The president is poised to sign into law sweeping financial regulatory reform that will result in a new regulator of consumer financial products and services, including credit counseling. While it will be months, if not years, from the date of creation of the new agency to the actual issuance of regulations by the agency, there are a number of legal issues looming over the industry, most notably those surrounding the potential scope, breadth and depth of new regulations that such a federal regulator may propose.
In the meantime, the state law landscape for credit counseling agencies continues to evolve. This month marks the five-year mark for the Uniform Debt-Management Services Act and state legislatures continue to consider and enact consumer protections and regulations that cover credit counseling agencies. Recent changes to existing laws and new laws have occurred in Kentucky, Indiana, Nevada, Tennessee, and the Virgin Islands. States also have enacted mortgage loan origination licensing statutes that may cover certain forms of housing counseling.
And, now that the Internal Revenue Services’ audits of the credit counseling industry are winding down, all is not quiet on the federal tax front for credit counseling agencies – including, most notably, housing counseling agencies. Recently, the IRS issued its first written guidance under Internal Revenue Code Section 501(q). Not only does the guidance serve as a good reminder of some of the strict prohibitions under 501(q), but it also demonstrates some of the unintended consequences of the 2006 law – with potentially disastrous implications for some in the credit counseling industry due to the restrictions placed on revenue from creditors. The IRS also continues to threaten intermediate sanctions against officers, directors and senior staff of tax-exempt credit counseling agencies.
Further, as credit counseling agencies work to meet the needs of consumers in financial distress, invariably they encounter issues common to other nonprofits, such as employment law concerns, funding concerns, and questions about federal and state grant compliance. These issues will only become more complex as the types of services and educational opportunities provided by credit counseling agencies expand.
To help put all of this into perspective, below is a list of the best of the credit counseling-related articles and PowerPoint presentations published or delivered by our attorneys over the first half of the year. We have put together some very interesting, useful materials that should be of help to your organization as you tackle the always challenging array of legal issues facing credit counseling agencies.
To read any of these articles, alerts, or PowerPoint presentations, please click on the title.