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Will Federal Rulings Affect Non-Profit Status of Credit and Debt Counseling Agencies?

Written by Mike Killian
Posted On: June 2, 2006

During October of last year I wrote an article regarding non-profit credit counseling agencies entitled Is Non-Profit Status Merely Marketing Hype. Scott Pryzwansky, Senior Account Executive at Trone Public Relations, saw the article and wrote to me:

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"A little known provision of the Senate tax bill is currently in front of Congress. This provision fully addresses the premise that many non-profits should actually not be tax-exempt. This provision would have a profound effect on the way the consumer credit counseling industry operates, ensuring that people trying to control mounting credit card debts get the counseling and education they need from legitimate credit counseling agencies."

Scott suggested interviewing a company he represented concerning this bill but unfortunately numerous attempts for an interview failed. But I was fascinated with the subject and did a bit of follow-up on the issue elsewhere.


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I approached Scott Bilker, a consumer advocate who is very familiar to our readers. Scott is the creator of DebtSmart.com and author of Talk Your Way Out of Credit Card Debt. He directed me to some great resources that I would encourage readers interested in the subject to review:

  1. Credit Counseling In Crisis
  2. National Consumer Law's Investigation of Debt Settlement Companies
  3. Profiteering In a Non Profit Industry

Mr. Bilker additionally offered some interesting insights when I asked what affect stripping credit counseling agencies of non-profit status could have on consumers:

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"I don't see this legislation affecting the consumer and if it does, like all other things that affect consumers, it would simply raise the price of service."

Since I silently disagreed with Scott's point of potentially raising the price of for-profit counseling services, I was very glad to see Scott also add a non-prompting afterthought:

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"Non-profit--yeah, right! Some of these outfits have multiple offices and charge big bucks. Please--I'd rather go to for-profit agencies so I can be sure they're working for an honest purpose!"

In my original article Is Non-Profit Status Merely Marketing Hype, Jim Young, CEO of Accelerated Debt Consolidation, echoes Scott's remarks. Jim's comments seem to sum up this whole controversy so well:

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"It is not so much a matter of for-profit versus non-profit as it is a matter of WHO is handling the accounts. Since you will get terms exactly the same whether you use a for-profit or a non-profit, there are more important issues involved. For example, what is the firm’s retention rate? How many clients have they brought in and how many are still with them? Do they disburse payments daily? Will they allow you to keep credit cards out of the program? Another question is follow-through...."

We welcome your comments about credit card and other money issues in our popular credit forum!

Posted in Credit Card Debt / Settlement | Credit Card Laws

About the author:
Mike Killian
Mike Killian is founder of Learning Credit and Debt Management. Mike has been writing about credit and debt management issues that are of importance to consumers for over 8 years. His articles have been referenced by various members of the media, including MSNBC and The Motley Fool. Mike has also offered debt elimination seminars to businesses and community colleges for many years.

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