NEW LAW MAY SWAMP CREDIT COUNSELORS; LENDERS NOT HELPING

June 12, 2001

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A proposed law requiring consumers to receive credit counseling before filing for bankruptcy protection could strain counseling agencies already pinched by reduced funding from lenders, officials of Consumers Union said, according to the Associated Press.

Officials also said yesterday said that the credit counseling industry, which handled some 3 million indebted consumers last year, may not be up to the task of aiding an additional 1 million or so who could seek help under the bankruptcy legislation before Congress.

Consumers Union is concerned because the banks, retailers and other credit card issuers that fund the counseling agencies have reduced their contributions in recent years.

At the same time, the number of people seeking credit counseling has grown. Because of the shrinking funding, many counseling agencies that belong to the National Foundation for Credit Counseling have had to begin charging consumers nominal fees, noted Durant Abernethy, the group’s president. Some programs remain free to consumers, however.