NYT Reports on Concerns Regarding Potential Conflicts Spawned by BAPCPA's Pre-Filing Credit Counseling Requirement
This New York Times story reports on the potential conflicts of interest at credit counseling firms, whose advice must (in all but emergency situations) be first sought by consumer debtors in advance of their filing for bankruptcy following BAPCPA's October 17, 2005 effective date.
The NYT reports that "critics say that the new counseling requirement, part of the law that takes effect on Monday, increases the risk that people will be improperly steered away from the courts and into debt management plans, for which the counseling agency often receives part of any debts repaid."
The story also quotes NYU's Professor Karen Gross (who is also president of the Coalition for Consumer Bankruptcy Debtor Education) as saying, "Lots of people see the opportunity to make lots of money off the backs of consumer debtors, and that should make people extremely cautious about this."
The Offices of the US Trustee for each district are responsible under BAPCPA for approving credit counseling agencies. We can only hope that they figure out how best to avoid this potential problem before it explodes in everyone's face.
What will need to watched with great care is how the Financial Services Roundtable funds the credit counseling industry. My guess is that you will see the majority of that 10 million go to only those forms which offer debt management plans, and not to those approved credit counseling agencies which do not engage in such DMP business.