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Credit Counseling – Congress Offers No Details In New Law
By: Charles Essmeier
The recently passed Bankruptcy Abuse and Consumer Protection Act was hailed as a
breakthrough in bankruptcy law. Passed with bipartisan support in Congress and
signed enthusiastically by President Bush, the law creates sweeping changes in
debt law and will make it much more difficult for debtors to have their
obligations swept away by the courts. A major requirement of the new law will
require that anyone considering filing for bankruptcy to first undergo credit
counseling. The idea is sound; anyone with problem debt can probably benefit
from some discussions about money management. There’s just one problem –
Congress failed to include any details in the bill about what, exactly,
constitutes credit counseling.
The credit counseling industry, which includes for-profit as well as nonprofit
organizations, has been through some hard times lately. The Federal Trade
Commission has been investigating some firms that have claimed to be nonprofit
but were actually steering their clients into pricey debt consolidation plans
run by for-profit affiliates. These high-profile cases have left a dark cloud
hanging over the industry. With the new legislation set to take effect this
October, many consumers have questions about the nature of the counseling
requirements. Who will pay for it, and what sorts of fees are acceptable? The
bill doesn’t say whether the debtors themselves or their creditors will pay the
counseling fees or how much the service should cost. The law only states that
the fees must be “reasonable” and that the services should be available even if
the debtor cannot afford to pay. The thought of being forced to provide
counseling to customers who cannot pay has justifiably angered the counseling
industry. Even nonprofit agencies have overhead and typically charge some sort
of fee.
Who qualifies as a counselor? As “credit counselor” is a vague term with no real
legal meaning, anyone might be able to place a sign on a building and call
himself or herself a credit counselor. Is that what Congress had in mind? The US
Trustee Program is in charge of making all of these determinations, and the
department is said to be compiling a list of “approved” agencies. Presumably,
the Trustees will also be examining these other issues and providing guidelines
before the law takes effect. In the meantime, both debtors and counselors are
concerned as thousands of Americans will be seeking advice for their debt
problems come October. By then, with a little luck, consumers with problem debt
will have some way of knowing whom they should call before filing for
bankruptcy.
© Copyright 2005 by Retro Marketing.
About the Author:
Charles Essmeier is the owner of Retro Marketing, a firm devoted to
informational Websites, including http://www.End-Your-Debt.com, a site devoted
to debt consolidation and credit counseling, and http://www.homeequityhelp.net,
a site devoted to information regarding home equity lending.
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