FOR IMMEDIATE RELEASE:
CONTACT: Deanne Loonin, NCLC, 617-542-8010
April 9, 2003
Travis Plunkett, CFA, 202-387-6121
FIRST-EVER STUDY OF CREDIT COUNSELING FINDS HIGH FEES, BAD ADVICE
AND OTHER ABUSES BY NEW BREED OF “NON-PROFIT” AGENCIES
--Credit Card Company Practices Have Helped Create Counseling Crisis--
Washington D.C. – As more Americans seek assistance for serious debt problems, the National
Consumer Law Center (NCLC) and Consumer Federation of America (CFA) today unveiled Credit
Counseling in Crisis, a report detailing the severe threat to consumers from a new generation of credit-
counseling agencies. The comprehensive study found that, unlike the previous generation of mostly creditor-
funded counseling services, these new agencies often harm debtors with improper advice, deceptive
practices, excessive fees and abuse of their non-profit status. An estimated nine million Americans have
some contact with a consumer credit counseling agency each year.1
The report also concluded that creditor practices and funding reductions have caused agencies to cut
back on educational services and have led more consumers to drop out of counseling and declare
bankruptcy. Another key finding was that poor oversight of credit counseling agencies by the Internal
Revenue Service and the states has allowed unscrupulous counseling agencies to grow and prosper.
“The findings of this report show that the credit counseling industry has undergone an alarming
transformation in the last decade,” said Deanne Loonin, Staff Attorney for the NCLC. “Aggressive firms
masquerading as ‘non-profit organizations’ are gouging consumers. Deceptive practices and outright scams
are on the rise,” she said. “More consumers are getting bad advice and access to fewer real counseling
options. Meanwhile, most state and federal regulators appear to be asleep at the switch.”
Major Problems With Credit Counseling
Not all of the new credit counseling agencies are a threat to consumer