The nation’s credit crunch is driving many toward insolvency and foreclosure. Some of the people caught in this mess would no doubt benefit from sound financial advice and help with creditors. But there’s also a danger that these same consumers could be ripped off by debt management companies more interested in getting big commissions and selling their products than in acting in their clients’ best interests.
So it’s troubling to see momentum building in Annapolis to allow for-profit companies to enter the debt services field – at least without independent research into the consequences of such a major policy change. Maryland is one of the few states that have kept them out by licensing only nonprofits to provide debt management services.
Supporters argue that the fallout from the subprime lending mess is going to lead to a shortage of service providers. But there’s scant evidence of this so far – especially compared with all the reports of problems in states where for-profit debt management companies have behaved badly.
Can for-profit companies theoretically do just as good a job of providing debt counseling and other needed services as nonprofits? Absolutely. Many mortgage companies, stockbrokers, bankers and others in the finance industry operate honorably under similar circumstances. And nonprofit debt management services firms have gotten in their share of license trouble, too.
But opening the door to big firms such as Columbia-based Ascend One Corp. would likely drive out the nonprofits that lack a big sales staff, advertising budget or Internet presence. With state attorneys general in Maryland and elsewhere currently looking into Ascend One’s business practices, it would seem foolish for legislators to act incautiously.
That neither Attorney General Douglas F. Gansler nor the O’Malley administration has taken a position on the bill is disappointing, but also reinforces the view that lawmakers should move slowly. Better to approve a detailed study of the matter (and there’s a pending House bill that does exactly that) than to put consumers at risk by licensing for-profit debt management services companies before all the facts are in.
Copyright 2008 The Baltimore Sun