Credit Counseling – Debt Management Plans and Consumer Psychology

Finding the Link between Consumer Attitude and Intent

Credit counseling and a debt management plan can lead to greater peace of mind for consumers in a bind, but proper education is needed first. (Photo:

Credit counseling and a debt management plan can lead to greater peace of mind for consumers in a bind, but proper education is needed first. (Photo:

When a consumer enters into credit counseling, a common element of any program is what’s called the debt management plan (or DMP). In a DMP, the consumer agrees to make a set monthly payment to their credit counseling agency. Those funds are in turn used by the credit counseling agency to repay the debtor’s bills, loans and other debts according to a schedule made with the creditors. The presence of the credit counseling agency in the transaction may persuade the creditors to be amenable to lowering interest rates or waiving fees, not to mention staunching the flow of credit collection calls the consumer had been receiving. Provided that something more than free counseling but less than bankruptcy filing is needed, a DMP can be a useful tool in protecting a consumer’s financial interests and helping them to move forward and repair credit.

Benefitting the Consumer

A 2008 study entitled “Completing Debt Management Plans in Credit Counseling: An Application of the Theory of Planned Behavior” by Jing Jian Xiao of the University of Rhode Island and Jiayun Wu of the University of Arizona tenders that the most ideal arrangement for a DMP would be one in which consumers were fully informed of their options and chose the most appropriate course of financial action. At the same time, creditors and credit counseling services alike would deal with the consumer in an ethical, professional manner.

While circumstances surrounding a consumer’s financial troubles rarely fall into place like clockwork, numerous recent studies have shown that consumers who participate in DMPs show ” a significantly lower incidence of bankruptcy over the two years following counseling” (Staten & Barron from 2006). Overall, consumer financial well-being has been observed to improve.

Xiao and Wu Study the Link between Attitude and Behavior

In other words, they get started the theory of planned behavior. Consumers’ attitudes toward credit counseling (and the DMP in particular) are important, as the theory hypothesizes that these attitudes will accurately predict future credit behavior. Xiao and Wu study survey and plan completion information from DMP-enrolled consumers in order to go where studies in the field have never been before. While previous studies have attempted to shed some light on the desires and behaviors of consumers who participate in credit counseling, they relied almost solely upon survey data. Xiao and Wu’s use of the theory of planned behavior to identify factors associated with completing the debt management plan is entirely new in the field, according to the study authors.

Positive Attitude, Intention and Results

The authors begin with the survey data from clients of a national credit counseling agency, and then they get started the theory of planned behavior and other methods from literature on the concept of consumer satisfaction. Their goal is to find the link between a consumer’s intent and their actual behavior when completing their DMP. Their discovery is that observed behaviors consistent with the theory of planned behavior had positive effect on consumer’s intentions, post-credit counseling.

Their Findings Have Implications for Credit Counseling Services

DMPs are understandably a significant monetary resource for credit counseling agencies. Predicting how likely consumers are to complete their DMP would hence be useful to the financial stability of such companies. Positive attitude toward completing a DMP plays a very important rule in a consumer’s future intent. It’s much more significant to ask someone “What do you think about completing the debt management plan?” versus “What do you think about the debt management plan?” Thus, the way in which credit counseling agencies approach the matter with their clients can definitely steer them toward more likely completion, which in turn could foster positive attitudes that reflect in how such credit counseling agencies are perceived by consumers.

Help Clients Feel They’re in Control of Debt Management

By providing clients with the necessary information to make informed decisions and periodically updating their progress, credit counseling services can help empower consumers. If said consumers feel as if they’re in greater control of their debt via a well-executed DMP, their instance of intent to complete the DMP is found by the authors to be higher. Greater client satisfaction is central to credit counseling success, which would indicate that if the agencies consistently treated clients with respect, there would tend to be positive result. Meeting consumer need and even exceeding expectations – a good recipe for any business transaction – leads to a greater likelihood of DMP completion. This is beneficial to all parties involved, from the client to the credit counseling agency to creditors.

What Can Educators Take From Xiao and Wu’s Study?

Determining a credit counseling client’s behavioral intention comes down to two factors, say the authors: “Attitude toward the behavior and perceived behavioral control.” When developing programs to promote positive behavior development, educators should consider directing subject attention to attitude toward the desired behavior as well as the method used to promote behavior (in this case, the DMP). Clear benefits and consequences of DMP completion should thus be made available to credit counseling clients. If such information is made available as a part of a financial education curriculum, the authors feel that consumers could possibly have a more favorable attitude toward DMPs should they ever have the need. Possible psychological barriers could be lessened.

Knowledge: the Key to Positive Attitude and Intent

Xiao and Wu findings suggest that if a consumer in credit counseling finds a DMP that best suits their needs, satisfaction levels can be significantly high. Education as to what the programs entail is most important. In order for consumers to have the optimal attitudes toward DMP usage, they also need to be aware of other options available within the credit counseling industry. Knowledge leads to well-informed choices and greater satisfaction, per the authors’ findings. It should be noted that another important part of a consumer’s financial education should include how to avoid marketing scams, as some segments of society view credit counseling and debt management plans with negative or exploitative. There are many reputable credit counseling agencies that would benefit from heightened consumer awareness.

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