Financially troubled consumers are fast becoming a desirable commodity in the New York metropolitan area.

Providing credit counseling to the overextended has suddenly become big business. A surge of new competition is turning this formerly quiet industry backwater into valuable and hotly contested real estate.

A member of the National Foundation For Consumer Credit, the umbrella counseling organization supported by virtually all major banks and other consumer lenders, opened six offices in New York late last year.

In addition, three "independents" - two New Jersey-based companies and one from New York that operate without the national foundation's imprimatur - have applied for New York State Banking Department approval to operate as credit counselors in the state.

Not even the banking department, where officials say they have never seen so many applications of this type, seems to know what sparked this recent interest in helping indebted New Yorkers.

"These people obviously see a market for their businesses," said Michael Hess, assistant deputy superintendent of licensed financial services for the department. "But I can't explain why we are receiving these applications now."

The National Foundation for Consumer Credit, which represents a not-for- profit membership with 1,150 locations nationwide, estimates that between 200,000 and 400,000 New Yorkers need credit counseling services.

Until the recent ferment, the market was served by one organization under national foundation sanction, Budget and Credit Counseling Services Inc.

The organization, known as Buccs, went independent - meaning it pulled out of the national foundation - in 1994. And then the floodgates opened. Through a combination of consumer demand and industry politics, New York became credit counseling heaven.

While corporate and government downsizing and rising consumer delinquency rates are contributing factors, said Luther R. Gatling, president and founder of 20-year-old Buccs, such economic developments are not occurring exclusively in New York.

What seems to confound the New York State Banking Department is eminently clear to Mr. Gatling.

"As soon as I got out of the foundation," said Mr. Gatling in a recent interview, "they all said, 'Oh, hot market. Gatling's not part of us anymore. We can go after him.'"

Durant Abernethy, president and chief executive of the organization, conceded that Mr. Gatling's departure was seen as a "green light" for other members to come into New York, which is seen as a fertile opportunity compared with other metropolitan areas.

Foundation affiliates experienced 40% annual growth from 1984 to 1994, in terms of new offices and the number of clients it counseled.

The growth, however, has leveled off the past two years to about 8%, except for New York, where clients are waiting at least six weeks before they can get an appointment in one of six new foundation offices.

"Normally, we like to see people within 10 days of their initial call, but there is so much pent-up demand in New York," said Mr. Abernethy.

The foundation maintains that New York was underserved during Buccs' reign as the sole credit counseling service in the area with only three locations, in Brooklyn, Manhattan, and Melville.

Its largest affiliate, Credit Counseling Centers Inc. of Michigan, doubled Buccs' reach by opening offices in Manhattan, Brooklyn, Hicksville, Staten Island, White Plains, and Yonkers.

While Mr. Gatling said he is not against the competition, he is concerned about the quality of the service Credit Counseling Centers will offer consumers.

Mr. Gatling's 10-year affiliation with the foundation was never cozy. Buccs pulled out of the foundation, he said, mostly because of its position on helping clients file for bankruptcy.

Buccs is one of the few credit counseling services that has an attorney on staff who helps people file for bankruptcy. About 5% of the 25,000 people who seek help from Buccs file for bankruptcy.

By contrast, consumers who visit an affiliate of the foundation are told to seek legal advice if their financial situation is so severe that bankruptcy appears to be the only solution. About 3% of the 750,000 people who go to NFCC affiliates are advised to get legal advice.

Mr. Gatling maintains that the foundation does not provide bankruptcy services because creditors would object.

Indeed, Mr. Abernethy said that some national lenders would have a problem with a credit counseling service that provides on-site legal advice on how to file for bankruptcy.

"There is no (NFCC) policy or directive that disallows bankruptcy counseling," said Mr. Abernethy, "but only Buccs has chosen to do that."

The foundation was created in 1966 by a number of large lenders. Generally, lenders refer their delinquent customers to foundation affiliates, who either give budget advice or enroll clients in a debt management program, which can last for several years. Clients pay a monthly fee for the latter option.

In addition, lenders pay counseling agencies between 12% and 15% of the customer's repaid debt for what is called "fair-share contribution." According to Mr. Abernethy, foundation affiliates as well as independents get at least 75% of their income from the lender's contribution.

Mr. Gatling is not the foundation's only critic. In 1994, a group of 13 independent counseling services operating in 11 states filed an antitrust lawsuit against the foundation and its members. Also named in the complaint are Discover Card Services Inc., Citicorp, Chase Manhattan Bank, and other lenders, for allegedly directing their customers to foundation affiliates. The independents claim that NFCC members have a virtual stranglehold on the credit counseling business because consumers are funneled to them directly.

Mr. Gatling has not joined the lawsuit, and said he does not plan to, but said he believes it is not "frivolous."

In the case of Discover Card Services, the independents claim that the Riverwoods, Ill.-based issuer said it will make referrals only to NFCC affiliates.

The independents have singled out Discover as being the most difficult and unfair lender. A spokeswoman for the company declined to comment on the litigation.

Alan Franklin, head of American Credit Alliance, an independent in Trenton, N.J., who also did not join the lawsuit, said that he supports many of its grievances.

For instance, he said he is unable to negotiate a lower interest rate with Discover Card Services for his clients, and that Discover requires his clients to write a letter requesting a lower rate. Typically, credit counselors negotiate repayment plans with lenders directly and often lenders reduce their interest rates and waive late fees.

"The consumer is the innocent victim," in this conflict, said Mr. Franklin.

The lawsuit, filed in U.S. District Court for the Eastern District of New York, based in Brooklyn, is still in the discovery stage. One independent agency has joined since the lawsuit was filed in March 1994.

In the meantime, the New York metropolitan market will likely be the biggest battleground between the independents and the foundation.

None of the players are shy about claiming to be the best in the business.

Mr. Gatling boasted that Buccs' "quality of service is unmatched anywhere."

Albert Horner, president of Credit Counseling Centers, the NFCC affiliate that opened six offices in New York, pointed to his organization's 34 years of experience in the credit counseling business.

There are notable differences between CCC, Buccs, and the independents.

Mr. Franklin's American Credit Alliance, which is one of the New Jersey- based operations that contacted the New York State Banking Department, hopes to open an office in Manhattan that would handle most counseling and debt management via phone and mail, whereas Buccs and Credit Counseling Centers encourage people to come into their offices.

American Credit Alliance is also less expensive than the latter two, charging clients a maximum of $25 a month to manage their debts. Its clients with up to three creditors pay $5 a month, and those with up to seven pay $15 a month.

Buccs debt management services cost a maximum of $50 a month, based on a client's ability to pay. And Credit Counseling Centers charges up to $65 a month. Mr. Horner said on average his clients have 14 creditors, which costs between $50 and $60 a month.

Garden State Consumer Credit Counseling of Freehold, N.J., the other independent trying to penetrate the New York market, charges $4 per creditor up to a maximum of $24 in addition to a $10 enrollment fee.

The New York-based independent, Debt Counseling Corp., could not be reached for comment.

All of the agencies offer their services free to people who are unable to pay. Their clients are from a range of income levels.

Mr. Gatling noted that Buccs helped more people last year who were in higher income brackets and were between 48 and 60 years old, which he attributed to corporate and government downsizing.

About one third of Buccs' clients enter a debt management program, which ends typically after two and a half years. The remainder of clients receive budget advice for a one-time $50 fee.

The typical person seeking Credit Counseling Centers' help in New York, said Mr. Horner, earns approximately $38,000, and owes 14 creditors a total of $55,000. Between eight and 10 of the lenders are credit card issuers.

Mr. Horner said that 50% of Credit Counseling Centers' clients are able to solve their financial problems without entering a debt management program, and it does not charge anything for an initial visit.

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