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Reforming Credit Repair Services Tax Exempt Status |
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Credit repair services mainly cater to the educational and other needs of families suffering financial difficulties. No loans are given or negotiated by credit repair services on behalf of debtors. All they offer are credit repair services for assistance in negotiating their debts. Neither is counseling refused to anybody unable to pay nor is debt management plan offered as an option. The fees charged are affordable and there is no fee based on a percentage of the consumer's debt, payments or savings, whether projected or actual on debt management plan. Credit repair services operate under a board of directors made up of 80% unpaid volunteers who get no payment for client referrals to other services. They have no relation to the lender, credit repair operation or profit-oriented debt management service. Voluntary contributions from clients are never sought during counseling or on a debt management plan. These credit repair services have their main objective as imparting knowledge apart from debt management and counseling services. In cases of financial difficulties, fees may even be waived. While most may be in order there are certain restrictions that lack logic. For one, they oppose counseling agencies offering credit repair services due to credit repair being seen as nefarious enough to eliminate the industry. In reality, many consumers require help in improving their credit and it's better a nonprofit CCA (consumer counseling agencies) handles it instead of a here-today-gone-tomorrow credit repair operation. Therefore they're eventually compelling people in need of help for credit repair to turn to the very profiteers who have made credit repair the dubious business it has become. It also leads to people getting the impression that credit counselors are not entitled to any fee for credit repair services on the basis of a percentage of the consumer's debt and payments, which is misleading. A standard monthly fee for debt management plans could be 6% of the consumer's monthly payment with a maximum of $20 to 25. A low monthly payment will thus not require you to pay the entire $20 every month. The average monthly fee for a DMP (Debt Management Plan) client at CCCS or Consumer Credit Counseling Services is just $12. The proposed rule would require everybody to pay the entire $25. Another issue is that there's no reason why referrals should be taboo. While the credit counseling business is unfairly accused of inadequate referrals of debtors to bankruptcy attorneys, they would be criticized equally for getting a referral fee from a bankruptcy attorney. Therefore it becomes a no-win situation. It would seem acceptable for nonprofit credit counselors to have bankruptcy attorneys as staff to help consumers with no other option left. The problem is with the profiteering types who refer their debtors to subsidiary profit-oriented credit repair services and exploit them. This leads to the provision of not being related to another credit repair services. With fair share quickly becoming a thing of the past and legislative fee caps limiting the charges of credit counseling agencies, starting a profit-oriented subsidiary has become a trend. It could make one feel rather intimidated. Most provisions are acceptable with some major exceptions. The provision for the aggregate of the agency's debt management plan services during the four year period inclusive of the agency's current taxable year and the immediate preceding three taxable years not to exceed 10% of the agency's total activities during the four year period is hard to digest. If all the recommendations were implemented, any non-profit credit repair services would be non-existent. In America no agency could survive on these restrictions. The more reputed the credit repair services, the more severely they are penalized by the proposal of tax code change. They have not been effective in lobbying for better tax-exempt regulations, successfully laying the blame on the right parties (the profiteers) and increasingly edged closer toward creditor control of the industry. Therefore if you're in need of help to get out of your financial crisis, help is at hand with credit repair services. |
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