Consumer Credit Counseling Reform

Consumer Credit Counseling Reform: The Good, the Bad and the Ugly

Estimates place the number of consumers seeking credit counseling services at approximately 9 million. This number is difficult to pin down because only the two major credit counseling trade organizations, the National Foundation for Credit Counseling (NFCC) and the Association of Independent Consumer Credit Counseling Agencies (AICCCA), report accurate numbers. Approximately 160 credit counseling agencies are members of NFCC2 up enforcement of nonprofit status by the Internal Revenue Service (IRS). Second, enact federal legislation to regulate what has become a national industry. Third, improve self-regulation of the credit counseling industry through NFCC and AICCCA. Finally, enact creditor reform and better support credit counseling efforts. Following Credit Counseling in Crisis, the Senate Permanent Subcommittee on

Profiteering in a Nonprofit Industry

Investigations released a telling report titled “Profiteering in a Nonprofit Industry: Abusive Practices in Credit Counseling.” In this report, even industry experts were surprised to learn that some of the less scrupulous credit counseling agencies were far worse than they imagined. The report examined three large, newer entrants to the industry and discovered abuse of their nonprofit status that reaped millions of dollars for their for-profit ancillary businesses, all at the cost of debt-burdened consumers.The subcommittee found that the organizations in question made no effort to provide true counseling or educational programming, and that their primary focus was to generate fee income from DMP administration.7 The report stated that “some credit counseling agencies are engaged in abusive practices that hurt debtors, including…charging excessive fees, putting marketing before counseling and providing debtors with inadequate educational, counseling and debt-management services.” The report also stated that “nonprofit credit counseling agencies are funneling millions of dollars each year from cash-strapped debtors to insiders and affiliated for-profit businesses, in apparent violation of tax laws….” The subcommittee recommended reforms that would address this problem. However, those bills are languishing in Congress.If you turned to an agency to assist you in managing your credit card debt and feel that you were ripped-off, don’t wait for Congress to wait. Take action now to get your money back and possibly more.

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