Pension law changes rules for credit counseling The Debt Adviser by Steve Bucci • Bankrate.com

President Bush recently signed the Pension Protection Act of 2006. Why does The Debt Adviser care?

This is particularly timely as the current bankruptcy law requires credit counseling and doubly so as the Internal Revenue Service is currently in the midst of wielding its scythe, like the Grim Reaper, clearing the weeds choking the nonprofit credit counseling industry.

So, this being good news for consumers, I wanted to make you aware of how the new requirements will benefit you.

The law says credit counseling agencies:

• Must provide services tailored to the specific needs and circumstances of the consumer. The organization must give consumers all their financial options and explain the ramifications of a debt management plan, or DMP. What this means for you is no cookie-cutter or boiler-room techniques will be allowed. Counselors have to pay attention to your individual needs and develop solutions that fit your situation. The 20-minute drive-by counseling session is history. • May not refuse anyone services based on inability to pay. This may come as a surprise to some agencies that value profit over community service, but most people who show up for credit counseling are financially distressed. Now those who can't afford to pay for help will be assured they will receive it. This small fact is often overlooked in the argument to allow for-profit players into credit counseling. Imagine hospitals providing emergency services to only those who could pay. But also imagine everyone who needs the services is cash-strapped. Not a pretty picture! • Except where allowed by state law, the law prohibits fees based on percentage of debt, pursuant to a debt management plan or as projected or actual savings from enrolling in a DMP. This provision of the law spells out and forbids organizations from charging unreasonable or undisclosed fees or taking a piece of the action for services. Any fees charged must be made clear upfront, and, as was stated above, you must receive services at no cost if unable to pay. • May not solicit contributions from consumers during initial counseling session or while receiving services. As nonprofit charitable organizations, it's not surprising that tax-exempt credit counseling agencies might solicit contributions from the public to help fund their services. Other nonprofits do this all the time. But to solicit donations at the same time and from the same financially shell-shocked families to whom services are being provided made no sense. • May not receive more than 50 percent of revenue from creditors. Legitimate credit counseling agencies have to be on speaking terms with creditors to help their clients. It is reasonable for creditors to pay some of the freight as they receive part of the benefit from a counseling session or debt management plan as a byproduct. This new requirement will assure that the organizations are not placing persons on DMPs unnecessarily in order to collect revenue from creditors and makes clear who is really the customer. In case you're wondering, it is the family or person in need, not the lender.

According to David Jones, president of the Association of Independent Consumer Credit Counseling Agencies, or AICCCA, 10 million or more Americans could benefit from credit counseling at any given time. The law's provisions will help ensure that clients are treated fairly and receive only the services needed, no matter which agency they contact for services. This new law should come as a comfort to families in need of financial advice and provides another tool for regulators to keep the bad guys out.

Many reputable credit counseling trade groups, such as AICCCA and the National Foundation for Credit Counseling, have had similar requirements in place for many years. The new law will not change the way the best agencies operate, but will bring the other agencies closer to their level of commitment to consumers.

The Debt Adviser, Steve Bucci, is the president of Money Management International Financial Education Foundation and the author of Credit Repair Kit for Dummies. Visit MMI for additional debt advice or to ask a question of the Debt Adviser go to the "Ask the Experts" and select "debt" as the topic.