multimillion-dollar losses, the CredAbility
credit-counseling agency pared its Orlando, Fla., staff
and laid off its top local executive last fall as part
of a companywide downsizing. In early January,
Atlanta-based CredAbility was absorbed in a merger with
a large Virginia agency called ClearPoint.
big name in credit counseling — InCharge Debt
Solutions of Orlando — has cut its workforce nearly in
half in recent years as net revenues have plummeted amid
an industrywide decline in the number of people seeking
nonprofit consumer-credit counseling — long seen as an
affordable recourse for cash-strapped people in trouble
with debt — has itself hit a financial crunch since
the Great Recession ended and the fortunes of many
Americans have improved with the recovery.
than 2 million people sought credit-counseling services
in 2012, down 50 percent from 4 million in 2009 at the
height of the recession, according to the National
Foundation for Credit Counseling, an industry advocacy
group based in Washington, D.C.
huge dropoff has set off a "re-sizing" of the
industry as hundreds of agencies have disappeared
through mergers, acquisitions or shutdowns, agency
the industry is consolidating," said George J.
Janas, president of Winter Park, Fla.-based Consumer
Debt Counselors Inc. "And everybody knows there are
more mergers and acquisitions on the horizon."
CredAbility group had grown rapidly during the recession
and also became well known for its Consumer Distress
Index research, which identified financially distressed
regions. The ranking was based on high unemployment,
foreclosure and consumer debt delinquency rates.
many agencies, however, CredAbility’s business took a
hit on every front — credit, housing and
pre-bankruptcy counseling — as credit-card and
mortgage delinquencies, unemployment filings and
personal bankruptcies fell during the economic recovery.
2010 to 2012, its gross revenues fell more than 35
percent to $29.4 million, according to documents filed
with the Internal Revenue Service. More notably,
CredAbility absorbed consecutive annual losses of more
than $2.5 million in 2011 and 2012, records show.
Credit Counseling, however, has fared better, posting
annual revenues of nearly $20 million each year from
2009 to 2012, according to IRS records. The Richmond,
Va.-based agency posted net gains of $1.1 million and
$2.1 million in 2010 and 2011; and losses of $860,000 in
2009 and $136,000 in 2012.
CredAbility officials said the merger was a timely one
for CredAbility, given ClearPoint’s stronger financial
that is fair to say," said Scott Scredon, a
spokesman for ClearPoint and former media relations
director for CredAbility. "But this merger is a
good fit for a number of reasons. ClearPoint has a
strong business in debt management work, while
CredAbility was one of the largest housing and
pre-bankruptcy counseling agencies in the country.
Together, we are a stronger financially and as an
organization in general."
drop-off in business has been dramatic at InCharge Debt
Solutions, a long-running credit-counseling agency that
has operated under several names since the late ’90s.
From 2008 to 2011, InCharge’s gross revenues fell 20
percent to less than $22 million and its net revenue
plummeted 87 percent to less than $1 million, according
to its latest IRS filings. Its work force has shrunk
from 255 to 144 during that period.
the most part, across the entire credit counseling
industry, volumes are down for credit counseling; and as
agencies are impacted by this, some have had no choice
but to merge," InCharge President Etta Money said.
"InCharge has experienced these declines as well
and has been forced to reduce staff to coincide with the
lower overall requests for service."
the industry is regrouping to handle the reduced demand,
credit-counseling officials say there are still far more
people out there who need help than have sought it. In
November, for example, consumer credit rose 4.75 percent
on an annual basis to nearly $3.1 trillion, according to
the Federal Reserve’s latest data.
still a lot of people who are struggling with debt, who
are just fatigued and wearing out," said Janas of
Consumer Debt Counselors, whose revenues have remained
stable during the downturn. "But they still resist
seeking help until their head is completely underwater.
That’s an audience we can still appeal to and
agencies also have developed counseling programs for
what they see as other fertile areas of need, such as
student-loan debt and financial advisory services for
have a pilot program now to provide financial advisory
services to the Hispanic community, focusing on saving
for retirement and college education for their
children," Scredon said. "So we are exploring
a number of new lines of service."