There is one topic which every time I write about it seems to generate some hate mail while at the same time spawning a flurry of wonderful praise from consumers. Of course, the hate mail is always from a few people that happen to own these “certain types” of businesses I discussed and those businesses of course are Credit Counseling or Debt Consolidation companies; of which many “claim” to be non-profit organizations.

You’d almost have to be an ostrich with your head stuck in the sand to not see or hear at least one advertisement a day from a Credit Counseling or Debt Consolidation Company.

However, you can expect this to change and change soon.

Since this is a topic which tends to “stir up” the owners of these businesses, I am going to take a different approach by NOT sharing my opinion, but rather, the opinion of others.

I will start with the news media and the Internal Revenue Service:

“(NPR News, May 15, 2006). The Internal Revenue Service is revoking the tax exempt status of some of the largest credit counseling agencies in the country.

An IRS investigation disclosed that the firms solicited business from people seriously in debt and that they didn't provide counseling or consumer education, as required.

Prodded in part by a congressional oversight committee and consumer advocates, the IRS began investigating dozens of credit counseling agencies - most holding non-profit status - two years ago."

IRS Commissioner Mark Everson says the companies "poisoned an entire sector of the charitable community.

Everson says in many instances, companies were organized merely to funnel business to loosely affiliated for-profit companies.

Many of the firms spend millions of dollars on commercials that urge anyone with debt to call them to solve their financial woes. And because tax-exempt organizations are not bound by the federal do-not call list, the firms were able to randomly call consumers, pitching their services under the guise of a non-profit counseling service.

The IRS investigations are also likely to affect consumers, thanks to a new bankruptcy law that requires consumers considering bankruptcy to get counseling before they are allowed to file.

The IRS wants to ensure that only legitimate non-profit agencies are doing the counseling. In addition to the actions announced Monday, the IRS is sending more than 700 compliance letters to the rest of the credit counseling industry (END).”

Since almost all Credit Counseling and Debt Consolidation companies claim a non-profit status, I feel most consumers are easily sucked in with their skepticism and defenses at bay. After all, when most of us hear the word “non-profit” the first thing we usually think of is a church or homeless shelter.

From the NPR article and the actions of the IRS, I think it’s fair to assume that many of these “non-profit” organizations have been operating under a scenario similar to that of a wolf guarding a hen house.

However, this doesn’t mean all credit counseling and debt consolidation companies are bad but, you do need to know the truth about how they operate and their limitations.

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