Managing consumer debt: Culture, compliance, and completion

a r t i c l e i n f o We examine the cultural dimensions of participation in a debt management program (DMP). Archival data from Consumer Credit Counseling Service provide insights into the behavior of consumers in a DMP. Latino clients differ from Anglo clients, and are ultimately less successful in resolving debt problems. A key difference appears to be the expected monthly payment established for clients. While only debt level determines Latinos' expected payment, Anglos appear to better negotiate an expected payment from creditors, increasing their success. Importantly , homophily increases compliance for Latino debtor–counselor dyads. Overall, this study contributes to the transformative service research (TSR) literature by suggesting ways culture influences adherence to and completion of a DMP, leading to financial freedom for consumers in distress. Household decisions regarding use of credit cards strongly affect consumer welfare. Consumer debt grew when the U.S. saw deregulation of the credit card industry. Two Supreme Court rulings " effectively hobbled state usury laws that once protected consumers from being charged excessively high interest rates and fees " (Garcia, 2007, 3). Also, use of sophisticated research methods in the banking industry to segment and target consumers resulted in exploitation of financially vulnerable consumers (Harrison & Gray, 2010). The number of solicita-tions of consumers by credit card firms has reached almost four solicita-tions per month per household (Kerr & Dunn, 2008). Consequently, in the U.S., household debt is the biggest portion of total debt — in July 2008 it peaked at $2.6 trillion, more than $8000 per capita. This number consists of approximately 36% credit card debt and 64% car loans, student loans, appliances, etc. The last time household debt levels were comparable was 1929 (The Economist, 2010). New research reveals that consumers are paying off less debt than a year ago, now that " memories of the Great Recession continue to fade " (Yerak, 2014). Some consumers find they need help addressing debt problems and turn to third parties to help them with creditors and paying down debt. Put in the context of transformative service research, studies that improve these non-profit debt management services have the potential to create " uplifting changes and improvements in the well-being of both individuals and communities " (Ostrom et al., 2010, 9). This paper is about American consumer behavior and success in paying down this $2 trillion household debt. We theorize that culture plays …