NFCC Requests Regulation of Fair Share; Credit Card Issuers to Pay More

Mike Croxson

A proposal that will mean new regulations – and new costs – for credit card companies is likely still flying below the radar screen of the companies that the regulations will impact the most.

Last month, the National Foundation for Credit Counseling (NFCC), the largest association of nonprofit debt relief providers, submitted comments to the Consumer Financial Protection Bureau (CFPB) that included, among other things, a recommendation that the government mandate fair share payments to nonprofit debt relief providers.  That’s right – the NFCC is asking the government to protect the revenue it receives from credit card companies.

For more than 50 years, creditors have voluntarily supported nonprofit debt relief providers through the practice of fair share. At one time, these payments comprised the majority of income for nonprofit credit counseling agencies. However, in recent years, the amount of those payments has dropped significantly. In 2005 it was estimated that NFCC members received between 12 percent and 15 percent of the payments made to creditors back in the form of fair share – as much as $360 million annually. Given the current financial pressures on creditors, the amount is likely lower now, but even a conservative estimate of an 8 percent return on payments would mean creditors still pay more than $190 million annually.

But for the NFCC, that simply isn’t enough. In its comments to the CFPB, the NFCC complained that “the amount of creditor support and ‘fair share’ payments to nonprofit agencies has dropped precipitously,” saying the decline has created financial hardships for its member agencies. To reverse this decline, the NFCC proposed the CFPB mandate that financial institutions provide support for nonprofit debt relief providers through fair share, citing “the need to find sustainable means to support nonprofit agencies.”

Yet, at the same time the NFCC is seeking more regulations and additional costs for creditors, it is asking the CFPB to exclude nonprofit providers from debt relief regulations. The CFPB believes its members already face enough regulation and that new rules would create an undue financial burden from a diminished revenue stream.  Yet, this argument overlooks the fact that most of the revenue nonprofit providers receive comes not from fair share but from consumer fees. In many states these fees are regulated by law so nonprofits earn as much in customer fees as their for-profit counterparts. Yet for-profit companies, such as my company CareOne Services Inc., do not collect fair share payments.

All members of the debt relief industry, regardless of tax status, need to be treated equally under the law. CareOne argued for such uniform rules in our own comments to the CFPB. A network of strict regulations for for-profit companies, with virtually no industry regulation for nonprofit providers of the same services, makes it challenging for both creditors and consumers to determine the legitimate players in the industry and is a disservice to all.

In recent years, several states have recognized the need to treat all debt relief providers equally; a growing number of states are enacting rules that do govern the entire industry, not just one sector. The National Conference of Commissioners on Uniform State Law has even said that all providers should be treated equally, regardless of tax status, in its model legislation the Uniform Debt-Management Services Act. I hope the CFPB will have the foresight to look past the self-serving arguments of the NFCC and enact regulations that are in the best interest of all.

Mike Croxson is president of CareOne Services Inc., one of the nation’s largest providers of debt relief services, a position he has held since 2005. In this role, Croxson is responsible for all facets of day-to-day business operations. He focuses on direct consumer and business client services, human resources, training, public affairs, communications and organizational development.