ADVISORY

FROM THE COMMITTEE ON WAYS AND MEANS

SUBCOMMITTEE ON OVERSIGHT

Houghton Announces Hearing on Non-Profit Credit Counseling Organizations

Congressman Amo Houghton (R-NY), Chairman, Subcommittee on Oversight of the Committee on Ways and Means, today announced that the Subcommittee will hold a hearing on non-profit credit counseling organizations.  The hearing will take place on Thursday, November 20, 2003, in the main Committee hearing room, 1100 Longworth House Office Building, beginning at 2:00 p.m.

In view of the limited time available to hear witnesses, oral testimony at this hearing will be from invited witnesses only.  Witnesses will include representatives from the Internal Revenue Service (IRS) and the Federal Trade Commission (FTC).

BACKGROUND:

Since the 1960s, non-profit consumer credit counseling organizations have assisted consumers with credit card debt problems by offering services such as educational programs, budget counseling, and, when necessary, debt management plans (often called DMPs or consolidation plans).  These groups traditionally have qualified for Internal Revenue Code Section 501(c)(3) tax-exempt status because they have met the definition of being organized for charitable or educational purposes.

In recent years, some consumer credit counseling organizations have lessened the focus on or have moved entirely away from providing counseling and educational services.  Instead, some groups focus on enrolling consumers in DMPs, for which they receive fees.  Credit counseling groups also have become more aggressive in marketing DMPs to individuals, such as through telemarketing, Internet solicitations, and television commercials.  Non-profit charitable organizations, including credit counseling groups, are not covered by the FTC’s Telemarketing Sales Rule, which includes the “National Do Not Call Registry.”  According to the Federal Reserve, revolving consumer debt exceeded $700 billion at the end of 2002.  It is estimated that between 800 and 1000 credit counseling groups are operating in the United States.   

In April 2003, two consumer advocacy groups, the Consumer Federation of America and the National Consumer Law Center, jointly issued a report entitled “Credit Counseling in Crisis: The Impact on Consumers of Funding Cuts, Higher Fees and Aggressive Market Entrants.”  The report found that many of the more recently established credit counseling organizations abuse their non-profit status, offer improper advice and deceptive practices, and offer services for excessive fees. 

On October 14, 2003, the IRS, the FTC, and State regulators issued a consumer alert to remind consumers that they should be careful when seeking assistance from tax-exempt credit counseling organizations.  The alert stated that regulators were “concerned that some credit counseling organizations using questionable practices may seek tax-exempt status in order to circumvent State and Federal consumer protection laws.”  As a result, the IRS has increased its enforcement efforts, including the commencement of a number of consumer credit counseling organization examinations.

In announcing the hearing, Chairman Houghton stated, “While non-profit consumer credit counseling organizations provide an important educational and counseling service to consumers who are experiencing financial difficulties, I am concerned about reports that some groups may be taking advantage of their tax-exempt status.  I look forward to hearing from the IRS and others as to what is being and should be done to stop abusive practices and protect consumers.”

FOCUS OF THE HEARING:

The hearing will focus on non-profit consumer credit counseling organizations.

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

Please Note:  Due to the change in House mail policy, any person or organization wishing to submit a written statement for the printed record of the hearing should send it electronically to hearingclerks.waysandmeans@mail.house.gov, along with a fax copy to (202) 225-2610, by the close of business, Thursday, December 4, 2003.  Those filing written statements who wish to have their statements distributed to the press and interested public at the hearing should deliver their 200 copies to the new Congressional Courier Acceptance Site at the location of 2^nd and D Streets, N.E., at least 48 hours prior to the hearing date.  Please ensure that you have the address of the Subcommittee on Oversight, 1136 Longworth House Office Building, on your package, and contact the staff of the Subcommittee at (202) 225-7601 of its impending arrival.  Due to new House mailing procedures, please avoid using mail couriers such as the U.S. Postal Service, UPS, and FedEx.  When a couriered item arrives at this facility, it will be opened, screened and then delivered to the Subcommittee office, within one of the following time frames:  (1) expected or confirmed deliveries will be delivered in approximately 2 to 3 hours, or (2) unexpected items, or items not approved by the Subcommittee office, will be delivered the morning of the next business day.  The U.S. Capitol Police will refuse all non-governmental courier deliveries to all House Office Buildings.

FORMATTING REQUIREMENTS:

            Each statement presented for printing to the Committee by a witness, any written statement or exhibit submitted for the printed record or any written comments in response to a request for written comments must conform to the guidelines listed below.  Any statement or exhibit not in compliance with these guidelines will not be printed, but will be maintained in the Committee files for review and use by the Committee.

        1.   Due to the change in House mail policy, all statements and any accompanying exhibits for printing must be submitted electronically to hearingclerks.waysandmeans@mail.house.gov, along with a fax copy to 202/225-2610, in Word Perfect or MS Word format and MUST NOT exceed a total of 10 pages including attachments.  Witnesses are advised that the Committee will rely on electronic submissions for printing the official hearing record. 

        2.  Copies of whole documents submitted as exhibit material will not be accepted for printing.  Instead, exhibit material should be referenced and quoted or paraphrased.  All exhibit material not meeting these specifications will be maintained in the Committee files for review and use by the Committee.

        3.  Any statements must include a list of all clients, persons, or organizations on whose behalf the witness appears.  A supplemental sheet must accompany each statement listing the name, company, address, telephone and fax numbers of each witness.

Note:  All Committee advisories and news releases are available on the World Wide Web at http://waysandmeans.house.gov.

The Committee seeks to make its facilities accessible to persons with disabilities. If you are in need of special accommodations, please call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four business days notice is requested). Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above.