41 Credit Advisors ‘Poisoned Industry?

[David A. Szwak]

41 credit advisors ‘poisoned industry? IRS says many counseling firms are not nonprofits

By Monica Hatcher
KNIGHT RIDDER TRIBUNE NEWS
Six months after the federal government began requiring consumers to get credit counseling before filing for bankruptcy, IRS audits revealed that the $1 billion nonprofit credit counseling industry is riddled with companies profiteering on those who can least afford it.

In a sweeping program to weed out organizations flouting laws governing nonprofits, the IRS on Monday said it has stripped or was in the process of stripping the tax-exempt status of 41 companies that claimed to provide educational and counseling services to consumers, but instead were in the business selling prepackaged debt management plans.

The IRS did not release the names of the companies.

Nonetheless, IRS Commissioner Mark Everson harshly rebuked the audited firms, which represent 40 percent of the industry’s revenues, calling the growing sector “the poster child of bad conductâ€