WASHINGTON – An industry group, The Coalition for Responsible Credit Practices (CRCP), says the credit counseling industry would do a better job of helping people manage their debt problems if it was legally opened to professional, regulated small businesses and financial professionals.
Currently, a narrow majority of states ban “for-profit” credit counseling and mandate that credit counseling providers have a tax-exempt or “charitable” tax status. In addition, a number of the nation’s largest creditors, who have historically controlled the financing and governance of most of the credit counseling industry, have sought to maintain their control by refusing to support any credit counseling agency that does not have charitable, tax-exempt status.
(For more background, see a report released this year by the group Consumers for Responsible Credit Solutions entitled “Nonprofits in Service to One of America’s Most Profitable Industries: A Report on How Creditor Control of the Credit Counseling Industry Hurts Consumers and the Need for Fundamental Reform” at www.responsiblecredit.com)
These “charitable,” “nonprofit” or tax-exempt mandates have been at the center of many of the problems and controversies recently surrounding the industry, in part because organizations with a charitable tax status are frequently exempt by law from basic state and federal regulation. In addition, the Internal Revenue Service has recently raised concerns about tax- exempt organizations being used to serve the profits of individuals and creditors closely associated with many charitable agencies.
CRCP advocates stronger, national regulation of tax-exempt charities that provide credit counseling. In addition, CRCP believes consumers would benefit from increased professionalization, competition and regulatory oversight that would result from expanding the industry to allow taxpaying, for-profit small businesses and professionals such as accountants, financial planners, estate planners, attorneys, and others with expertise in financial management to help consumers with credit counseling services.
“Just as consumers can choose between for-profit banks and non-profit credit unions, they should have the greatest choice possible when seeking credit counseling,” said CRCP executive director Darrell McKigney. “Small businesses and financial professionals have much to offer consumers seeking help with managing their finances, and consumers should no longer be denied access to their expertise.”
CRCP supports enacting new national standards that would open the credit counseling industry to both tax-exempt charities and professional business and provide stringent regulatory enforcement across the entire industry. Find out more at http://www.responsiblecreditpractices.com
