Why Nonprofits Should Be in the Debt Collection Business
NEW YORK (TheStreet) -- Nonprofit organizations are wonderful things. They do fabulous work to uplift and advocate for the less fortunate, fill their bellies and their souls and offer shelter when none is available. Nonprofits may be secular or religious but seek equally to improve quality of life for those for whom quality of life is low.
Thirty-nine million of our fellow citizens in debt, and debt collectors make billions of phone calls intended to annoy, embarrass and abuse them into giving up the rent money or even money for food to take care of that credit card debt or payday loan or unpaid medical bill. Debt collectors file 10 million lawsuits a year. Contrary to common belief, these debts almost always were not the result of poor decisions. Largely they are the result of a lost job or an illness in the family.
Those two activities -- doing good for society and collecting debt -- are poles apart, yet they really fit hand in glove. Nonprofits are in the business of helping people who need help, and consumers overwhelmed by debt certainly need lots of help but have no choices other than to just hunker down and struggle on.
At first blush, no nonprofit would say they wanted to become a debt collector and no debt collector would behave like a nonprofit. What changes this dynamic is an idea that opens a door for nonprofits to see themselves able to magnify their efforts and extend their outreach in ways not before possible. For every nonprofit, the limiting factor is not a shortage of people who need their help -- it is a lack of funding to meet those needs.Both needs are solvable in a way that does not create a social welfare or giveaway program nor create a tax burden for government. I have made proposals to the administration and consumer advocacy groups for the creation of a special tax credit program that would give banks incentives for donating delinquent consumer loans to nonprofit organizations. Those donated loans become the source of funding for expanding the programs and outreach for the nonprofit. The nonprofits, operating under special rules and qualifications, would work with the consumer to restructure loans into payment terms that would truly fit the consumer's specific situation and generate a cash flow that the nonprofit uses to fund broader service needs. This new revenue source will allow nonprofits to extend their reach farther and faster.
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