Overwhelming debt is a reality for many Americans.
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Today, many American families are experiencing financial strain, with 17% unable to pay all their bills and close to one-third lacking the savings to cover a $500 expense. In this environment, many have turned to debt to get by. Consumer debt has reached record levels, with credit card debt exceeding $1 billion.
While debt and credit can be useful to smooth expenses, manage shocks, and pursue opportunities, for some families, debt loads have become unsustainable. Today, three in ten people say their debt has reached unmanageable levels, and close to 10% of credit card balances went into delinquency in 2023. Clearly, many families are struggling under the weight of accumulated debt and need help to recover.
Credit counseling agencies (CCAs) are nonprofit organizations that work with people seeking to get a handle on their finances and debt. In addition to credit counseling, CCAs offer debt management plans (DMPs), a tool that can help clients access better interest rates and terms on their debt. DMPs also streamline credit management—the client submits a single payment to the CCA, which then repays the various creditors—relieving the stress of dealing with multiple providers.
In spite of the benefits they can offer, CCAs frequently struggle to reach and engage the people who could most benefit from their services. CCAs often compete with for-profit debt settlement providers that have much larger marketing budgets—but are risky to deal with.
The Consumer Financial Protection Bureau (CFPB) even says: “Warning: Debt settlement may well leave you deeper in debt than you were when you started.”
And even when clients do sign up for DMPs, many do not make payments consistently, jeopardizing their ability to successfully complete the program and benefit from a clean slate and a repaired credit score.
Debt management plans (DMPs) are debt repayment plans that help people manage and repay unsecured debt, such as credit cards and personal loans. DMPs are offered by credit counseling agencies (CCAs), which negotiate with lenders to create custom, consolidated payment amounts and schedules, often with reduced interest rates. They typically require 3–5 years to complete.
ideas42 uses insights and tools from behavioral science to improve lives, build better systems, and drive social change. We work closely with the communities we serve to design and advocate for behaviorally informed solutions that meet the needs of people with low and moderate incomes so they can have a financially secure present and a self-determined future.
With support from Capital One, ideas42 partnered with multiple CCAs from across the country, leveraging behavioral insights to improve client uptake and successful completion of DMPs. The aim, through this project, was to offer a win-win-win for clients, CCAs, and creditors:
Consumers
Healthy, safe support system for managing debt
Credit Counseling Agencies
Double bottom line
Creditors
Recover principal and interest
Consumers
Healthy, safe support system for managing debt
Credit Counseling Agencies
Double bottom line
Creditors
Recover principal and interest
Consumers
Healthy, safe support system for managing debt
Credit Counseling Agencies
Double bottom line
Creditors
Recover principal and interest
Consumers
Healthy, safe support system for managing debt
Credit Counseling Agencies
Double bottom line
Creditors
Recover principal and interest
Consumers
Healthy, safe support system for managing debt
Credit Counseling Agencies
Double bottom line
Creditors
Recover principal and interest
As part of this project, ideas42 collaborated with a New Jersey-based credit counseling agency to pilot a series of behaviorally informed designs aimed at improving DMP repayment and encouraging clients who were struggling to make payment to seek support.
The pilot tested four interventions: SMS payment reminders, action-oriented emails, video testimonials, and digital calendar reminders. Results suggest these interventions contributed to a modest but encouraging improvement in repayment outcomes, resulting in a 0.87% decrease in payment bouncebacks. Among the tested designs, action-oriented emails stood out, achieving a 64% open rate. This high level of engagement highlights the potential of behaviorally designed communications to effectively reach clients who have missed a payment.
The report is organized into three primary “chapters,” each focusing on an important step on a client’s journey with a DMP:
In order to benefit from credit counseling agencies, clients have to know they exist, and be able to distinguish them from harmful alternatives.
In order to benefit from credit counseling agencies, clients have to know they exist, and be able to distinguish them from harmful alternatives.
Before they can benefit from debt management plans, clients need to connect with a CCA and navigate the registration process.
Before they can benefit from debt management plans, clients need to connect with a CCA and navigate the registration process.
To successfully complete the DMP and achieve freedom from debt, clients need to make regular, timely payments to the CCA over the duration of the DMP.
To successfully complete the DMP and achieve freedom from debt, clients need to make regular, timely payments to the CCA over the duration of the DMP.
Each step in this process currently presents several behavioral barriers that can deter prospective clients from taking action. For each, we offer evidence-based design principles that can address these barriers and contribute to greater client success. Chapter 5 includes a deep dive on a pilot study that tested the impact of behaviorally informed solutions on repayment outcomes. Finally, we offer lessons from this initiative, with insights to inform future collaborations and offer suggestions for CCAs looking to implement behavioral principles.
Each chapter follows the experience of an individual—Manny, Jae, or Leo—who is struggling with their current financial situation and seeking ways to manage their debt. These individuals are not unique but help bring to life the stories of many people across the country. Each chapter also includes direct quotes from real CCA clients and recommendations for future DMP design.
42-year-old HVAC contractor in San Diego, CA
Manny is a 42-year-old HVAC contractor based in San Diego. Manny has been in his trade for over a decade, but his current contract is coming to an end next month.
Manny is also grappling with home repair bills after finding mold in the rental property he owns. Only a fraction of the cost was covered by insurance, and he was forced to cover the rest with credit cards.
He’s making payments but seeing little progress in reducing his debt. “I work, and work, and work, and it feels like I’m just treading water,” Manny shares.
Learn more about Manny’s journey to finding a CCA
30-year-old sales manager in St. Petersburg, FL
Leo is a 30-year-old who works as a sales manager for a cleaning company in St. Petersburg, Florida. He relied on credit cards through college and early in his career, and the debt quickly added up. He’s on a strict budget now, but he’s still grappling with accumulated credit card debt, a car loan, and student loans. On top of everything, his car broke down last month.
Leo worries constantly about his financial situation. “I feel like I’m in a never-ending loop,” he said. “No matter how hard I try, life keeps happening, and I’m still in debt.”
Learn more about Leo’s experience with signing up for a DMP
50-year-old nurse in Brooklyn, NY
Jae is a 50-year-old nurse living in Brooklyn. She’s a single mother, and things are tight financially.
Her mortgage is reasonable since she bought when rates were low, but she has had to shift to a part-time schedule due to chronic back problems. This has limited her income, and she’s put some expenses on her credit cards. One of her accounts is in collections—adding to her financial stress.
Her oldest son is starting college soon, and even with the scholarships he’s earned, Jae is not sure how she will keep up. “I don’t know who I can talk to. I feel so alone.”
Learn more about how Jae navigated the repayment journey
Insights for this report are based on extensive research on debt management as well as in-depth data collection conducted over more than two years, beginning in July 2022.
ideas42 staff conducted interviews with more than two dozen CCA staff, over 70 prospective and current clients of CCAs, and multiple people working across the credit and debt relief industry. We held several rounds of qualitative interviews and user testing with clients and stakeholders across multiple U.S. states, both in person and over Zoom. Through this process, we learned about the behavioral, structural, and policy issues that affect the industry, agencies, and clients, and explored design principles and solutions to address the behavioral barriers. We also draw from past work and existing behavioral science research on the behavioral impacts of context and financial scarcity.
We also conducted a pilot project with more than 300 clients to test mechanisms to increase consistent and on-time payments. This pilot study is detailed in Chapter 5.
The personas of Manny, Leo, and Jae are composites inspired by real DMP clients. Their stories offer insights into the experiences and barriers faced by many consumers struggling with debt management. Throughout the project, we also use real quotes from current or prospective DMP clients. These quotes have been edited lightly for clarity.
This project represents a collaboration between ideas42 and numerous partners who were critical to its success.
ideas42 collaborated closely with multiple credit counseling agencies to implement this project: Consumer Education Services Inc., Navicore Solutions, Take Charge America, LSS Financial Counseling, American Financial Solutions, The Consumer Credit Counseling Service of Maryland & Delaware (CCCSMD) and Money Management International (MMI).
CCAs were selected through a competitive process and were assigned to one of two areas, based on their preferences:
These CCAs provided valuable input throughout the initiative to ensure that the insights generated were relevant and that solutions were feasible. They also coordinated interviews with their clients to help ground our understanding of barriers and solutions in real life experiences.
In addition to the implementation partners, ideas42 also convened a “Scaling Insights” advisory group to ensure that our insights and tools were relevant across the industry. The Scaling Insights group consisted of six agencies: Consolidated Credit, Trinity Debt Management, Family Means, GreenPath, The Village Family Service Center, and Family Budget Services, Inc.
These organizations helped generate ideas for improving DMP outcomes and provided inputs throughout the design and testing process.
We're grateful to Capital One for their generous support for this project. We are also grateful to all the Credit Counseling Agencies who partnered with us, and to their clients for sharing their experiences and honest feedback which informed the solutions we developed.
