Harvard Economist Recognizes the Substantive Benefits of Debt Settlement

Harvard Professor Will Dobbie, Ph.D., recently completed a review of the 2017 iteration of “Options for Consumers in Crisis: An Updated Economic Analysis of the Debt Settlement Industry” (Greg Regan, 2017).  Dr. Dobbie’s review included a lengthy analysis of the financial outcomes of individuals enrolled in debt settlement programs to determine their effectiveness in helping those with overwhelming levels of unsecured debt. Confirming the benefits of debt settlement that have been realized by millions of consumers, Dr. Dobbie notes in his report: “Reviewing the evidence from both this report and recent research, we conclude that debt settlement programs have the potential to significantly benefit many financially distressed individuals, particularly if they are not eligible for Chapter 7 bankruptcy protection or wish to avoid the negative consequences of Chapter 13 bankruptcy restructuring.”

Dr. Dobbie examined the data of approximately 110,000 individuals, totaling more than 735,000 accounts. His report found that those individuals who enrolled in a debt settlement begin to experience relief early in the process, with the first settlement usually occurring four to five months after the start of the program. In total, Dr. Dobbie found that the average debt settlement client experiences net savings of $5,800 on settled accounts based on the current balance.

Notably, the data and determinations by Dr. Dobbie match previous reports commissioned by AFCC. Dobbie used 2017 data in his analysis, the same data used in the 2017 Regan Report – the most up-to-date iteration of the AFCC-commissioned report by Greg Regan, a Partner at Hemming Morse, LLP. In addition to asking Dr. Dobbie to perform his own independent analysis of the data, AFCC asked him to, “conduct an independent examination of the 2017 iteration of the Regan report to determine whether the available data supported the report’s analyses and conclusions.” He was provided with the exact account-level data set used in the Regan Report, as well as, “detailed notes on the sample restrictions and analyses used in the report and full access to the author to discuss the reports’ methodology, scope, and outcomes.” The AFCC ensured there was no personally identifiable information disclosed in the numbers it provided but otherwise did not direct Dr. Dobbie’s scope, methodology, or analysis.

Dr. Dobbie reached virtually identical conclusions as did Regan: “All of the statistics reported here are substantively identical to those reported in the 2017 Regan report. We also find nearly identical results when measuring outcomes over both shorter and longer time horizons.”

Debt settlement is a consumer-friendly option which aids hundreds of thousands of Americans each and every year. After clients fully settle their debt, about 99 percent never need debt settlement again.

Dr. Dobbie is a Professor of Public Policy at the Harvard Kennedy School and a Faculty Research Fellow at the National Bureau of Economic Research. His research focuses broadly on the causes and consequences of poverty in the U.S., including the labor market consequences of bad credit reports. Prior to his joining the faculty at Harvard, Dr. Dobbie was an Assistant Professor of Economics and Public Affairs at Princeton University.