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SAN DIEGO — Mitch Ronco, spokesman for consumer credit counselor InCharge Debt Solutions, said he’s been turning more and more struggling consumers away because they don’t qualify for InCharge’s full-repayment program.“There is a huge need, far more than we can handle,” Ronco said. “We have more people coming to us that don’t fit full-payment plans-more each month. Our average consumer’s debt used to be $17,000, and now its $23,000 or $24,000, and some are well beyond that. We recently had someone with $195,000 worth of unsecured debt, someone who will never qualify for full payment.”While lenders are willing to negotiate to lower interest rates or push past due amounts to the end of the loan, most still want full payment of all principle.“Once you determine a consumer can’t afford full payment, there really aren’t anyother solutions out there except debt settlement, and that’s had its problems,” he said. “You don’t want to push someone into bankruptcy if they can make partial payment, andthe consumer sure doesn’t want that. So we’ve been looking for a good partial-payment provider.”Then Ronco met Robert Manning, who had recently written a white paper for Filene Research Institute, outlining his responsible debt relief algorithm, which includes plans for partial payment. Manning demonstrated his algorithm, showing a tool that tests a household’s shock exposure to rising debt payments or lowered income, similar to the way financial managers shock test portfolios for interest rate risk.Per the algorithm, debt-strapped consumers can be divided into three programcategories: full payment, partial payment and bankruptcy. Manning cuts partial-payment qualification off at 20% of debt, saying it’s not worth the expense for creditors to collectless than that.InCharge’s services are phone-based, so when consumers don’t fit the Orlando-based organization’s full-payment plan, they are told to call Salt Lake City-based Hope Financial USA, which offers a partial-payment program based on Manning’s algorithm.Ronco said InCharge doesn’t offer partial payment because it would require anintensive computer system upgrade and extensive staff training. And, he said, so many consumers need consumer counseling services these days, there is plenty of businessto go around.Creditors are beginning to warm up to the idea of partial settlement, he said, although major credit card companies still resist anything less than 70%. However, even major card providers see the writing on the wall when it comes to consumer’s abilities to pay back their debt, particularly when economists are predicting further job losses, he said.“The bottom line is, partial payment is a better option than bankruptcy for both the lender and the consumer,” he said.Ronco added that Manning’s algorithm makes the partial-payment sell easier for Hope Financial because the settlement amount is based on a consistent, mathematical model, rather than arbitrary offers lenders don’t usually trust.–handerson@cutimes.com

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