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Most Credit Counseling Agencies Are Honest; States Try To Keep Them That Way
By: Talbert Williams
The recently passed Bankruptcy Abuse and Consumer Protection Act requires anyone
considering a bankruptcy filing to undergo credit counseling first. That’s a
great idea; it is an attempt to prevent future problems by educating consumers
now.
The problem is that there are a lot of dishonest agencies out there that would
rather line their pockets than actually help their customers. With that in mind,
many states have now established strict guidelines regarding who may and who may
not call themselves a credit counselor. The latest state to jump in is South
Carolina, which has recently passed legislation aimed at hte credit counseling
industry that takes effect in December 2005.
Typical of those established in other states, the new regulations in South
Carolina require the following:
• Applicants must first undergo criminal background checks. This seems like a
great idea; if you’re worried about an industry that is rampant with fraud, why
not weed out those with a history of criminal activity at the application
process? We aren’t sure what the state will consider when looking at criminal
background checks, but anyone with a history of any sort of financial
legerdemain will probably not be issued a license.
• Licenses must be issued by the state, and a fee will be required. The fees,
presumably, will be used to fund the background check and other associated
items.
• Applicants will be required to fully disclose their own personal financial
status. The state will then have an accurate picture of exactly who is handling
the money of the customers. It stands to reason that anyone who has a history of
financial problems of their own will probably not be in a good position to
handle the finances of others.
• Put a cap on fees and establish fee guidelines. Counseling agencies will no
longer be able to randomly set fees; they will be established by the state. This
will provide a more evenhanded set of fees for all agencies, rather than the
current situation, which has some companies charging modest amounts while others
charge exorbitant setup charges.
While the legislation will regulate those businesses that have a physical
presence in the state, it will not affect those that do business form out of
state, via the telephone or the Internet. The very nature of doing business that
way precludes the state doing anything about it.
Still, this is a step in the right direction and we hope that it will mark the
beginning of the end of predatory companies that charge huge upfront an monthly
fees and keep the money, rather than forwarding it to creditors. After all, if
visiting a debt management agency makes your problems worse, rather than better,
then you might as well not have bothered.
About the Author:
Talbert Williams offers debt consolidation, debt reduction, credit card debt
referrals and advice. For more information, articles, news, tools and valuable
resources on debt solutions, visit this site: http://www.1debtfreedom.com
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