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Credit Cards

Credit Crackdown

The feds weed out bogus counseling services. Where to find good advice.

When Congress passed a new bankruptcy law, lawmakers also required filers to get credit counseling. With more than two million personal-bankruptcy filings last year, consumers clearly need guidance. But it turns out that the solution is often worse than the problem.

The IRS recently audited 41 credit counselors, representing the revenue of more than 40% of the agencies in the field, and found that almost all of them were fronts for debt collectors that took advantage of unwary debtors. As a result, the IRS revoked the firms' tax-exempt status.

The agency that oversees bankruptcy case administration is reviewing the IRS's findings to see if any of the organizations can remain on its approved list.

As legitimate advice gets scarce, employers may fill the void. Human-resources consultants say an increasing number of companies are adding debt-management help to their employee assistance programs. Aflac, the insurance company, offers its employees weekly Lunch and Learn sessions, during which outside experts talk about personal-finance topics. Financial planners who charge reasonable hourly fees or donate their time can be another resource.

-- Joan Goldwasser