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THE CONSUMER BANKRUPTCY LETTER
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In This Issue:
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October 20, 2003
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BANKRUPTCY THIS WEEK . . .
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LEGISLATION & REFORM NEWS . . .
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IRS INVESTIGATES CREDIT COUNSELING AGENCIES
Washington Debtors beware. Consumers who turn to nonprofit credit counseling services could find themselves paying high fees and getting little advice, government agencies said Tuesday in announcing an investigation of the industry.
The Internal Revenue Service and the Federal Trade Commission, pursuing an increasing number of consumer complaints, said some nonprofit credit counselors do not meet the standards for educational, tax-exempt status.
The two agencies said consumers sometimes are pushed into debt repayment plans or consolidation loans fixed payment plans to help pay off debts without help in learning how to budget, save and manage debt.
Complaints also have centered on high fees, hidden charges, even late fees when counselors fail to pay a consumer's creditors on time. In a few cases, counselors have not paid a consumer's creditors at all, the agencies said.
Many of these groups provide a valuable service to consumers, but some use the tax code to skirt consumer protection laws, said IRS Commissioner Mark Everson.
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NEW IRS CHIEF WILL FOCUS ON ENFORCEMENT
By David Cay Johnston
The new Internal Revenue Service commissioner, with an emphasis different from his predecessor's, says effective enforcement of the tax laws rather than further improving customer service would be the main focus of his administration.
Those businesses and wealthy individuals who for years have gotten away with cheating on their taxes will no longer slip past the Internal Revenue Service, the new commissioner, Mark W. Everson, said Wednesday in his first interview since taking office in May.
"Clearly in an effort to do better on the customer service side we poached from law enforcement," he said. "Now there needs to be a re-centering of the agency."
As he spoke, I.R.S. agents in Chicago were serving a summons on a major law firm, Sidley Austin Brown & Wood, for the names of its tax-shelter clients.
The firm said it was cooperating with the I.R.S. and hinted that it no longer recommended tax shelters, saying it would advise "our former clients" of the summons so they "will have the opportunity to seek relief from the court."
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