The U.S. House of Representatives will soon consideration bankruptcy reform legislation (S. 256) on the House floor. In the bill is a requirement that consumers must seek a budget analysis and financial review by a non-profit credit counseling agency before they are eligible to file for bankruptcy. Congress should use this opportunity to regulate all credit counseling agencies through a federal law.
(PRWEB) March 21, 2005 -- The U.S. House of Representatives will soon consideration bankruptcy reform legislation (S. 256) on the House floor. In the bill is a requirement that consumers must seek a budget analysis and financial review by a non-profit credit counseling agency before they are eligible to file for bankruptcy.
According to Mark Guimond, Executive Director of the American Association of Debt Management Organizations (AADMO), a trade association for the credit counseling industry, this legislation starts to set the standard for what makes a good credit counseling agency. Congress needs to look beyond only consumers in bankruptcy and address all consumers facing financial distress. Its inconsistent for the Congress to say that one class of consumers deserves federal protections in credit counseling but others are left high and dry."
By virtue of the bankruptcy reform legislation, Congress is saying credit counseling is a federal issue – an interstate issue. Lets take this opportunity to develop standards for practice, performance and consumer protection. The patchwork of state laws is complex, ineffective and contradictory. Congress has the vehicle for positive change right in their hands", said Guimond.
AADMO has developed draft legislation to help the Congress in its efforts to regulate the credit counseling industry. AADMOs 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 consumers obligations to creditors.
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. This is a great opportunity for the federal government to uniformly regulate credit counseling agencies and provide equal protections for all consumer regardless of what state they live in", said Guimond.
Credit counseling is a reliable and proven method for consumers to become debt-free. Credit counseling 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.
About AADMO
AADMO is the credit counseling and debt management industrys largest trade association. It is an industry education and advocacy organization whose mission is to promote and ensure the continued operation and viability of credit counseling and debt management organizations. AADMO provides its members and the consumer public with information about the credit and debt counseling industry. AADMO members are consumer credit counseling agencies, debt management organizations, credit counselors, personal finance educators, credit and debt information educators, consumer lawyers and many others.
AADMO is the only trade association to have held state law compliance workshops with the New York State Banking Department and the California Department of Corporations upon enactment of their respective laws governing credit counseling and AADMO is the only trade association for the industry to publish a formal summary of state laws that has been reviewed by state regulators.
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