The IRS’s list of its annual “Dirty Dozen” tax frauds includes credit counseling.
Credit Counseling Agencies. Taxpayers should be careful with credit counseling organizations that claim they can fix credit ratings, push debt payment plans or impose high set-up fees or monthly service charges that may add to existing debt. The IRS Tax Exempt and Government Entities Division is in the process of revoking the tax-exempt status of numerous credit counseling organizations that operated under the guise of educating financially distressed consumers with debt problems while charging debtors large fees and providing little or no counseling.
The debt settlement model heads my personal list of scams, since it so seldom produces any meaningful settlement, provides no protection to the consumer while the money is accumulating, and lines the pockets of the organization in the meantime.
This is the industry that Congress made the gatekeeper to bankruptcy for individuals. Go figure.
Cathy Moran