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To: nextrade! who wrote (18297)	3/8/2004 8:48:48 PM
From: nextrade!	Read Replies (1) \| Respond to of 306849

Consumer Debt Is At Crisis Level ctnow.com March 7, 2004 Despite what Federal Reserve Chairman Alan Greenspan says, there is a credit crisis in this country. But by that, I don't mean people can't get credit. The opposite is true, and that's the problem. The consumer debt level is at an all-time high, notes Susan C. Keating, the new president and CEO of the Maryland-based National Foundation for Credit Counseling (NFCC), the nation's largest organization of nonprofit credit counseling agencies. Keating is in a better position than Greenspan to know how bad off many consumers are. After all, the credit agencies that are a part of NFCC are on the front lines, working with people overwhelmed with debt. Oh, but Greenspan says everything is just peachy. "Overall, the household sector seems to be in good shape," he said in a speech to the Credit Union National Association. Good shape? Only if you think the debt-related obesity that consumers are suffering from is baby fat. Consider: According to the Federal Reserve, last year America's consumer debt topped $2 trillion for the first time. The number of consumer bankruptcies continues to rise. Personal bankruptcies for 2003 rose to 1.63 million, up 5.6 percent from 2002. And, according to bankruptcy researchers Elizabeth Warren and Amelia Warren Tyagi, authors of "The Two-Income Trap," for every family that officially declares bankruptcy, there are seven more whose debt loads suggest they should. The average household credit card debt is $9,200, according to CardWeb.com. Each year, almost 9 million consumers seek help from debt counseling services. The average client seeking help from an NFCC credit-counseling agency has more than $15,700 in unsecured consumer debt and $30,000 in gross income. Reflect on this last fact. Some people are carrying consumer debt (mostly credit card debt) that is just a little more than half of their gross pay. Not net, but gross. So where do people turn when their good shape goes to pot? They go looking for help from credit counseling agencies, many of which have been investigated for deceptive practices, dishonest and poor advice, excessive fees and abuse of nonprofit status. The IRS, the Federal Trade Commission and state regulators are warning people about problems with unscrupulous credit-counseling organization. The IRS has begun auditing more credit-counseling agencies to see if they deserve tax-exempt status. A report last year by the National Consumer Law Center and the Consumer Federation of America found that many debtors pay high fees to set up debt-repayment plans. Others end up with worse credit records than before they sought help because the credit-counseling agencies don't pay their clients' bills on time - or at all. Keating, who comes to NFCC after 29 years in consumer banking, admits that the credit counseling industry is in "transition." "I believe there are agencies out there that are not doing the right thing morally and ethically on the part of consumers and are taking advantage of individuals when they are vulnerable," she said in an interview. Still, Keating maintains there are a lot of good nonprofit credit-counseling agencies. The question is how to find one. NFCC provides free or low-cost credit counseling at more than 1,000 locations through 129 member agencies. Keating plans to work with Congress to push for federal legislation to weed out bad credit counseling agencies. "NFCC remains committed to ensuring that consumers have access to high-quality, affordable financial management advice and debt relief services," she said. Keating may be just the person to help NFCC lead the charge to clean up the industry. She certainly isn't new to a crisis situation. Her last top banking position was as president and chief executive of Allfirst Financial Inc., a bank holding company that became mired in a major $691 million currency trading scandal. Keating was not one of the executives forced out during the height of the scandal, although she resigned in 2002 shortly after the trading fraud, one of the largest in banking history, was revealed. She left before the banking company, owned by Allied Irish Banks PLC of Dublin, was sold to M&T Bank Corp. "I've had a very interesting journey that led me to this position," she said of her new job. Keating said she wants to use the position to get rid of the quick-fix debt operations that do little if any worthwhile credit counseling. She favors an industry that doesn't push cookie-cutter debt repayment plans for one that puts more emphasis on financial education and counseling. Considering the magnitude of the credit crisis, I hope the industry that is supposed to help people recover financially will shape up. Michelle Singletary, a business writer at The Washington Post, has been writing "The Color of Money" for seven years.