**Association of Independent Consumer Credit Counseling Agencies**

**PMB 626**

**11350 Random Hills Road**

**Suite 800**

**Fairfax, Virginia 22030-6044**

[By E-Mail]{.underline}

April 1, 2008

Clifford J. White III

Director, Executive Office for United States Trustees

20 Massachusetts Avenue, NW

8^th^ Floor

Washington, DC 20530

[Re: EOUST Docket No. 102 -- Notice of Proposed Rulemaking \--
Application Procedures and Criteria for Approval of Nonprofit Budget and
Credit Counseling Agencies by United States Trustees]{.underline}

Dear Director White:

I am writing on behalf of the Association of Independent Consumer Credit
Counseling Agencies (AICCCA). AICCCA members currently provide
counseling and education to millions of U.S. consumers and presently
serve about 500,000 clients repaying their unsecured debts through
legitimate Debt Management Plans (DMPs). Together, these agencies are
currently returning approximately \$2.4 billion annually in consumer
payments to the nation's creditors while providing consumers with a
financial restructuring option outside of the bankruptcy system.

AICCCA has championed fair pricing, stringent ethical guidelines, and
consumer protection standards governing the activities of its members.
Seven years ago, AICCCA's self-regulatory approach was strengthened when
it instituted independent agency accreditation requirements through the
International Standards Organization. That accreditation to ISO-9001
includes thorough annual Code of Practice audits and represents the most
rigorous, independent, audit-based accreditation and oversight in our
industry today. This independent third-party accreditation is combined
with an equally independent certification of all agency counselors by
the Institute for Personal Finance-AFCPE as well as the Center for
Financial Certifications. Together, AICCCA member accreditation plus
counselor certification provide significant assurances for consumers
needing credit counseling services that they will be treated fairly and
competently.

**Overview and Executive Summary**

AICCCA filed comments on the predecessor Interim Final Rule in September
2006 and is once again pleased to provide input to the EOUST as it now
considers the adoption of this proposed Final Rule. AICCCA appreciates
the open line of communication that the EOUST has maintained with us and
we commend the EOUST for its diligent attention to the implementation of
the credit counseling provisions of the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005 (BAPCPA). The publication of this
proposed Final Rule is further evidence of the EOUST's dedication to the
goal of making these requirements work in a manner that assures
sufficient counseling and education resources in a manner that is
consistent with statutory language and Congressional intent.

[While the AICCCA generally endorses the thrust of the proposed Final
Rule we do have substantial concerns regarding certain aspects of it and
therefore urge the EOUST to take the following observations into account
prior to publication of a binding Final Rule:]{.underline}

-   There are to date no reports of insufficient approved credit
    counseling or financial education resources to carry out BAPCPA's
    requirements. This is in major part attributable to the
    extraordinary, unanticipated, and so far continued reduction in
    bankruptcy filings since BAPCPA took effect, as well as voluntary
    participation in the pre-bankruptcy counseling program by about 160
    non-profit agencies. However, current economic conditions do appear
    to be resulting in an upswing in bankruptcy filings, and there is
    reason to be concerned that counseling resource shortages could
    occur in select judicial districts should filing levels continue to
    increase substantially in response to the subprime mortgage
    situation and other major overhangs of consumer debt during an
    economic slowdown or recession.

-   The best means of assuring continued growth in the ranks of approved
    credit counseling and financial education providers, and to prevent
    attrition among already approved providers, is for EOUST to clarify
    under what circumstances an approved provider may decline to provide
    free services to an applicant who appears to have ability to pay.
    Non-profit credit counseling agencies (CCAs) operate within tight
    fiscal restraints, particularly given the overall decline in the
    "fair share" payments (as a percentage of repaid debt) made by
    creditors to CCAs over the past decade. Our industry cannot be
    expected to continue to provide pre-bankruptcy counseling services
    at a net financial loss over an extended time span. Yet that is
    exactly the situation that approved CCAs find themselves in at
    present \-- and the EOUST's proposed guidance on the matter of a
    client's "ability to pay" offers little prospect of relief.

-   The CCA sector needs clear guidance from EOUST as to what
    information regarding the availability of and relief provided by
    bankruptcy may be communicated by an approved CCA to a debtor
    receiving pre-bankruptcy counseling without crossing the line of
    impermissibly providing "legal advice". The proposed Rule's guidance
    on this matter is insufficient In addition, the EOUST has, despite
    our earlier request, failed to clarify the acceptability of certain
    practices that have arisen among some bankruptcy attorneys in regard
    to required pre-bankruptcy counseling, particularly the monitoring
    of debtors' telephonic consultations with approved counseling
    agencies, as well as certain payment arrangements.

-   The proposed mandatory pre-approval requirement for a broad range of
    agency actions and decisions would convert regulatory oversight into
    micromanagement and could dissuade many agencies from continuing or
    initiating their voluntary participation in the pre-bankruptcy
    counseling program. It should be replaced by a requirement that an
    agency provide notice to the EOUST of a material change in
    circumstances.

-   We appreciate the Rule's clarification that prohibited referral fee
    arrangements do not include creditor fair share payments or payments
    to locator services.

-   We question whether extensive client verification procedures are
    required for telephone and Internet counseling and seek guidance as
    to the permissible methods for their implementation, particularly as
    regards situations where client intake and counseling occur in a
    single session.

-   The mandatory client disclosure requirements are overbroad and will
    impose a significant burden on participating agencies without making
    a meaningful contribution to the client's understanding of key
    aspects of the counseling process. They should be pared back to only
    items of critical personal import to the client while excluding
    matters that go to the details of the criteria for agency approval
    by the EOUST.

-   The EOUST's directions on approved advertising should be modified so
    as to eliminate doubts it may presently raise among debtors
    regarding the quality of an approved agency's services.

-   The mandatory recordkeeping requirements should be limited to those
    that arise naturally within the context of providing counseling
    services and that do not place new observational or analytic
    requirements upon participating agencies.

-   We continue to believe that the EOUST should withdraw or amend its
    proposal that it may immediately remove an agency from the approved
    list by interim directive solely upon notification that the IRS has
    proposed to revoke an agency's tax-exempt status. The proposal
    continues to provide insufficient substantive due process to
    agencies and ignores the clear legal distinction between nonprofit
    status, which is required under BAPCPA, and tax-exempt status, which
    is not.

-   We previously requested that the EOUST address issues raised by the
    authority conferred by new Code Section 502(k) relating to the
    negotiation of debt settlement plans by approved CCAs.
    Unfortunately, the proposed Rule not only fails to clarify our
    responsibilities relative to that provision but requires us to tell
    consumers of their nonexistent 'right" to negotiate a type of debt
    settlement agreement that is not yet available from creditors. Under
    present circumstances, many EOUST-accredited counseling agencies may
    be acting in violation of state law if they communicate the debtor's
    interest in negotiating a "60/60" plan, and such communication may
    only serve to advise the client's creditors of the likelihood their
    customer is contemplating bankruptcy.

**Discussion**

[Bankruptcy Filing Levels and Growing Concerns About the Adequacy of
Credit Counseling Resources]{.underline}

Bankruptcy filings have continued to exhibit an extraordinary decline
since BAPCPA took effect in October 2005. In the aftermath of a rush by
debtors to file in the third (about 542,000 filings) and fourth (667,000
filings, the vast majority of which occurred prior to BAPCPA's October
17 effective date) quarters of 2005, filings plummeted. According to
available statistics, consumer bankruptcy filings in 2006 totaled
573,203 and in 2007 totaled 801,840 \-- that latter number is only about
forty percent of the record number of filings in 2005 and only about
half the levels experienced in the years immediately preceding BAPCPA's
enactment. We do not have an explanation for this dramatic decline in
filings, other than that we are certain that the necessity to obtain
counseling from an approved CCA prior to filing and the modest cost of
such counseling (waived or reduced for those debtors lacking ability to
pay) cannot be a factor of any significance.

However, current economic circumstances may now be resulting in a
significant upswing in consumer bankruptcy filings. Just over 76,000
consumer bankruptcies were filed in February 2008, the highest number
for a single month since BAPCPA took effect. It is too soon to say
whether this is the start of a significant trend but it may well be so.
Further, Congress is currently debating changes in the treatment of
loans secured solely by primary residences that, if enacted, could well
result in the filing of several hundred thousand additional Chapter 13
cases annually over the next two or more years.

Thus, while the present number of approved CCAs appears more than
adequate to satisfy the need for pre-bankruptcy counseling at current
filing levels, we have serious concerns about the adequacy of counseling
capacity should there be a significant upward spike in filings during
the remainder of 2008 and into the future. A shortage of capacity in
such circumstances could trigger the provisions of BAPCPA that provide
for suspension of the counseling requirement in judicial districts
lacking adequate capacity, and call into question the viability of the
pre-bankruptcy counseling requirement and the ability of the EOUST to
oversee it.

Strong efforts should be made to avoid such an unfortunate outcome.
There is a limited pool of agencies with the qualitative attributes
necessary to satisfy the EOUST's rigorous approval criteria. We
previously commented that we believed that number to be substantially
smaller, by orders of magnitude, than the 800 potential applicants
agencies originally projected by the EOUST \-- and would observe that
there are as of today only about 160 approved agencies throughout the
United States. Agencies that have already received approval and that are
providing pre-bankruptcy counseling must believe that their continued
participation is warranted, and that an investment of their scarce
resources into an expansion of capacity is prudent. Agencies that are
considering participation must receive encouragement and positive
feedback from these that are already participating.

Unfortunately, without some focused effort, there is a possibility that
the number of participating CCAs will decline, even as bankruptcy
filings begin to accelerate in reaction to economic pressures and new
legislation.

[The Proposed Clarification of "Ability to Pay"]{.underline}

Every CCA approved to provide BAPCPA pre-bankruptcy counseling must
charge a "reasonable fee" for counseling services, must provide services
"without regard to ability to pay that fee," and must provide to EOUST
its "criteria for providing services without a fee or at a reduced
rate." It must also agree to "not withhold a certificate of counseling
completion because of a client's inability to pay." AICCCA applauds
these criteria, which are consistent with our own member accreditation
standards.

Approved CCAs have, to date, been extremely cautious in assessing fees
from debtors who claim they lack ability to pay. Yet approved CCAs have
consistently been offering pre-bankruptcy counseling at a significant
financial loss. All the information we have seen indicates that, for
both AICCCA members and other approved agencies, the cost of providing a
pre-bankruptcy counseling in accord with EOUST criteria is about \$50,
while the average payment from each debtor is about \$32. Less than two
percent of the post-BAPCPA effective date debtor population has even
been eligible to enter a debt management program (DMP), and many of
those nonetheless choose to file bankruptcy, so the opportunity for CCAs
to offset the counseling loss with DMP income is negligible. This
situation is simply not sustainable for non-profit entities that are
already straining to provide services despite severe fiscal constraints.

As we pointed out in September 2006, there are only two available
remedies for this situation, short of a public or private sector
subsidy. The first was for the EOUST to clarify under what circumstances
an approved CCA may refuse to provide counseling to an individual
debtor, or refuse to provide a certificate of completion to a debtor who
has received counseling, where the debtor's own financial information
indicates that they indeed have an ability to pay a full or reduced fee.
The second was to raise the average charge for a BAPCPA counseling
session, which could well have the unfortunate result that some honest
debtors would incur a higher fee to offset the refusal of another,
perhaps better situated debtor, to pay the same fee.

Unfortunately, the proposed Final Rule only exacerbates this situation.
Rather than identifying those circumstances in which an approved agency
may refuse to provide services to a debtor with apparent ability to pay,
it has now proposed that a client's lack of ability to pay shall be
presumed if his current household income is less than 150 percent of the
official OMB poverty line. According to the [Federal
Register]{.underline} of January 23, 2008 the official poverty line for
a family of two is \$14,000 and for three us \$17,600, so that 150
percent of those dividing lines would be a range of \$21,000 - \$26,400.
Meanwhile, according to the most recent available Census Bureau data the
median income for all U.S. households (average household size of 2.56
individuals) in 2006 was \$48, 201. Remembering that more than ninety
percent of all post-BAPCPA enactment filers have earned less than the
median family income for their states, we are concerned that the
presumption proposed to be established by this Rule will sanction an
even greater percentage of potential bankruptcy filers as eligible to
receive pre-bankruptcy counseling at no cost.

As we know of no credible evidence of any pattern of clients being
unreasonably denied access to pre-bankruptcy counseling due to inability
to pay, we do not believe that this portion of the Final Rule should be
given effect until the EOUST has performed much greater statistical
analysis of its potential impact on the financial stability of approved
counseling agencies. The need for such analysis is exacerbated by the
Final Rule's proposed presumption that any fee exceeding \$50 is not
reasonable, and its requirement that an agency must obtain prior
approval from the EOUST to charge a fee higher than \$50; while this
upper threshold will be revised periodically, that may be as seldom as
every four years . As we commented in September 2006, at that time the
average cost of providing a counseling session was \$50, which means
that some agencies may already be providing these services at a loss
even before factoring in the percentage of clients receiving them at
reduced cost or for free based on lack of ability to pay. We therefore
request that the EOUST revise the upper threshold for presumed
reasonableness to \$60 so as to relieve those agencies who believe that
they must charge such a fee to remain active participants in the
pre-bankruptcy counseling program from the necessity of obtaining prior
approval -- a requirement that in itself will result in significant
additional expense to any agency that elects to exercise it.

Further, we strongly question the EOUST's ability to require that an
approved agency that has provided pre-bankruptcy counseling to a client
who has then chosen to enter into a DMP must provide additional
counseling for no additional charge if, upon the completion or
termination of the DMP, the client chooses to file bankruptcy. If the
initial pre-filing counseling session and the subsequent completion or
termination of the DMP are separated by more than the six month lifespan
of the initially issued certificate they should be regarded as two
separate and distinct events for which the agency is entitled to some
additional compensation, subject of course to the client's ability to
pay.

Currently approved agencies will simply not be able to continue
participation over the long term if the provision of BAPCPA-mandated
counseling does not become at least a break-even financial proposition.
And CCAs considering participation will mostly back away as their
industry colleagues convey their experience and withdraw from the
program. This is especially true because the actual cost of completing
an application to participate is, based upon feedback from AICCCA
members, substantially more than the \$500 estimate provide by the EOUST
in response to Executive Order 12866, and is accompanied by substantial
added costs for an additional surety bond as well as employee fidelity
insurance. The client disclosure and statistical record keeping
requirements placed upon approved agencies by this Final Rule will only
further add to the cost of participation.

[The Question of What Constitutes "Legal Advice"]{.underline}

The debtor bar made clear that it strongly opposed BAPCPA while the
proposed law received Congressional consideration, and that its
opposition definitely encompassed the law's pre-bankruptcy counseling
requirements. While less than two percent of the current pre-bankruptcy
counseled population is choosing an alternative to bankruptcy, it is
quite possible that this percentage will grow significantly if
bankruptcy filings increase and the debtor financial profile begins to
include greater numbers of higher income debtors. Every individual
considering bankruptcy who detours as a result of mandatory credit
counseling is one less client for a debtor attorney. In any event, the
debtor bar is not pleased that bankruptcy filings have dropped by half
since BAPCPA took effect.

The debtor bar may therefore look for opportunities to allege that a
particular approved CCA is "practicing law without a license" by
providing basic bankruptcy information as part of the counseling
process. And it has demonstrated its willingness to intervene in the
counseling relationship by intrusively monitoring it.

In regard to the first point, the EOUST already requires that approved
CCAs "shall not, unless otherwise authorized by law, provide legal
advice on any matter." In September 2006 we stated that it would be
extremely helpful to the credit counseling industry if the EOUST would,
by regulation, provide a "safe harbor" delineated by the boundaries of
what advice can be provided by an approved CCA to a counseling client
regarding the availability and consequences of bankruptcy without
crossing the line to providing forbidden "legal advice." It would seem
axiomatic that a counselor assisting a financially troubled debtor needs
to be able to advise that individual that bankruptcy is one available
option, that bankruptcy may offer either liquidation or partial
repayment of his debts depending on his circumstances, and that a
bankruptcy will remain on his credit report for a decade. These factual
matters can be readily distinguished from the giving of advice regarding
whether the debtor should file for bankruptcy, what Chapter would be
most advantageous, and how the court would likely treat the petition.

Unfortunately, the proposed Final Rule fails to provide such a "safe
harbor". It simply states that an approved agency may not provide "legal
advice" as defined in Section 110(e)(2) of the Bankruptcy Code, which
provides:

...legal advice...includes advising the debtor --

\(i\) whether -

\(I\) to file a petition under this title; or

\(II\) commencing a case under chapter 7, 11, 12, or 13 is

appropriate;

\(ii\) whether the debtor\'s debts will be discharged in a case

under this title;

\(iii\) whether the debtor will be able to retain the debtor\'s home,
car, or other

property after commencing a case under this title;

\(iv\) concerning -

\(I\) the tax consequences of a case brought under this title; or

\(II\) the dischargeability of tax claims;

\(v\) whether the debtor may or should promise to repay debts to a
creditor or enter

into a reaffirmation agreement with a creditor to reaffirm a debt;

\(vi\) concerning how to characterize the nature of the debtor\'s
interests in property

or the debtor\'s debts; or

\(vii\) concerning bankruptcy procedures and rights.

This definition, drawn from the Code's provisions regarding acceptable
conduct by non-attorney bankruptcy petition preparers, comports with our
view that an approved agency's counselors should refrain from offering
the client any advice regarding the applicability of bankruptcy law to
their specific situation, nor should they offer any opinion as to
whether or not a client should file for bankruptcy. However, the
proposed Rule still fails to offer any guidance as to what a counselor
may say about bankruptcy law generally, especially in reply to the
inevitable questions that some clients may pose to them. The Rule's
failure to provide any "safe harbor" guidance may well result in
counselors refusing to respond to even elementary questions regarding
options available under bankruptcy law and may therefore fail to serve
their clients' best interests.

In regard to the second point, BAPCPA's legislative history buttresses
the view that Congress intended to assure that debtors receive informed
and objective advice from two separate sources -- an approved CCA and an
attorney -- before making a decision of such momentous consequence as
filing for bankruptcy. Yet the debtor bar has continued a
profession-wide effort to monitor their client's telephonic
consultations with approved CCAs. The debtor bar would be loudly
protesting if credit counselors were insisting on the right to listen in
on their calls with clients, yet many are making such monitoring a
standard practice. We continue to believe that the EOUST should, by
regulation, clarify whether such attorney monitoring of required
pre-bankruptcy counseling is permissible and what actions an approved
CCA may employ to deter it. We also continue to urge the EOUST to
clarify the legal and ethical boundaries for interaction between these
two professions, particularly as regards the referral of clients to a
particular agency and the collection of fees on behalf of that agency by
a debtor attorney.

[Mandatory Pre-Approval Process]{.underline}

The proposed Rule mandates that an approved agency obtain approval from
the EOUST "prior to making any of the following changes". The only one
of the listed changes that would seem to require such pre-approval is
the engagement of an independent contractor to provide counseling
services or have control over client funds, as such a change goes to the
establishment of agency counselor qualifications and financial controls
that are the heart of the EOUST approval process. However, the other
listed items- such as a change in the amount of required bonds or
insurance, a change in fee policies, expansion into additional Federal
judicial districts, and changes in service delivery methods - would seem
to merit at most a notice requirement unless such change was both
material in nature and would also result in the agency no longer being
in compliance with the statutory and regulatory requirements for
approved counseling agencies.

The power of the EOUST to assure compliance with those requirements
should not be converted to the power to micromanage an approved agency's
day-to-day operations and decisions. The micromanagement nature of this
requirement is clearly embodied in the final listed item; namely, "any
changes in the approved agency's counseling services". This final
category is no longer an enumerated and discrete item but an expansive
catch all term that could implicate almost any decision made by an
approved agency, even those of a nonmaterial nature. We are concerned
that retention of these broad pre-approval requirements, rather than
their replacement by a mere notice requirement, will eventually result
in an erosion of the number of agencies voluntarily participating in
pre-bankruptcy counseling because such participation will be seen to
carry a requirement of getting advance assent from the EOUST for a broad
range of routine agency decisions that have no material impact upon its
continuing satisfaction of the relevant requirements for participation.

[Referral Fee Arrangements]{.underline}

We appreciate the proposed Rule's clarification that prohibited fee
arrangements, by which an agency pays or receives payment for client
referrals, do not include fair share payments from creditors or payments
to third party locator services. This clarification brings the proposed
Rule in conformity with 2006 Tax Code changes speaking to the
eligibility of credit counseling agencies for tax-exempt status.

[Identification Requirements for Telephone and Internet
Counseling]{.underline}

The proposed Rule requires an agency that delivers counseling by
telephone or via the Internet to have proficiency in employing
verification procedures to ensure that the client is indeed the
individual receiving the services. It goes on to prescribe that this
requirement be met through obtaining one or more unique personal
identifiers from the client and then assigning an individual user ID,
access code, or password at the time of enrollment -- and then requiring
the client to provide the assigned verifier along with one or more of
the unique personal identifiers during the course of delivering the
services.

Since the pre-bankruptcy counseling requirement is not a test that must
be passed but simply a procedure that must be complied with prior to
achieving eligibility to file bankruptcy we have doubts that any
significant percentage of debtors has or will seek to have a third party
undertake the counseling on their behalf. Therefore, in light of the
financial burden likely to be incurred by participating agencies, we
would request guidance from the EOUST as to the precise methodologies
that will be acceptable for this verification procedure, with an eye
toward keeping the cost and record-keeping burden to a minimum. Further,
since a significant percentage of debtors will need to obtain
eligibility certificates on an expedited basis, and since many agencies
may well combine both the intake and counseling process in a single
session to both meet the needs of such clients as well as achieve cost
efficiencies, we would seek EOUST guidance as to how the verification
process can be effectively enforced within the context of such a
combined procedure rather than the separate, two-part process that the
proposed Rule seems to contemplate.

[Mandatory Disclosures to Clients]{.underline}

The proposed Final Rule contains extensive new mandatory disclosure
requirements to clients and potential clients. An approved agency must,
prior to obtaining any information from or providing any services to a
client, disclose:

1.  its fee policy

2.  its policy enabling clients to obtain services free or at a reduced
    rate based upon ability to pay

3.  its funding sources

4.  its counselors' qualifications

5.  the potential impact upon credit reports of all the alternatives it
    may suggest

6.  its prohibition against receiving or paying any referral fee other
    than fair share payments or those made to a locator service

7.  its obligation to provide a certificate promptly upon completion of
    the counseling services

8.  the client's "right" to negotiate a debt settlement plan (see below
    for a more extensive discussion of this point)

9.  the potential sharing of client information with the EOUST

10. the fact that the EOUST has only reviewed the agency's counseling
    services and not the other services it may provide

11. the fact that the client will receive a certificate only if he
    completes counseling services.

Overall, we believe that these mandatory disclosures are far too
extensive and will place a continuing and excessive burden upon
participating agencies without providing meaningful information to
clients and potential clients. In fact, some of these disclosures may
well mislead or confuse clients and require the agency to spend a
significant portion of the counseling session answering questions about
these disclosures rather than providing the services that Congress
intended.

Agencies that have been approved to provide pre-bankruptcy counseling
services by the EOUST have passed a rigorous initial screening program
and are subject to continuing oversight and annual review and
re-approval. While a few of the items that the proposed Rule would
require to be disclosed are of personal import to the client -- such as
the ability to receive counseling at a reduced fee or for free, and the
agency's obligation to furnish a certificate of completion promptly --
many of the others go to the minutiae of the agency's compliance with
statutory and regulatory requirements. For example, is it really of
import to a potential client what the agency's precise funding sources
are or should the client simply rely on the fact that the EOUST has
screened those sources to assure that there are no potential conflicts
of interest? Likewise, need a client be given the qualifications of
every counselor who might provide pre-bankruptcy counseling or is it
sufficient that the EOUST has been satisfied that an agency's counselors
satisfy applicable standards? We would strongly suggest that rather than
requiring agencies to furnish all potential clients with a long and
detailed document addressing matters that are of no personal concern the
required disclosures should be pared back solely to those items that
assist the client in understanding the nature of the pre-bankruptcy
counseling. At most, additional matters relating to the agency's overall
satisfaction of EOUST-administered requirements should be alluded to
with an advisory that additional information regarding such matters is
available for inspection within the agency upon request.

[Permissible Advertising]{.underline}

The EOUST requires all approved CCAs to comply with its directions on
approved advertising, as stated in Appendix A to the application form.
Those directions require that an approved CCA may state in an
advertisement that it has been approved to provide credit counseling
services in compliance with the Bankruptcy Code, but that any
advertisement that makes reference to such approved status must be
stated in only one particular manner: "*Approved to issue certificates
in compliance with the Bankruptcy Code. Approval does not endorse or
assure the quality of an Agency's service."* We continue to have strong
concerns about the second sentence of this required disclosure.

Advertising is commercial speech protected by the First Amendment, and
any government-compelled speech must raise concerns. The second sentence
of the EOUST's required statements cannot help but raise doubt in the
mind of a prospective counseling client regarding whether the EOUST's
approval means anything at all, and whether the agency placing the ad
can indeed provide quality service. Yet the EOUST only approves a given
CCA after it has met strict criteria consistent with BAPCPA standards,
the sum total of which indicates that an approved agency treats clients
fairly and ethically, employs experienced personnel, and provides an
objective and impartial analysis of the debtor's financial options.
These are all significant qualitative measures, yet the EOUST's required
disclosure implies that its review process and approval mean little.

We strongly urge the EOUST to delete the second sentence -- leaving only
the factually correct statement that a CCA has been approved to issue
pre-filing certificates and can provide one to an individual considering
bankruptcy -- or else to substantially amend the disclosure statement so
that consumers are advised that agencies must comply with rigorous
standards to merit EOUST approval. When BAPCPA was first enacted, many
agencies believed that being approved by the EOUST would confer a "Good
Housekeeping seal of approval." Instead, this direction forces an
approved agency to either refrain from mentioning its status in an
advertisement or to do so in a manner that raises questions about its
quality of counseling. This is hardly an incentive for agencies to
remain in or apply for the program.

[Mandatory Record Keeping Requirements]{.underline}

We understand the need for approved agencies to maintain adequate
records of their activities and keep them available for EOUST
inspection. However, given that most agencies will be offering
counseling services at a net cost that is less than the average fee paid
per counseling session, the EOUST should be sensitive to the need to
keep these requirements limited so as to impose the minimum additional
financial burden upon the agency's financial and human resources. Hence,
we would urge the EOUST to review the proposed requirements and pare
them back to requiring accurate records of the type that would naturally
accrue in the course of providing counseling services and that do not
require additional data gathering, judgment and analysis. For example,
we have no objection to requiring that an agency maintain annual audited
financial statements as well as copies of all client correspondence.
However, we do have concerns about such requirements as maintaining a
count of the total number of clients and potential clients with limited
English proficiency and special needs, and of hearing-impaired clients,
along with details of the agency's best efforts to provide services to
such clients, and further supporting or justifying the failure to
provide services to such clients, as such aggregate records would not
naturally accrue in the course of providing counseling services and this
type of requirement places additional observational and explanatory
burdens upon the agency. Likewise, it seems reasonable to require
agencies to maintain records of all clients who received services at a
reduced rate or for free but does not seem reasonable to require that
the agency disclose which of such instances were "voluntary",
particularly since under the proposed Rule the provision of free
services to certain clients will be mandatory.

[Agency Removal]{.underline}

The EOUST has proposed that, in certain circumstances, its decision to
revoke an agency's approved status need not wait upon an agency's
exhaustion of its opportunity for administrative review but may be
effected immediately by an interim directive. We continue to take strong
exception to the EOUST's proposal that one factor supporting such an
interim directive can be the revocation of the agency's tax-exempt
status by the Internal Revenue Service (IRS).

Specifically, the proposed Rule provides that the EOUST shall promptly
commence an investigation to see if one of five listed factors exists if
the IRS revokes an agency's tax-exempt status. Inasmuch as the
revocation of an agency's tax-exempt status by "any entity...even if
that revocation is subject to further administrative or judicial
litigation, review or appeal" is one of the listed factors, it is a
foregone conclusion that the EOUST will find the existence of that
factor. And once any of the factors is found to exist, the EOUST may
remove an agency from the approved list immediately. Thus, a threshold
and non-final decision by the IRS to revoke an agency's tax-exempt
status, which need have no impact on the non-profit status required by
BAPCPA, can nonetheless trigger an immediate revocation of approved
status by the EOUST. We do not believe this potential action has any
sound basis in law or policy.

BAPCPA is quite clear that, while non-profit status is required to
become an approved CCA, tax-exempt status is not. Because tax-exempt
status is not a statutory requirement, the EOUST should not deprive an
approved CCA of its full appeals right simply because it might lose or
has lost that status. The EOUST already requires every approved CCA to
complete and sign a tax waiver authorizing it to seek confidential
information regarding the agency from the IRS, as well as to notify it
immediately of the termination of that tax-exempt status by the IRS.
Therefore, the EOUST already has access to any information developed by
the IRS in the course of its audit of a particular agency. AICCCA
believes that the EOUST should make its own independent judgment
regarding a CCA's eligibility to provide pre-bankruptcy counseling,
separate and apart from any IRS determination regarding eligibility for
tax-exempt status. Should an IRS audit have uncovered information
indicating that an agency was not in compliance with EOUST criteria,
that information could of course be a factor in the EOUST's separate
evaluation. But the mere loss of tax-exempt status, in and of itself,
should not be a basis for revocation of EOUST-approved status,
especially on an expedited basis.

It appears that the EOUST is proposing to tie possible withdrawal of an
agency's approved status to just an initial IRS decision to seek
revocation rather than a final revocation action. Since a tax-exempt
counseling agency has an opportunity under tax law to appeal such an IRS
decision, it is administratively inappropriate for the EOUST to use an
interim directive to revoke approved status based upon a preliminary IRS
action that could well be reversed upon appeal.

We would also note that, in 2006, Congress enacted new statutory
requirements for the achievement and maintenance of tax-exempt status by
CCAs as part of H.R. 4, the Pension Protection Act. Those statutory
provisions provide welcome clarification of the structural and
operational requirements for such status, and also make clear that the
provision of DMPs is consistent with tax-exempt status so long as
properly integrated with counseling and educational services, and so
long as associated "fair share" income from creditors constitutes no
more than fifty percent of an agency's revenues. Nonetheless, the
complexity of this new statutory language reiterates that eligibility
for tax-exempt and EOUST-approved status are somewhat related but also
differ substantially in detail. The EOUST should therefore refrain from
revoking a CCA's approved status, without the opportunity for an appeal
to delay removal from the approved agency list, based solely upon a
separate and distinct revocation by the IRS.

[Appeals Process]{.underline}

The EOUST has proposed to establish an appeals process for those CCAs
who have had their application for approved status denied, as well as
those approved agencies who have their status revoked. The process
requires that an agency seeking such review submit its documented appeal
within twenty calendar days of the denial or revocation notice. It also
permits the Director to seek additional information from the appealing
agency, and requires the Director to issue a written decision no later
than sixty days after receipt of the agency's request. That decision
deadline can be extended if the agency agrees to the extension or if the
Director extends the period on his own volition. The Director's ultimate
decision constitutes final agency action.

We believe that this proposal, while welcome, needs to be clarified to
make clear that the agency's time period for filing an appeal begins to
run upon its receipt of the EOUST's decision, rather than from the time
it was made. That clarification would mirror the day of receipt trigger
for the start of the time period in which the Director must take final
action, and would assure that no agency has its appeals right prejudiced
by a delay in the communication of that decision. We would also urge
that the proposal be modified so that the Director may only extend his
review period in exigent circumstances, as an agency is entitled to
expeditious review of its appeal by the EOUST rather than be kept in
limbo for an extended period.

Finally we would note that, for this appeals process to be meaningful,
the Director must limit the use of interim directives to the minimum
except in extraordinary circumstances required to protect the public
interest. Likewise, in implementing its new appeals process for agencies
which have been denied approved status or which have had that status
revoked, the EOUST should strive to adhere to its proposed deadlines for
action and should refrain from extending that review period absent
extraordinary circumstances.

[Debt Settlement Plans]{.underline}

Bankruptcy Code Section 502(k), added by BAPCPA, allows the court, on a
debtor's motion and after a hearing, to reduce a claim based wholly on
unsecured and nondischargeable consumer debt by up to twenty percent, if
the creditor unreasonably refused to negotiate a reasonable alternative
repayment schedule proposed in a timely manner by an EOUST-approved CCA
that would have provided for repayment of at least sixty percent of the
debt during the loan's repayment period or a reasonable extension
thereof. These sixty percent over sixty months debt settlement
arrangements are commonly referred to as "60/60 plans".

This new provision potentially provides approved CCAs with some ability
to negotiate a debt settlement plan on behalf of a debtor who lacks the
financial resources to complete a traditional one hundred percent
repayment DMP. The 60/60 plan would provide debtors with a
non-bankruptcy repayment option similar to a Chapter 13 filing. However,
it also makes a future legal right of the debtor contingent upon the
present action of the approved CCA, and thereby it creates some
potential legal liability for CCAs as well as some ethical questions.
For example, is an approved CCA compelled to attempt to negotiate a
sixty percent repayment plan on behalf of a debtor who has the financial
capacity to make full repayment or can the CCA exercise some discretion
when a debtor requests such action?

Given the potential of new forms of debt settlement plans to provide
benefits to both debtors and creditors, as well as the new
responsibility thrust upon CCAs by Section 502(k), we requested that the
EOUST address this topic when it published more comprehensive guidance
in a proposed Final Rule.

However, the Rule we are commenting upon not only fails to provide that
type of guidance but requires us to provide misinformation on this point
to prospective clients. Specifically, the proposed disclosures that
approved agencies must provide to potential clients include disclosure
of:

> \(8\) The client's right to negotiate an alternative payment schedule
> with regard to each unsecured consumer debt under terms as set forth
> in 11 U.S.C. 502(k);

However, the referenced Section of the Bankruptcy Code does not provide
any such "right" to any consumer debtor, but merely sets forth
prospective penalties for consumer creditors who unreasonably refuse to
negotiate such a repayment arrangement with certain debtors. We doubt
that the Congress that enacted BAPCPA's means testing for Chapter 7
eligibility intended to create a right to debt settlement plans for
debtors with the ability to fully fund a traditional DMP.

The nonprofit credit counseling community believes that the availability
of additional assistance tools, including a standardized debt settlement
option, would benefit its clients and we are currently engaged in active
discussions with major creditors regarding the creation of such a
reduced payment debt settlement plan for eligible debtors \-- but no
such alternative yet exists. We do not believe that the EOUST should
promulgate a Final Rule that requires us to advise individuals seeking
pre-bankruptcy assistance of a "right" that has no basis in law and that
relates to a type of repayment arrangement that does not yet exist. In
the absence of a 60/60 plan acceptable to major creditors any attempt to
negotiate such a plan on behalf of a client would be a disservice as it
would do little more than advise his creditors that he is giving serious
consideration to filing for bankruptcy protection. In addition, a
binding regulatory obligation to advance such a plan could subject some
approved CCAs to legal jeopardy as most states require that an agency
advancing such a proposal for one of its residents be licensed to do
business within it.

**Conclusion**

The AICCCA appreciates this opportunity to provide input to the EOUST on
this proposed Final Rule. We recognize the continuing dedication of the
EOUST to the proper implementation of the required credit counseling
provisions of BAPCPA, as well as your open line of communication with
our Association and its individual members. We are hopeful that you will
be responsive to the concerns raised in this letter before the proposed
Final Rule is put into effect.

Sincerely,

David C. Jones, Ph. D.

President