The U.S. Trustee Program yesterday released the names of 26 credit counselors approved to provide counseling to consumers under the new bankruptcy law that takes effect next month.
More than 100 nonprofits had applied to the U.S. Trustee to become counselors for bankruptcy filers. Additional names will be posted as agencies are approved, said Jane Limprecht, a spokeswoman for the Trustee Program, which oversees the administration of bankruptcy cases.
Four nonprofits have been approved for Maryland: Consumer Credit Counseling Service of Maryland and Delaware Inc. in Catonsville; GreenPath Inc. of Farmington Hills, Mich.; Money Management International Inc. in Houston; and Springboard Nonprofit Consumer Credit Management Inc. in Riverside, Calif.
Under bankruptcy legislation signed into law by President Bush in April, consumers must undergo credit counseling from a nonprofit within six months before filing. They will receive a certificate showing they have taken the required counseling. Additionally, the law will require filers to undergo a financial education course to get their debts discharged in bankruptcy.
Currently, filers do not have to undergo credit counseling.
The average length of a pre-bankruptcy counseling session is expected to run 90 minutes, according to the U.S. Trustee. Topics to be covered include budget analysis, alternatives to filing for bankruptcy, an analysis of the debtor's financial situation and what factors caused the money problems. The counseling can be done in person, over the telephone or the Internet. Counselors must be trained and experienced. Fees have not been set by the U.S. Trustee but must be "reasonable" under the law. Those costs, which some counselors said will range between $50 and $75, must be waived for those who can't afford the fees.
The reputation of the credit counseling industry in recent years has been tarnished by some agencies that charged high, hidden fees and sometimes left consumers in worse shape. Some consumer advocates had been concerned that bankruptcy legislation, which had taken eight years to pass, would push vulnerable consumers into the hands of unscrupulous players.
"Two or four years ago, the bad players were the rule and not the exception," said Eric Friedman, chief of Montgomery County's consumer affairs division. Things have improved now that Congress has investigated the industry and regulators have taken action against Maryland-based AmeriDebt Inc., Friedman said.
The Federal Trade Commission and four states sued the Germantown nonprofit in 2003, claiming it charged excessive fees and channeled much of the revenue to an affiliated for-profit group. AmeriDebt is being liquidated in U.S. Bankruptcy Court, and the FTC is pursuing a civil case against AmeriDebt's founder in an effort to recoup about $172 million in fees
Nonprofits say they are gearing up for Oct. 17, when the new bankruptcy law takes effect.
"We don't really know how much that will impact us," said Linus Campbell, director of education for the Consumer Credit Counseling Service of Maryland and Delaware. The agency, which is training four new counselors, will provide counseling in person and over the telephone. Campbell said the agency expects to charge $50 for the pre-bankruptcy counseling.
Springboard expects to charge between $50 and $75, said Daniel Pena, director of Hispanic education for a California-based nonprofit that has been approved to provide in-person counseling in certain areas nationwide, as well as over the telephone and online.
"We're ramping up to get ready for that deadline," he added.
Money Management International, which took over AmeriDebt's customers this year, has 150 offices in 22 states. The nonprofit will provide counseling in person and over the telephone and the Internet on a sliding scale based on income and other factors, said Ivan Hand, chief executive. The top fee will be $75, although the average will be around $50, he said.
Hand said the nonprofit has 300 credit counselors and 300 support counselors. It will be hiring and training an additional 100 to 150 credit counselors to handle the expected upturn in pre-bankruptcy clients.
"We have some challenges just getting ready for it," Hand said.
The list of approved credit counselors by state can be found at www.usdoj.gov/ust