|
Credit counseling agencies were taking advantage of customers
The Bankruptcy Abuse and Consumer Protection Act was enacted last year at the urging of the credit card companies, who claimed that most people who filed for debt relief through the courts simply didn’t want to pay their bills. It isn’t true, but Congress never fails to listen when big business talks, and the result was the most sweeping reform of debt law in more than 25 years. One of the requirements of the new law is that anyone who is going to file for debt relief must first enroll in a credit counseling program. The law requires that the agencies be nonprofit, and that the fees be “reasonable.” The result of these requirements has been tough on both consumers, who now have to pay fees to agencies and jump through one more hoop, and counseling agencies, who find themselves swamped with customers who cannot afford to pay them for their services. It’s been a mess.
Recently a bad problem has become worse as the Internal Revenue Service has revoked the tax exempt status of 41 nonprofit agencies. The charges are that the agencies were merely paying lip service to helping their clients. While only pretending to help, the agencies were trying to steer their clients into enrolling in expensive debt repayment plans that ultimately put money in the hands of the agencies while doing little to help their customers get out of debt. The plans weren’t really tailored to the needs of specific customers; they were just generic plans that were heavy on fees and light on repayment. And the employees of the agencies were given cash incentives to steer their clients towards repayment when they really needed to be steered towards bankruptcy court.
|
