Credit counseling crunch

For decades, Consumer Credit Counseling Service of Yakima Valley has helped residents weather financial crises. Now it's facing its own financial problems.

And it's not alone. The same dwindling economy that's driving growing numbers of debt-ridden consumers to seek help has similar nonprofit agencies that assist them also looking for help.

Banks, a major source of grants to nonprofit debt management organizations, are tightening up.

"Those grants continue to decline every year," said David Gilbreath, CEO of Consumer Credit Counseling Service. "And given the current stance of banks, that's expected to continue."

The crunch comes at an already challenging time.

The number of people seeking foreclosure-prevention counseling doubled to about 80 a month this year while revenue from banks declined by 36 percent. Not including the recent spike, the agency assists about 250 people a month with debt management.

Now, for the first time in its 37-year history, Consumer Credit Counseling is asking the public for help.

This week, letters seeking donations will go out to area businesses and foundations, he said.

"The need for these services is at an all-time high and the funding is at an all-time low," Gilbreath said. "I think every consumer credit counseling service in America is in a difficult position."

Running lean on funds this year, the agency that employs six counselors to cover eight counties in Central Washington dipped into its reserves by anywhere from 5 to 10 percent, he said.

"But we won't know how deep (we dipped) until the end of the calendar year," he added.

If funding doesn't increase soon, the agency will have to either reduce services or increase fees clients pay, he said. Clients pay no more than a $15 fee for help. The fees account for only about 15 percent of the agency's $1 million annual budget.

The Yakima agency isn't alone. Other nonprofit debt management agencies across the country are exploring alternative funding solutions, said National Foundation for Credit Counseling spokeswoman Gail Cunningham in Wichita Falls, Texas.

Declining revenue at one of the region's oldest debt management agencies -- Consumer Counseling Northwest on the state's west side -- was recently forced to merge with a larger nonprofit organization in Ohio after its funding diminished.

"Certainly agencies are struggling," Cunningham said. "Paradoxically, when consumers need it the most, funding is being cut. We're out here trying to help the consumer keep his head above the financial waters."

Much of the increase in traffic at the Yakima agency is people who have run afoul in credit card debt and can't afford their mortgage as a result, Gilbreath said.

Medical bills, loss of jobs and divorces are the leading reasons people run into problems paying mortgages and eventually into bankruptcy, he said.

"We're clearly seeing an increase in people in distress with their mortgages," he said.

In the past, they'd take out a loan to consolidate their debt or draw some equity out of their homes -- options that are harder to come by these days, he said.

"It's more and more difficult to do that given the current credit market," he said.

Overwhelming credit card debt drove Kay Hickle of Moxee into the local agency earlier this year.

She and her husband, Jack, have struggled to pay their mortgage after he became disabled by a hand injury a couple of years ago.

Their income dropped from about $2,100 a month to $1,400, she said.

"We were really good (paying) our credit cards, always on time," she said of the time her husband was working. "It's rough, that's for sure."

After going to Consumer Credit Counseling, they learned that their only option was to file for bankruptcy. They'll get to keep their home and car.

"The reality is that we were in over our heads" she said. "There was no way of getting out of it.

"Credit cards are the worst thing to get into right now," she added. "You never get it paid off -- the interest eats you up."

Bankruptcies in Yakima County slightly increased this year with 1,198 so far, up from a total of 1,125 last year.

There are more than 360 foreclosed homes currently on the market in Yakima County, according to RealtyTrac, an online service that tracks the housing market.

That figure represents about a 10 percent increase in the county's foreclosures, said Steve Emhoff, president of Emhoff Group Inc., a realty company.

He guesses the increased caseload at the local Consumer Credit Counseling Service has more to do with people preparing for possible impacts of the economic downturn, which hasn't yet caused a significant change in the housing market here.

"Consumer Credit Counseling may be seeing more (people) coming in now because of the state of the economy," he said. "People are afraid of losing their jobs, and are probably trying to see what they can do so they don't lose their house."

Either way, keeping the local Consumer Credit Counseling Service going will only help the economy, Cunningham said.

"I would certainly support (Gilbreath's) effort locally," she said. "You know, when debts get repaid, it helps the consumer because he's doing what he's supposed to be doing by paying his debt. And it certainly helps the creditor because he's getting paid, and it helps the community because money is getting put back into circulation."

* Phil Ferolito can be reached at 577-7749 or pferolito@yakimaherald.com.

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