DISCLAIMER – The comments made in this post represent my personal views.
Regional credit counselling agencies provide incredible value to consumers and post neither addresses the work they do or their business practices.
Finally, I wish to acknowledge that Consolidated Credit Counselling Services is the only national credit counselling agency that has invited Project Recover to educate their employees on human trafficking and financial fraud. They have also established a policy for their employees. Should any employee be aware that a individual seeking their services is a survivor they should encourage the individual to have their advocate reach out to Project Recover.
Credit Counselling – A Solution or Revictimization of Survivors?
Survivors of human trafficking facing fraudulent debt arising from their exploitation are susceptible to organizations seeking to benefit financially from their exploitation. Both survivors and advocates should approach solutions with trepidation and awareness of the nature of their business.
Credit counselling agencies in Canada offer a solution to consumers facing a debt crisis. For decades these organizations provided an invaluable service for Canadians. Historically these agencies had also provided education and supports to address the underlining reasons that lead to a debt crisis.
In 1996 the Ontario government ceased funding of credit counselling agencies. Then Minister of Finance, Ernie Eves, stated “are they a charity or are they a business. We regard them as a business.”
Creditors saw the benefit credit counselling organizations provided in their communities. At that time, as Director for AVCO Financial Services, I was proud to join many Canadian creditors in supporting the passing of Bill PR82 – The Ontario Association of Not For Profit Credit Counselling Services Act.
Since 1997 technology and the growth of centralized contact centres led to a shift from regional support services to larger national profit centres.
The only source of revenue for national credit counselling organizations is the selling of debt management plans (DMP). Their financial filings with Canada Revenue Agency so little or no donations.
The construction of a DMP involves identifying the monthly income and reasonable expenses of a consumer. The delta between the two represents the available monthly payment a consumer can pay towards their creditors. A DMP is typically 4 years (48 months) in duration.
Credit Counselling Organizations charge a fee to the consumer generally equal to 10% of their monthly payment. ( $500.00 x 10% = $50.00).
By means of illustration a consumer owing $24,000.00 to various creditors would be required to pay $550.00 under a DMP ( ($24,000.00 / 48) + $50.00 = $550.00)
Creditors, recognizing these organizations are collecting debt owed to them, pay an average of 12% of monies collected by the credit counselling organization on their behalf.
Supporting a consumer with a debt of $24,000.00 a credit counselling organization would earn on average $5,280.00
While Credit Counselling Agencies state they will waive their fees in hardship cases a review of those files where they were aware of the trafficking suggest otherwise.
A DMP can only be successful if the delta between the consumer’s income and expenses allow for the necessary monthly payment to address all creditors.
How do credit counselling agencies address this?
A research paper published by Stephanie Ben-Ishai (Research Professor; Former Senator, Chair of Hiring, Faculty Council and Finance – Osgoode Law School) outlines how credit counselling agencies work to adjust income and expenses of a customer so as to facilitate the monthly payment
As identified in Ben-Ishai’s research paper the adjustment of income and expenses appears only to be an effort to sell the DMP to the consumer. The same conclusion was noted in review of files involving survivors of human traffkcing.
In one case involving a survivor the monthly income was stated as being $795.00. The actual monthly income was only $345.00 a month while the survivor was living in a shelter. Even accepting the stated income the DMP. required a monthly payment of $435.00 a month for 48 months.
In another case, as stated on documents authored by the credit counselling organization the survivor was left with $157.00 a month for expenses outside of rent. Within the expenses the DMP presented to creditor allowed a monthly clothing allowance of $5.00. Even the most frugal consumer would experience difficulty with annual clothing allowance of $60.00.
Not identified in these proposals was the $43.50 and $17.80 in monthly fees the survivors were required to pay for the management of the DMP by the credit counselling agencies.
Structuring a DMP is not limited to adjusting income and expenses. If a consumer owed $56,000.00 in debt with a monthly income of $1,110.00 they would be unable to make the required monthly payment. ( $56,000.00 / 48 months = $1,1166.66).
In each case reviewed by Project Recover only the total amount owed to creditors that would sustain the DMP payment were included. Other creditors having a claim against the survivor were excluded.
Were credit counselling agencies aware of other debt not included in the DMP. The answer is yes. Survivors were advised to look to pay other creditors as they could. Alternatively they were told Government debt (student loans) cannot be included in a DMP.
In some cases the survivor was not aware of the existence of the other debts owing (typical in trafficking cases). These debts would have been identified on the credit report obtained by the credit counselling agency but were ignored.
As part of their services Credit counselling agencies promote credit counselling sessions to educate consumers on money management and credit. Not a single survivor Project Recover has worked with recalls participating in a counselling session. This validate Ben-Ishai’s research where “counselling session” are restricted to the initial call constructing a DMP.
Bill PR82 – The Ontario Association of Not For Profit Credit Counselling Services Act requires all credit counselling agencies operating in Ontario to be accredited under the requirements of the regulations. Section 8.2 of the act states “ (2) Any person in Ontario who is not a member of the Association as described in subsection (1) is guilty of an offence if they take or use the designation “Accredited Not-for-Profit Credit Counselling Agency”.
Two national credit counselling agencies operating in Ontario belong to a different “accreditation” organization – Credit Counselling Canada. A review of their webpage identifying their board brings a visitor to a page “no results found. The current CEO is Stacy Yanchuk Oleksy who, prior to assuming her position, was Director of Education and Community Awareness for the largest Credit Counselling Agency in Canada.
Marketing material offered by credit counselling agencies who are affiliated with Credit Counselling Canada state they are an “accredited member”. A self-regulating body that appears to be in violation of regulations under Bill PR 82.
Project Recover has established a process with over 200 creditors across Canada. The compliance, privacy of information and more importantly controls around the identity of a survivor are well documents. With in each creditor only those individuals with a “need to know” have visibility to the survivor’s information. The information is also protected. Oversight is provided through a committee comprised of creditors, survivor advocates, business leaders and key stakeholders.
In credit counselling agencies any call centre agent can speak with and obtain details of a survivor. Information shared with creditors also involves sharing the information of the survivor with third party vendors. The credit counselling process involves multiple individuals having access to the personal information of a survivor.
A review of the financial filings to Canada Revenue Agency offers a clear picture of national credit counselling agencies. In 2016 the combined annual revenue disclosed was $23.1 million. In 2020 their revenue jumped to $37.9 million. In 2016 the combined cash and long term investments disclosed was $13.1 million. In 2020 that number more than doubled to $26.8 million.
From 2016 to 2020 the national credit counselling organizations reported that they spend nothing on training and education of their employees.
“Are they a charity or are they a business. We regard them as a business.”
Is credit counselling the revictimization of survivors of human trafficking?
The answer is an unqualified yes.
I believe that “no person should be required to pay for the credit facilities through which they were bought and sold!” Forcing a survivor to pay each month for debts which where incurred without their knowledge or by force only revictimizes them can lead to retriggering.
To charge fees or earn revenue from their exploitation is exploiting the survivor further.
Entering a debt management plan will imperiled the credit of a survivor for the 4 year period of the DMP program and remain on their credit report for 2 years after completion of the program. This extends the financial aspects of a survivor’s exploitation for a combine 6 from the time they enter into a DMP agreement.
Entering into a DMP is a legally binding agreement where the individual (survivor) acknowledges that the debt is their debt and their liability. It makes it more challenging to address this with creditors on behalf of survivors.
Where a survivor has entered into a DMP there is another concern where charges have been laid against the trafficker. By formally acknowledging the debt a skillful defense attorney can leverage this to suggest the survivor was an active participant in the use of credit facilities.
The very first question Project Recover asks a survivor if they are concerned with their trafficker locating them. This is to ensure that we protect them in the process. The credit counselling process risks the survivor’s address from being obtained by their trafficker.
Project Recover has been involved in 11 cases where a survivor had entered into a DMP and were unable to maintain the payment required. In each case Project Recover was able to illustrate the fraud and remove the debt from the survivor’s liability.
In addition to identifying the debt as fraud arising from human trafficking creditors have returned funds collected through these DMP. Yet even when requested credit counselling agencies have refused to return the fees they charges the survivors.
Throughout my career I have been a strong supporter of credit counselling agencies. Those involved in the early discussions of finding a solution for survivors will affirm that one of the credit counselling agencies was involved for almost 2 years. It was their counsellors that were going to be trained in the process to support survivors. At the last minute they declined further participation. There was no revenue in this support.
Forcing survivors to pay for debt incurred during their trafficking is wrong. Earning revenue for charging fees is an even greater wrong.