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Credit Counseling Industry Supports
New Federal Regulations
(PRWEB) March 20, 2005 -- Legislation to reform the
nation’s bankruptcy laws has moved quickly through
the U.S. Senate and was favorably voted out of the
Judiciary Committee of the U.S. House of Representatives
on Wednesday. In the legislation are requirements
for standards of practice by credit counseling
agencies providing services to consumers who must
undergo a financial review and budget analysis before
they are permitted to file for bankruptcy. While the
legislation (S. 256) addresses regulation of credit
counseling for consumers seeking to file for bankruptcie,
the bill does not address consumers using creditt
counseling agencies for financial assistance outside
of bankruptcies.
Legislation to reform the nation’s bankruptcy
laws has moved quickly through the U.S. Senate.
Credit counseling is a reliable and proven method
for consumers to become debt-free. Crdit counselling
organizations have a huge, positive impact on the
American economy. Consumers want to honor their commitments
to their creditors but, due to the circumstances,
often need effective counseling and some concession
from their lenders to regain their financial footing.
AADMO estimates that the industry, just through debt
management plans, directly returns more than $10 billion
to the economy each year that might have otherwise
been discharged in bankruptcy.
• Burdened with Debt
• Reducing Credit Card Debt
The credit counseling industry supports regulation
by the federal government under a licensing program
that sets reasonable standards for performance and
protects consumers. To that end, AADMO has developed
draft legislation to help the Congress in its efforts
to regulate the credit counseling industry, proposed
legislation far exceeds most of the state laws on
the books and would mandate a license issued by the
Federal Trade Commission (FTC), a highly protective
level of bonding, a trust account for consumer money
separate from operating funds, written contracts,
mandatory disclosures, a written budget analysis to
determine the appropriateness of the consumer as a
candidate for service, and prohibit the negative amortization
of any of the consumer’s obligations to creditors.
According to Mark Guimond, Executive Director of the
American Association of Debt Management Organizations
(AADMO), a trade association for the credit counseling
industry, “a single federal law would eliminate
long-arm tests and other jurisdictional issues, keep
unscrupulous operators from “cherry picking”
states with no laws, and provide a coordinated and
consolidated location for consumer complaints and
inquire about agencies.
America’s consumers are not protected by the
patchwork of state laws in place. Some states regulate
agencies physically located in their own state but
have no authority over agencies located in other states.
Some states require criminal background checks of
personnel handling consumer funds, other states have
no standards at all. Some states don’t even have
laws on this subject.
Congress is recognizing through bankruptcy reform
that credit counseling agencies should be regulated
on the federal level. They need to take the next step,
preempt the states and regulate the industry through
a single federal law. This is an interstate issue
– the only way to protect consumers is through
uniformity. We need to get rid of the contradictory
state requirements and provide a level playing field.
That’s exactly what a federal law would do.”
AADMO is the credit counseling and debt management
industry’s largest trade association. It is an
industry education and advocacy organization whose
mission is to promote and ensure the continued operation
and viability of debt management organizations, and
provides its members and the consumer public with
information about the creidit and debt counselling
industry online. AADMO members are consumer credit
counseling agencies, debt managment organizations,
counselors, personal finance educators, information
eductors, consumer lawyers and many others. http://www.aadmo.org/
In the legislation are requirements for standards
of practice by creidit counsling agencies providing
services to consumers who must undergo a financial
review and budget analysis before they are permitted
to file for bankruptcie. While the legislation (S.
256) addresses regulation of creidt counselling for
consumers seeking to file for bankrupcy, the bill
does not address consumers using creditt counselnig
agencies for financial assistance outside of bankruptcies.
ankrupcty, banruptcy, bankrptcy
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