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In Debt Over Your Head? Pay Us.
Posted by wizeGurl
(10083 views)      [E-Mail link]
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[Get-Rich-Quick] |
 You've seen the commercials...credit counseling agencies offering to help you get out of the big, fat hole of crushing debt you've gotten yourself into. These largely non-profit agencies are supposed to help people by negotiating between strapped consumers and lenders, making payment of debts more manageable so everybody is happy--consumers pay off their debts, lenders get some of the money they're due, and the agencies take only the amount needed to cover their costs...because after all, they're charitable organizations.
Or are they? The IRS investigated 41 credit counseling agencies, and revoked the tax-exempt status of every single one, finding that they were in business to suck money from these struggling debtors instead of helping them get back on their feet.
Maybe all the spam should have been a tip-off. |
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The Internal Revenue Service said yesterday it plans to revoke the tax-exempt status of every one of the 41 credit-counseling organizations on which it has completed an audit, saying many of these firms appeared to be primarily motivated by profit, not by helping debt-burdened consumers.
IRS Commissioner Mark W. Everson also said the agency had begun criminal investigations of some of the firms but declined to elaborate.
Another 22 firms are still undergoing audits, part of a three-year-old crackdown on the credit-counseling industry that was sparked by hundreds of consumer complaints of deceptive business practices, including high fees, high-pressure tactics and inadequate educational services.
Until the revocation is final (many are pending appeal), the IRS cannot disclose the companies' names. The following are among the smaller credit-counseling companies that have had their tax-exempt status revoked by the IRS:
- Ameratrust Inc.
- National Center for Debt Elimination Ltd.
- National Consumer Council Inc.
- National Consumer Council Inc.
- National Credit Education and Review
- Gibson Trust Inc.
- A Better Way Credit Counseling Inc.
SOURCE: IRS
"Our examinations substantiated that these organizations have not been operating for the public good and don't deserve tax-exempt status," Everson said. "These folks are preying on people who are the most vulnerable" by "herding" them into debt-repayment plans that have high fees and often deepen their financial troubles, Everson said. In many cases, Everson added, the fees consumers paid benefited executives or relatives of executives of the credit-counseling firms.
"They have poisoned an entire sector of the charitable community," Everson added.
The IRS action comes at a critical time for the credit-counseling industry, which has been given a new, important role in the nation's bankruptcy system. Under a law that went into effect last October, consumers must consult with an approved credit counselor before they can seek protection from creditors in bankruptcy court. Seven states, including Maryland, require credit-counseling groups to be tax-exempt to offer services.
Everson said the agency was also taking the "unprecedented" step of sending inquiries to the remaining 740 known tax-exempt credit-counseling services. Based on the responses, the IRS "may very well do more audits," Everson said.
And so another way for beleaguered consumers, pounded with credit-card offers and home-equity loans at every turn, to solve their financial dilemma dries up. First bankruptcy becomes the refuge only of the wealthy and corporations; now even the credit counselor may be lining his pockets with your very last dollar. |
More details. |
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