If you can’t pay your mortgage or credit card bills, chances are you will seek help at a credit counseling agency. And if you give up your battle with debt, you’ll need one of their pre-bankruptcy filing certificates.
Working from call centers, the largest agencies counsel tens of thousands of consumers a year, mainly via phone and Internet. Their work is supported by lenders, by federal housing programs, and by debtors who pay fees for the help they receive. Credit card debt management plans cost up to $50 a month and take years to complete.
While credit counseling agency clients are struggling financially, their leaders are doing anything but.
In researching my story, “Salaries of CEOs at nonprofit credit counseling agencies,” I found the average pay for the CEO of a top-10 counseling organization was $539,000 in 2014, according to the agencies’ public financial disclosures. Only two of the 10 CEOs made less than the average pay at comparably sized nonprofits, according to comparison figures published by Guidestar.
Topping the list is Ivan Hand (right), the chief executive of Money Management International, the largest counseling agency, with an annual budget of more than $50 million. His $1,481,616 compensation in 2014 was more than double the average at even the largest nonprofits.
For Hand, it was the second year that a six-figure bonus ballooned his compensation into the highest tier. Searching the largest nonprofit organizations, it is not easy to find leaders who receive more. Many larger organizations, including the National Audubon Society, the American Civil Liberties Union and the San Diego Zoo, pay their CEOs a fraction of what Hand gets.
Why do organizations supported by struggling debtors pay their executives so richly? It’s a question for both the debtors and U.S. taxpayers, since credit counseling firms’ revenue includes federal grants.
In 2014 and 2013, MMI said it paid the bonus in recognition of Hand’s approaching retirement age. Hand, who has led MMI since 2000, explained that the idea was to retain him during a transition period for the industry. For most of his 16-year tenure his pay was less than peers, he said.
The outsized pay package came while MMI’s laid off counseling workers as fewer debtors sought its help. Its revenue &ndash which measures the organization’s counseling activity as well as its financial health – is about half its 2010 level, the steepest plunge among the largest counseling agencies.
Times are changing fast for the business of credit counseling. The nation’s debt woes are shifting from mortgages and credit cards to student loans. But it’s unclear what MMI’s leader did to refocus the organization on today’s debt problems, as student loan counseling remains a small part of MMI’s workload.
So why did the board decide to pay $1.3 million in bonuses over two years to the longtime leader, on top of base annual pay of $675,000? That question remains unanswered as the board’s chairman, Lester Dees, refused to comment, referring questions back to the CEO.
If the board is not exercising a firm hand on executive pay at MMI, it is unlikely to get much help from outside. The Internal Revenue Service, which regulates nonprofits, lacks the resources to crack down on excessive pay. And credit counseling agencies are not subject to reviews published by watchdog organizations such as Charity Navigator, which reviews nonprofits that collect donations from the public.
Consumers still have growing problems with debt – just not the kind of debt that Money Management, and other credit counseling agencies, were designed to address. Credit counselors, as experts in budgeting, may have a role to play in helping lift the U.S. $1.3 trillion student loan burden. But so far policymakers have given that job to student loan servicers, who have the power to modify the loans’ repayment terms. (See “Credit counselors turn to student debt.”)
Finding a way to help alleviate the student loan crunch is an admirable goal, and one that would help credit counseling organizations survive in an era of low credit card defaults. But handing outsized pay and bonuses to a CEO doesn’t seem to be connected to this goal – or any other part of the organization’s mission. Taxpayers, and people paying monthly fees in their struggle with debt, deserve to know why the board paid Hand so much more than nonprofit norms, and what it got for the money.