In 2009, Dr. Richard Briesch of Southern Methodist University conducted a study on Debt Settlement Programs (DSPs). In this study, he concluded that debt settlement provided greater consumer welfare than debt management plans. However, how valid is this conclusion, considering debt settlement often has negative consequences on your credit report, the savings are subject to taxation, and there are often significant up-front fees?
In his consumer welfare analysis, he ignored some significant pieces of information including:
Throughout his study he discussed six findings and made four recommendations, which will be listed below.
The Six Findings:
The Four Recommendations:
His study may seem to be valid and free of error. However, it can be contradicted and proven wrong. I encourage you to read to the full review/dispute of his study at Debtors Unite by clicking the link below.
Read the entire review of his study at Debtors Unite [http://debtorsunite.com/Articles/Debt-Settlement/Review-of-Briesch-Debt-Settlement-Study.aspx]
Read Dr. Briesch's study at Consumer Credit Choice(A Debt Settlement Company)
In his consumer welfare analysis, he ignored some significant pieces of information including:
- Actual Completion Rates
- Benefits of counseling activities
- Financial cost comparison between debt relief methods
- Credit Score Impact
- Long-term success for clients
Throughout his study he discussed six findings and made four recommendations, which will be listed below.
The Six Findings:
- Accurate measures of consumer completion and cancellation cannot be calculated from the data
- "The firm had mean, median and mode settlement offers at or below 50% of the original debt"
- "...more than 57% of the clients have offers to settle at least 70% of their debt"
- "the debt settlement company has an increasingly higher value to customers with higher account balances and higher total debt, but lower number of accounts"
- CCCS (Consumer Credit Counseling Services) fees and payments for a consumer account were stated to possibly exceed 29% of the consumer debt once fair share payments are taken into account
- Reasonable upfront fees by Debt Settlement Programs should be allowed.
The Four Recommendations:
- Relief of litigation and calls from creditors when the client was making satisfactory progress in accredited Debt Management Programs. (However, these clients to not usually face litigation or calls.)
- DSPs should be able to "set up trust accounts for their clients that have very specific limitations on disbursements."
- "Require full disclosure of all fees consumers directly or indirectly pay."
- "Provide guidance of how companies can accurately measure program effectiveness."
His study may seem to be valid and free of error. However, it can be contradicted and proven wrong. I encourage you to read to the full review/dispute of his study at Debtors Unite by clicking the link below.
Read the entire review of his study at Debtors Unite [http://debtorsunite.com/Articles/Debt-Settlement/Review-of-Briesch-Debt-Settlement-Study.aspx]
Read Dr. Briesch's study at Consumer Credit Choice(A Debt Settlement Company)