The work of helping consumers overwhelmed by their debt but who want to avoid bankruptcy has traditionally fallen to agencies that received heavy support from creditors. A new kind of consumer credit counseling agency (CCA) has arisen in recent years with a higher profile that even includes advertising on cable television and radio. These agencies focus on debt management programs that negotiate lower interest rates and accelerated payback programs for their clients, notes lawyer Barnaby W. Zall, of counsel to Weinberg & Jacobs LLP in Rockville, Maryland. The IRS has taken a close look at the tax-exempt status of these agencies and decided that they are the “bad boys” of the tax-exempt world. But Zall notes that, aside from a few high-profile bad apples, CCAs provide a service to consumers that was being left undone with the traditional credit counseling agencies that depend on funding from the largest creditors. In the Tax-Exempt Advisor, Zall argues for restraint in regulating this new consumer helper. The circumstance of CCAs could also play out on a larger stage of IRS scrutiny of tax-exempt organizations.
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This story is from the CCH’s monthly Focus on Tax newsletter, which provides advise and guidance on federal and state tax issues for tax and accounting professionals.
Read this article from CCH’s Journal of Taxation of Financial Products.