compared with the quarter ending March 2008.

Starting a New Chapter: The Role of Credit Counseling in Helping Debtors Recover from Bankruptcy

The 2005 Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) includes two provisions which require debtors to complete an approved credit counseling course prior to filing for bankruptcy and a financial education course prior to the discharge. Recent debates have raised concerns about the counseling mandate and whether debtors are benefiting from the requirement. A multi-phase research study was launched in 2009 to investigate the impact of BAPCPA’s mandates. The goal was to track debtors through the entire bankruptcy process and assess the long-term impacts of the requirements on debtors’ financial well-being. This study reports the findings from the first phase of the analysis where data were collected from a national sample of debtors who participated in a bankruptcy counseling course offered by one of the largest full-service nonprofit consumer credit counseling agency in the U.S. The purpose of the study was to measure the educational value of the counseling and to identify specific groups of debtors who were more likely than others to benefit from the experience. The results show that overall debtors were very satisfied with their counseling experience. Moreover, their financial knowledge, attitudes, and behavioral intentions significantly improved as a result of the counseling. The effects of the counseling were primarily dependent on debtors' prior knowledge, behavior, and socioeconomic status, as well as the circumstances that resulted in their current financial problems. There was little, if any, evidence to suggest that the counseling requirement had been a burden or an administrative obstacle.