New Recommendations On Credit Repair Services: Future At Stake? |
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Credit repair services primarily provide education and assistance to families with financial problems. Credit repair services make no loans, nor negotiate loans on behalf of debtors. They just provide credit repair services to help people in negotiating with their debts. They don't refuse counseling to anyone who cannot pay or is not interested in a debt management plan. These services charge reasonable fees and not charge any fee based on a percentage of the consumer's debt, the consumer's payments, or on projected or actual savings related to their debt management plan.
80% of the boards of directors of credit repair services are unpaid volunteers who receive no payment for referring clients to other services. They are not to be related to a lender and never solicit voluntary contributions from clients while those clients are being counseled or are on a debt management plan. Most of the restrictions placed on the credit repair services are appropriate; but some of them make no sense. The industry is viewed as nefarious and attempts are made to stamp it out. The reality is that many consumers do need assistance in improving their credit and such services are best provided by a nonprofit CCA (Consumer Counseling Agencies) rather than a fly-by-night credit repair operator. The restrictions imposed force people who need help repairing their credit into the arms of the very profiteers who have made credit repair such an unsavory enterprise. The idea that credit counselors should not charge any fee for their credit repair services based on a percentage of the consumer's debt or payments is flawed. A standard monthly fee for debt management plans might be 6% of the consumer's monthly payment up to a maximum of $20 or $25. That way, if you have a low monthly payment, you're not required to part with the whole $20 every month. At CCCS (Consumer Credit Counseling Services) the average monthly fee paid by a DMP (Debt Management Plan) client is only $12. Under this proposed rule, everyone would be likely to pay the full $25. Referrals are another problem; why should they be disallowed? The credit-counseling world is unfairly accused of not referring enough debtors to bankruptcy attorneys, but they'd also be criticized for getting a referral fee from a bankruptcy attorney. It's a no-win here. Nonprofit credit counselors should be able to have bankruptcy attorneys on their staff to help those consumers who come in for counseling and have no other option. The problem, of course, is the profiteer types who refer their debtors to subsidiary for-profit credit repair services and fleece them. It's a tricky issue. That brings us to the "not being related to another credit repair services" provision. In a world where fair share is fast becoming history and legislative fee caps limit what credit counseling agencies can charge, starting a for-profit subsidiary is all the rage. It's a practice that frankly makes me a little squeamish. Like I said, most of these provisions are acceptable, with a couple of big exceptions. But this one blows my mind: "the aggregate of the agency's debt management plan services during the four year period that includes the agency's current taxable year and the immediately preceding three taxable years does not exceed 10% of the agency's total activities during such four-year period." If these recommendations were enacted as written there would be no nonprofit credit repair services at all. No agency in America could live up to this and survive. How did we get to this point? The more reputable the credit repair services, the more grievously they are punished by this proposed change to the tax code. They haven't effectively lobbied for better tax-exempt regulations, they haven't successfully laid the blame where it belongs (on the profiteers), they've edged more and more towards creditor control of the industry. So, if you need help to get out of your financial crisis, you can get help from credit repair services. |
