For those on the verge of bankruptcy, the danger of dishonest credit counselors is an all too frightening reality. Some so-called “credit counselors” are actually predatory lenders looking to make a buck off consumers desperate to get out of debt. These victims often end up losing whatever meager financial resources or home equity they had - assets which would have been protected had they filed for bankruptcy.
To fight these scam artists and protect those backed into a corner by debt, I recently authored a local law that will ensure that New Yorkers can identify credit counselors that they can truly depend upon to provide sound, honest financial advice. Before we discuss my law, I need to tell you about a federal law regarding bankruptcy that passed last year.
The Federal Bankruptcy Prevention and Consumer Protection Act of 2005 is a mixed blessing for the millions of Americans struggling to get themselves out of debt. The Act requires that - before filing for bankruptcy - debtors must see a federally approved credit counselor to assess whether bankruptcy is really their best option. All such approved credit counselors must be non-profit companies that do not sell financial products such as mortgages or loans. While the federal Act has made it harder for the average citizen to file for bankruptcy, its approval system provides a means of identifying credit counselors who have the best interest of the consumer at heart.
My law takes advantage of this new federal approval system for credit counselors to help consumers identify and avoid potential scam artists. It creates two major requirements of businesses that provide credit-counseling services - but have not been approved under the federal law to provide such services.
First, it requires “non-approved” credit counselors in New York City to disclose to all prospective clients in writing that it is not an approved credit counselor for filing for bankruptcy. Second, it requires that all “non-approved” businesses who advertise bankruptcy counseling services to disclose this fact in their advertising.
This new consumer protection law stands up to deceitful credit counselors by helping New Yorkers with debt problems to identify counselors that they can truly depend upon to provide sound, honest financial advice. I am confident that this new law will ensure that New Yorkers seeking financial counseling can separate the qualified, trustworthy businesses from the cheats and the swindlers.
If you are in need of bankruptcy counseling, a list of the federally approved counselors can be found on the Department of Justice website at https://www.usdoj.gov/ust/eo/bapcpa/ccde/ccapproved.htm. To report a dishonest credit counselor go to www.consumeraffairs.com.
Jim Gennaro is the Council Member from the 24th District. He represents the neighborhoods of Fresh Meadows, Jamaica Estates, Hillcrest and Kew Gardens Hills. He Chairs the Environmental Protection Committee.
