Money Management International (MMI) NCHER Knowledge Symposium November, 2013

Who is MMI? The largest full-service credit counseling agency in the United States.  We serve clients nationwide.  We are a nonprofit 501(c)3 organization.  We offer counseling 24 hours a day, seven days a week by telephone.  We have 85 branch locations in 26 states. The largest member of the National Foundation for Credit Counseling (NFCC). The largest member of the Association of Independent Consumer Credit Counseling Agencies (AICCCA). 2

What is Credit Counseling? Certified professional counselors provide: Complete income review. Complete expense review, including:  Housing expenses.  Living expenses.  Debt repayment. Organization of outstanding debt. Comprehensive spending plan. Realistic action plan. 3

What is Credit Counseling? Credit counseling agencies may offer one or more of the following in addition to debt counseling:  Financial education programs.  Housing counseling. Delinquent mortgage counseling. MMI is a Member of Homeownership Preservation Foundation (HPF). MMI provides the Making Homes Affordable Help Line for HPF.  Reverse mortgage counseling.  Bankruptcy counseling and Bankruptcy education.  Many smaller organizations are part of social service agencies specializing in community-based programs such as youth mentoring, foster care, and substance abuse programs. 4

Credit Counseling Overview This is a pivotal time for the credit counseling and financial education sector.  The needs of clients served are changing—and Credit Counseling Agencies need to change with them.  The economy is improving. Unemployment and bankruptcy filings are down to their lowest levels since The national mortgage delinquency rate has dropped 26 percent over the past year. The credit card delinquency rate is close to the all-time low set in Consumers are also saving again. 5

Credit Counseling Overview  At its peak, credit counseling agencies served 4 million consumers in  Now, that financial crisis is easing, fewer clients are being counseled - down to 2 million in  But the crisis is not yet over. A third of working-age baby boomers have no retirement savings. Another third have savings equal to less than a year’s salary. At a trillion dollars, student loan debt is now the second-largest form of consumer debt—and about half of it is in default. 6

Credit Counseling Overview What a Credit Counseling is not.  We do not repair your credit report or credit score.  We do not promote to settle your debt 90% less than you owe.  We do not give legal opinions.  We provide consumers with options through information.  We are not a lender 7

Credit Counseling Overview In counseling clients we often find that these clients lack a basic understanding of their overall finances. Although from 2011, this video portrays what we often see when counseling clients. 8

How do Credit Counseling Agencies get paid? Many Credit Counseling agencies do not charge for the initial debt and budget review. Certain Housing Counseling sessions are paid for by HUD and other Housing organizations. If the client decides that a Debt Management Plan (DMP) is the best solution for them:  the client deposits money with the Credit Counseling Agency.  the Agency distributes those funds based on agreements with the creditors. 9

How do Credit Counseling Agencies get paid?  The client receives a reduced monthly payment amount and a reduced interest rate while on the DMP.  We know the creditor polices since the majority of unsecured debt is with the top 10 credit cards.  In return, the creditors reimburse the Credit Counseling Agency a percentage of the payment. Fifteen years ago, that percentage was almost 15%. Today it averages less than 5%.  Because of this reductions in creditor contributions, the clients are now charged a small fee based on an ability to pay. 10

How do Credit Counseling Agencies get paid?  MMI charges a small up-front set up fee (averaging less than $45)  MMI charges a monthly fee when monies are disbursed. The average monthly client fee is less than $24. Today a typical mix of income for a Credit Counseling Agency is 1/3 from creditors, 1/3 from clients, 1/3 from a combination of Housing and Bankruptcy plus other grants. 11

Regulation of our Services 12

MMI and others are regulated and monitored by federal and state agencies including…. Regulations The Internal Revenue Service. The United States Department of Housing and Urban Development. The Executive Office for United States Trustees and the Administrative Office of the United States Courts. State debt management regulators.  Departments of Financial Services/Banking/Consumer Protection. State charitable organization regulators.  Attorneys General. 13

Student Loans 14

Why Does MMI and Others Care About Student Debt? Student Loans As Student Debt grows it becomes an increasingly important aspect of MMI’s Mission fulfillment as well as a larger portion of consumer overall debt. In counseling clients, more than 26 % of the clients MMI serves have student loans and we find that these clients lack a basic understanding of their overall finances and student loans. Recent studies indicate that debt and budget counseling for those individuals seeking or obtaining mortgage loan modifications improves their chances for success. 15

Why Does MMI and Others Care About Student Debt? There is growing sentiment in many sectors that an overall financial counseling approach can help relieve the student loan crisis. The same should also hold true for individuals seeking repayment options or in need of Student Loan Rehabilitation. 16

Why Does MMI and Others Care About Student Debt?  “… One of the things you quickly realize is that the repayment of the student loan….. It is the repayment with the least utility in their monthly budgets.” So it’s the last thing they pay. One of the things you look at to solve that Student Loan problem, you virtually have to solve all their other problems above that. To free up the capital that they have too make their student loan which is never going to go away. It is non-dischargeable. You have to deal with the credit card debt. So from our perspective, that’s why financial literacy becomes a means to an end.” Paul Combe, President and CEO American Student Assistance CFPB Hearing in Financial Literacy 17

Composition of Household Debt has Shifted Student Loans 18

Composition of Loan Delinquency has Shifted Student Loans 19

How many MMI clients have student loan debt?  Based on an evaluation of MMI client credit bureau data in MeasurementValue Total credit reports evaluated200,457 Consumers have at least one education trade line61,750 Consumers have at least one education trade line with a balance 45,848 % of consumers have at least one education trade line30.80 % of consumers have at least one education trade line with a balance % of education debt to total debt on CBR for those with education debt 12.68

What is MMI and other Credit Counseling Agencies Doing About Student Debt? Student Loans MMI and many Credit Counseling Agencies are working with student loan industry stakeholders to determine how to more effectively provide individuals with student loan debt problems easy access to seamless, holistic, consumer focused credit counseling services. We are not the experts in student loans and realize that the holder of the loan has the best information. Our job is to free up the capital through financial literacy to make sure all bills get paid. 21

What is MMI and other Credit Counseling Agencies Doing About Student Debt? Student Loans Credit Counseling Agencies need to understand the impact of student loan debt on the client’s ability to pay all other debts. And the impact of all other debt on the individual’s ability to pay student loan debt. 22

What Can You Do? So what can you do to help your students?  Identify a partner in the Consumer Credit Counseling arena;  Refer clients of yours that are struggling with debt above and beyond student loan debt;  Get feedback from that agency to measure the success of your referrals. 23

Questions Questions? 24