Regulators Warn about Counselors
The Federal Trade Commission, Internal Revenue Service and state regulators have issued a consumer alert for those seeking guidance from tax-exempt credit counseling agencies.
Many consumers are seeking help from nonprofit credit counseling agencies to manage their debt or "repair" damaged credit, state and federal regulators noted. They urged consumers to be cautious when choosing a credit counseling organization, saying that there have been an increasing number of complaints to state and federal agencies that suggest some credit counselors are engaging in "questionable activities."
The regulators say they are concerned that some credit counseling organizations are using tax-exempt status to circumvent state and federal consumer protection laws.
IRS commissioner Mark Everson said the IRS "will work to protect the integrity of tax law to ensure that tax-exempt organizations understand and comply with the rules. We will work with other federal agencies and state regulators to combat abuse in this area," he said.
FTC chairman Timothy Muris urged consumers to be cautious about "quick fixes" that might cause them to "lose even more money."
To protect themselves, the advisory urges consumers to:
* Make sure the organization helps people manage finances better through counseling and education.
* Carefully read any written agreement an agency offers detailing services to be performed, payment for these services, timeframes and any guarantees that are offered.
* Beware of high fees or required "voluntary contributions" that, with high monthly service charges, may add to a consumer's debt burden.
* Make sure creditors are willing to work with the agency a consumer chooses.
* Check with state agencies or the Better Business Bureau to find out about a specific credit counseling organization's record.
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