March 1, 2006


The Honorable Charles Grassley
Chairman, Senate Committee on Finance
219 Dirksen Senate Office Building
Washington, DC 20510

Dear Chairman Grassley:

This letter is submitted on behalf of the Bankruptcy Implementation Council (“BIC”) to provide our comments on Section 221 of H.R. 4297, the Tax Relief Act of 2005, as recently passed by the Senate. The BIC is a coalition of financial services companies, trade associations, and other interested parties that share the goal of implementing the Bankruptcy Abuse Prevention and Consumer Protection Act (“BAPCPA”) in the manner intended by Congress. While we do not represent the credit counseling industry, our members are major third party users of the system.

Section 221 of the Tax Relief Act is designed to curb reported abuses within the credit counseling industry. We share your goal of ensuring that credit counseling offered by non-profit entities to consumers is done so in a legitimate and beneficial manner. There are no legitimate beneficiaries when companies abuse their non-profit status or provide inappropriate counseling services.

Although we appreciate your desire to address reported abuses in the credit counseling industry, we are concerned that the provisions in Section 221 of the Tax Relief Act may have significant unintended consequences. For example, we believe that a statutory limit on debt management plans could adversely affect the operation of legitimate credit counselors. In addition, the restrictions against assisting individuals in improving their credit history may chill the ability to provide legitimate counseling which could have the effect of improving a consumer’s credit history. We also note that it may be more appropriate to require a credit counselor to disclose any relevant fees as part of the initial counseling, as opposed to submitting the fees to the consumer only after the consumer has obtained the service.

We believe it is important to share these concerns with you because a key provision in the BAPCPA was the requirement that the consumer should be informed of their options through a reputable credit counseling agency prior to filing for bankruptcy. Although bankruptcy may be the most appropriate option for a consumer, it is critically important that the consumer fully understand the other options available and the consequences of filing for bankruptcy. For this reform to achieve viability the credit counseling industry must retain sufficient capacity to continue to offer these services to potential debtors. It is our hope that you will redraft the provisions in Section 221 of H.R. 4297 in a manner that addresses the abusive practices without unintentionally reducing vital credit counseling capacity provided by legitimate counselors. We would be pleased to discuss this issue further at your convenience.

Sincerely,