16138 Federal Register / Vol. 78, No. 50 / Thursday, March 14, 2013 / Rules and Regulations 

49OATI at 6. 

50See Order No. 771, FERC Stats & Regs ¶ 31,339 

at P 39; 18 CFR 366.2(d). 

51See, e.g., NAESB Wholesale Electric Quadrant 

(WEQ) Business Practice Standards (Coordinate 

Interchange) requirement 004–1 (‘‘All requests to 

implement bilateral Interchange * * * between a 

Source BA and Sink BA, where one or both BAs are 

located in either the Eastern or Western 

Interconnection, shall be accomplished by the 

submission of a completed and accurate RFI) to the 

Sink BA’s registered e-Tag Authority Service’’) and 

requirement 004–2 (‘‘Until other means are adopted 

by NAESB, the primary method of submitting the 

RFI shall be an e-Tag communicated to and 

managed by the Sink BA’s registered e-Tag 

authority service using protocols compliant with 

the Version 1.8.1 Electronic Tagging Functional 

Specification.’’ (Emphasis added.)). See NAESB 

Wholesale Electric Quadrant (WEQ) Business 

Practice Standards (Version 003), published July 31, 

2012. 

only the CC list of an e-Tag to see if the 

Commission is included. If an IntraBalancing Authority exception were 

created, Balancing Authorities with 

validation responsibilities would first 

need to check the market and physical 

segments of an e-Tag to see if they met 

additional criteria, and then check to 

see if the Commission is included on 

the CC list. Likewise, e-Tag Authors 

would have to develop additional 

procedures to ensure an Intra-Balancing 

Authority exception was appropriately 

implemented. 

5. Balancing Authorities 

a. Comments 

34. OATI states that Order No. 771 

creates certain obligations on 

‘‘Balancing Authorities’’ and notes that 

multiple Balancing Authorities can be 

listed on a single e-Tag. OATI seeks 

clarification that the Final Rule refers to 

the Balancing Authority serving as the 

Sink Balancing Authority and providing 

e-Tag Authority Services for the 

particular e-Tag transaction, rather than 

to other Balancing Authorities that may 

be listed on the e-Tag.49

b. Commission Determination 

35. Order No. 771 imposes certain 

requirements on Balancing Authorities 

located within the United States with 

respect to ensuring Commission access 

to e-Tags.50 In response to OATI’s 

question, we clarify that the 

requirements on Balancing Authorities 

to ensure Commission access to e-Tags 

relate only to the Sink Balancing 

Authority on an e-Tag and not to other 

Balancing Authorities that may be 

included on an e-Tag.51

The Commission orders: 

The Commission hereby grants 

rehearing in part, and denies rehearing 

in part, as discussed in the body of the 

order. 

By the Commission. 

Nathaniel J. Davis, Sr., 

Deputy Secretary. 

[FR Doc. 2013–05856 Filed 3–13–13; 8:45 am] 

BILLING CODE 6717–01–P 

DEPARTMENT OF JUSTICE 

28 CFR Part 58 

[Docket No EOUST 102] 

RIN 1105–AB17 

Application Procedures and Criteria for 

Approval of Nonprofit Budget and 

Credit Counseling Agencies by United 

States Trustees 

AGENCY: Executive Office for United 

States Trustees (‘‘EOUST’’), Justice. 

ACTION: Final rule. 

SUMMARY: This final rule (‘‘rule’’) sets 

forth procedures and criteria United 

States Trustees shall use when 

determining whether applicants seeking 

to become and remain approved 

nonprofit budget and credit counseling 

agencies (‘‘credit counseling agencies’’ 

or ‘‘agencies’’) satisfy all prerequisites of 

the United States Code, as implemented 

under this rule. Under the current law, 

an individual may not be a debtor under 

title 11 of the United States Code, unless 

during the 180-day period preceding the 

date of filing a bankruptcy petition, the 

individual receives adequate counseling 

from a credit counseling agency that is 

approved by the United States Trustee. 

The current law enumerates mandatory 

prerequisites and minimum standards 

applicants seeking to become approved 

credit counseling agencies must meet. 

Under this rule, United States Trustees 

will approve applicants for inclusion on 

publicly available agency lists in one or 

more federal judicial districts if an 

applicant establishes it meets all the 

requirements of the United States Code, 

as implemented under this rule. After 

obtaining such approval, a credit 

counseling agency shall be authorized to 

provide credit counseling in a federal 

judicial district during the time the 

agency remains approved. 

EOUST intends to add to its 

regulations governing credit counseling 

agencies, two new provisions not 

previously included in the proposed 

rule on this subject. A new section 

58.17(c)(11) will require agencies to 

notify the United States Trustee of 

certain actions pursuant to 11 U.S.C. 

111(g)(2) or other consumer protection 

statutes, such as an entry of judgment or 

mediation award, or the agency’s entry 

into a settlement order, consent decree, 

or assurance of voluntary compliance. 

The second provision will amend 

section 58.20(j) to require an agency to 

assist an individual with limited 

English proficiency by expeditiously 

directing the individual to an agency 

that can provide counseling in the 

language of the individual’s choice. 

Because these provisions were not 

discussed in the proposed rule 

published on February 1, 2008, EOUST 

will publish another Notice of Proposed 

Rulemaking requesting public comment 

with respect to these two provisions. 

DATES: Effective Date: This rule is 

effective April 15, 2013. 

ADDRESSES: EOUST, 441 G Street NW., 

Suite 6150, Washington, DC 20530. 

FOR FURTHER INFORMATION CONTACT: 

Doreen Solomon, Assistant Director for 

Oversight on (202) 307–2829 (not a tollfree number), Wendy Tien, Deputy 

Assistant Director for Oversight on (202) 

307–3698 (not a toll-free number), or 

Larry Wahlquist, Office of the General 

Counsel on (202) 307–1399 (not a tollfree number). 

SUPPLEMENTARY INFORMATION: On July 5, 

2006, EOUST published an interim final 

rule entitled Application Procedures 

and Criteria for Approval of Nonprofit 

Budget and Credit Counseling Agencies 

and Approval of Providers of a Personal 

Financial Management Instructional 

Course by United States Trustees 

(‘‘Interim Final Rule’’). 71 FR 38,076 

(July 5, 2006). Due to the necessity of 

quickly establishing a regulation to 

govern the credit counseling application 

process, EOUST promulgated the 

Interim Final Rule rather than a notice 

of proposed rulemaking (‘‘proposed 

rule’’). On February 1, 2008, at 73 FR 

6,062, EOUST published a proposed 

rule on this topic in an effort to 

maximize public input, rather than 

publishing a final rule after publication 

of the Interim Final Rule. Before the 

comment period closed on April 1, 

2008, EOUST received forty seven 

comments. The comments received and 

EOUST’s responses are discussed 

below. This rule finalizes the proposed 

rule with changes that, in some cases, 

reduce the burden on credit counseling 

agencies while maintaining adequate 

protections for consumers. 

This rule implements the credit 

counseling sections of the Bankruptcy 

Abuse Prevention and Consumer 

Protection Act of 2005 (‘‘BAPCPA’’), 

Public Law 109–8, 119 Stat. 23, 37, 38 

(April 20, 2005), which are codified at 

11 U.S.C. 109(h) and 111. Effective 

October 17, 2005, an individual may not 

be a debtor under title 11 of the United 

States Code unless during the 180-day 

period preceding the date of filing a 

bankruptcy petition, the individual 


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Federal Register / Vol. 78, No. 50 / Thursday, March 14, 2013 / Rules and Regulations 16139 

receives adequate counseling from an 

approved credit counseling agency. 11 

U.S.C. 109(h)(1) and 111; see also H.R. 

Rep. 109–31, pt. 1 at 2 (providing that 

the Bankruptcy Code ‘‘requires debtors 

to receive credit counseling before they 

can be eligible for bankruptcy relief so 

that they will make an informed choice 

about bankruptcy, its alternatives, and 

consequences’’). 

Section 111(b) of title 11, United 

States Code, governs the approval by 

United States Trustees of credit 

counseling agencies for inclusion under 

11 U.S.C. 111(a)(1) on publicly available 

agency lists in one or more United 

States district courts. Section 111 of title 

11 provides that, in applicable 

jurisdictions, a United States Trustee 

may approve an application to become 

an approved credit counseling agency 

only after the United States Trustee has 

thoroughly reviewed the applicant’s (a) 

qualifications, and (b) services. 11 

U.S.C. 111(b)(1). A United States 

Trustee has statutory authority to 

require an applicant to provide 

information with respect to such review. 

Id. EOUST reserves the right to publish 

on its public Web site non-confidential 

business information relating to credit 

counseling agencies, including contact 

information, counseling services 

provided, language support services 

offered, and fees charged for services. 

After completing that thorough 

review, a United States Trustee may 

approve a credit counseling agency only 

if the agency establishes that it fully 

satisfies all requisite standards. 11 

U.S.C. 111(b). Among other things, an 

applicant must establish it will (a) 

provide qualified counselors, (b) 

maintain adequate provision for 

safekeeping and payment of client 

funds, (c) provide adequate counseling 

with respect to client credit problems, 

and (d) deal responsibly and effectively 

with other matters relating to the 

quality, effectiveness, and financial 

security of the services it provides. 11 

U.S.C. 111(c)(1). 

This rule will implement those 

statutory requirements. By doing so, the 

rule will help clients obtain adequate 

counseling from competent credit 

counseling agencies, and help safeguard 

their funds. It also will provide an 

appropriate mechanism by which 

entities can apply under section 111 of 

title 11 to become approved credit 

counseling agencies, and will enable 

such applicants to attempt to meet their 

burden of establishing that they should 

be approved by United States Trustees 

under 11 U.S.C. 111. 

Summary of Changes in Final Rule 

The final rule modifies the proposed 

rule by making it: (1) Less burdensome 

on credit counseling agencies; and (2) 

by providing technical or clarifying 

modifications. The modifications are 

summarized according to their 

classification below. A parenthetical 

reference to the regulatory text has been 

added to assist the reader in locating the 

relevant provisions of the rule. In 

addition, where applicable, a reference 

to the comment providing a more 

detailed explanation of these changes is 

included: 

Modifications To Make the Final Rule 

Less Burdensome on Credit Counseling 

Agencies 

• The definition of ‘‘material change’’ 

has been revised to eliminate staff other 

than the management or counselors of 

an agency (§ 58.12(b)(27)—comment # 

B9). 

• An agency is not required to 

negotiate an alternative payment 

schedule with creditors regarding 

unsecured consumer debt as provided 

in 11 U.S.C. 502(k). Instead, if an agency 

does not provide this service, the agency 

shall disclose that it may refer clients to 

other approved agencies that do provide 

this service, and that clients may incur 

additional fees in connection with such 

referrals (§ 58.20(l)(9)—comment # B24). 

• An agency may disclose to clients 

and potential clients that, to the extent 

it is approved as a provider of a 

personal financial management 

instructional course pursuant to 11 

U.S.C. 111(d), the United States Trustee 

has reviewed those debtor education 

services (§ 58.20(l)(11)—comment # 

B23). 

• The reference to ‘‘any applicable 

law’’ in the prohibition that an agency 

take no action to limit clients from 

bringing claims against the agency as 

provided in 11 U.S.C. 111(g)(2) has been 

deleted (§ 58.20(p)(6)—comment # B27). 

• The rule has been revised to add a 

rebuttable presumption that a client 

lacks the ability to pay the counseling 

fee if the client’s current household 

income is less than 150 percent of the 

poverty guidelines updated periodically 

in the Federal Register by the U.S. 

Department of Health and Human 

Services under the authority of 42 

U.S.C. 9902(2), as adjusted from time to 

time, for a household or family of the 

size involved in the fee determination 

(§ 58.21(b)(1)—comment # B31). 

• The United States Trustee is 

required to review the basis for the 

mandatory fee waiver policy one year 

after the effective date of the rule, and 

then periodically, but not less 

frequently than every four years 

(§ 58.21(b)(2)—comment # B31). 

• The requirement that, for an agency 

to send a credit counseling certificate to 

a client’s attorney, the client must make 

the request in writing to the agency has 

been deleted (§ 58.22(a)—comment # 

B32). 

• The rule has been revised to delete 

the requirement that agencies attach a 

budget analysis to the credit counseling 

certificate (§ 58.22(b)—comment # B34). 

• The requirement that an agency 

provide original signatures on 

certificates, in recognition of electronic 

filing in the bankruptcy courts and the 

technology used to generate certificates, 

has been deleted (§ 58.22(l)(2)— 

comment # B35). 

• The rule has been amended to set 

forth new procedures for approved 

agencies that cease to offer debt 

repayment plan (DRP) services to new 

clients. This amendment reduces the 

burden on approved agencies that make 

the business decision to cease offering 

DRP services to new clients, but 

continue to provide services to existing 

clients by enabling them to decrease 

their bonding and insurance 

requirements. In other words, an agency 

must continue to meet the rule’s current 

bonding and insurance requirements 

with respect to existing plans only. An 

approved agency that neither offers DRP 

services to new clients nor continues to 

service existing plans, having 

transferred those plans to other agencies 

or obtained a waiver from EOUST 

pursuant to the rule (as set forth in 

§ 58.23(f)), is not subject to the bonding 

and insurance requirements (§ 58.23(d), 

(f)—comment # B40). 

Technical or Clarifying Modifications 

• The definition of ‘‘client’’ has been 

revised to mean an individual who both 

seeks and receives counseling services 

from an approved agency, rather than an 

individual who only seeks but does not 

receive such services (§ 58.12(b)(11)— 

comment # B4). 

• The definition of ‘‘criminal 

background check’’ has been revised to 

require an agency to obtain background 

checks for a counselor in each state 

where the counselor has resided or 

worked during the preceding five years 

(§ 58.12(b)(14)—comment # B25). 

• The definition of ‘‘limited English 

proficiency’’ has been revised to be 

consistent with that used by the Civil 

Rights Division of the Department of 

Justice (§ 58.12(b)(26)—comment # B8). 

• The definition of ‘‘material change’’ 

has been amended to include a change 

in language services provided by the 

agency. Agencies are already required to 

inform the United States Trustee of the 


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16140 Federal Register / Vol. 78, No. 50 / Thursday, March 14, 2013 / Rules and Regulations 

languages they provide when applying 

for approval. This clarification 

emphasizes the importance of notifying 

the United States Trustee whenever an 

agency adds or removes a language from 

its available services (§ 58.12(b)(27)). 

• A new definition, ‘‘potential 

client,’’ has been added to describe an 

individual who seeks, but does not 

receive, counseling services from an 

approved agency (§ 58.12(b)(31)— 

comment # B12). 

• The rule has been amended to 

clarify that when disclosing its fee 

policy, an agency must disclose its 

policy, if any, concerning fees 

associated with generating a credit 

counseling certificate prior to rendering 

any counseling services (§ 58.20(l)(1)— 

comment # B22). 

• The rule has been amended to 

clarify that the requirement that an 

agency disclose its policy on fees prior 

to offering services includes Internet 

based credit counseling. In other words, 

an agency that publishes information on 

the Internet concerning its fees must 

include its policy enabling clients to 

obtain counseling for free or at reduced 

rates based upon the client’s lack of 

ability to pay. This is not an additional 

burden on agencies as the proposed rule 

requires agencies to disclose their fee 

polices prior to providing services; the 

final rule makes it clear that this 

requirement includes Internet based 

credit counseling (§ 58.20(l)(2)). 

• The rule has been amended to 

clarify that an agency’s duty to disclose 

its fee policy before providing 

counseling services includes disclosing 

the agency’s policy to provide free 

bilingual instruction to any limited 

English proficient client. This is not an 

additional burden on agencies as the 

proposed rule requires agencies to 

disclose their fee polices prior to 

providing services; the final rule makes 

it clear that this requirement includes 

disclosing agencies’ fee policies 

regarding services for limited English 

proficient individuals (§ 58.20(l)(3)). 

• The rule has been amended to 

clarify that an agency’s duty to maintain 

records regarding limited English 

proficiency individuals includes 

maintaining records regarding the 

methods of delivery of counseling 

services, the types of languages and 

methods of delivery requested by clients 

and potential clients, the number of 

clients served, and the number of 

referrals made to other agencies. 

Because the proposed rule already 

requires agencies to maintain records 

regarding the delivery of services to 

limited English proficiency individuals, 

this is not an additional burden in the 

final rule. Rather, the final rule makes 

clearer what is expected of agencies in 

terms of record-keeping for limited 

English proficient individuals 

(§ 58.20(o)(5)). 

• The rule has been amended to 

clarify that Internet and automated 

telephone counseling are not complete 

until the client has engaged in 

interaction with a counselor following 

the automated portion of the counseling 

(§ 58.22(a)—comment # B33). 

• The rule has been amended to 

clarify that certificates must bear not 

only the date, but also the time and the 

time zone when counseling services 

were completed by the client 

(§ 58.22(n)(3)—comment # B36). 

• The rule has been amended to 

correct non-substantive stylistic, 

numbering and typographical errors. 

Discussion of Public Comments 

EOUST received forty seven 

comments on the proposed rule. Many 

of the comments contained several subcomments. EOUST appreciates the 

comments and has considered each 

comment carefully. EOUST’s responses 

to the comments are discussed below, 

either in the ‘‘General Comments’’ 

section or in the ‘‘Section-by-Section 

Analysis.’’ 

A. General Comments 

1. Cost of the Rule to Credit Counseling 

Agencies 

Comment: EOUST received several 

comments that the rule will make it 

more expensive for credit counseling 

agencies to operate and that they will 

pass the costs on to clients. 

Response: EOUST recognizes that the 

rule may cause agencies to incur 

additional costs, but those costs are 

minimal. Additionally, the extra costs 

for such measures as procedures to 

verify a debtor’s identity, the 

requirement that agencies provide 

additional counseling after completion 

or termination of a debt repayment plan 

at no additional cost to the debtor, and 

mandatory disclosure of the agency’s fee 

policy, are sufficiently important to 

protect consumers to warrant the extra 

costs to the agency. 

2. Mandatory Nature of Credit 

Counseling 

Comment: EOUST received one 

comment that credit counseling should 

not be mandatory. 

Response: Pursuant to the BAPCPA, 

Congress specifically requires 

individual debtors to complete credit 

counseling before filing bankruptcy. 

This requirement is codified at 11 

U.S.C. 109(h). EOUST does not have the 

authority to waive this statutory 

requirement. 

3. Micro-Management of Agency’s Dayto-Day Operations 

Comment: One comment stated that 

the power to ensure a credit counseling 

agency’s compliance with the statute 

and regulations should not become a 

micro-management of the agency’s dayto-day operations. 

Response: EOUST concludes that the 

rule obtains the appropriate balance 

between ensuring compliance with the 

law and preserving a credit counseling 

agency’s operational autonomy. 

4. Preemption 

Comment: One comment noted that 

the rule omits language stating that 

nothing in the rule preempts state law, 

and requested that such preemption 

language be restored. 

Response: The omission of the 

preemption language does not constitute 

an expression, from the standpoint of 

EOUST, that the rule preempts state law 

to the extent of any conflict between the 

rule and state law. No inference should 

be drawn from the omission. 

B. Comments on Specific Subsections of 

the Proposed Rule 

1. Use of the Terms Accreditation and 

Certification [§ 58.12(b)(1), (b)(2) and 

(b)(13)] 

Comment: EOUST received two 

comments that the rule erroneously uses 

the terms accreditation and certification 

interchangeably, when accreditation 

refers to organizations and certification 

refers to individuals. 

Response: EOUST has reviewed the 

rule carefully and found no instances 

where accreditation was used to refer to 

individuals and certification was used 

to refer to organizations. In a few 

instances, an agency representative 

must sign a certification attesting to a 

particular fact or facts; these instances, 

however, do not use the term 

erroneously. 

2. Definition of Adequate Counseling— 

Repayment Plans [§ 58.12(b)(3)] 

Comment: One comment stated that 

the definition for adequate counseling 

should be revised to ensure counseling 

includes offering repayment plans when 

clients qualify. 

Response: This change is 

unnecessary. The definition of 

‘‘adequate counseling’’ includes 

counseling services, which explicitly 

provide consumers the opportunity to 

participate in repayment plans. 

3. Adequate Counseling—Alternatives 

to Bankruptcy [§ 58.12(b)(3)] 

Comment: One comment 

recommended adequate counseling be 


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Federal Register / Vol. 78, No. 50 / Thursday, March 14, 2013 / Rules and Regulations 16141 

revised to require counselors to detail 

the nature of alternatives to bankruptcy 

if they exist. 

Response: This change is 

unnecessary. The definition of 

‘‘adequate counseling’’ includes 

counseling services, which requires 

counselors to explain, among other 

things, all reasonable alternatives to 

resolve a client’s credit problems. 

Alternatives to bankruptcy should be 

discussed with clients as a matter of 

course. 

4. Definition of Client [§ 58.12(b)(11)] 

Comment: One comment stated that 

the definition of ‘‘client’’ is too broad, 

and should not include a person who 

merely inquires about services. 

Response: EOUST concurs and has 

adopted this technical modification by 

revising the definition of ‘‘client’’ to 

include only individuals who both seek 

and receive services from an approved 

credit counseling agency. The term 

‘‘client’’ does not include ‘‘potential 

clients,’’ who are defined separately as 

those who seek, but do not receive, 

counseling services from an approved 

agency. An individual may be both a 

client of the agency from which he or 

she seeks and ultimately receives 

counseling services, and a potential 

client of other agencies from whom he 

or she seeks, but ultimately does not 

receive, counseling services. 

5. Definition of Counseling Services— 

Generally [§ 58.12(b)(12)] 

Comment: Several comments objected 

to the proposed rule’s definition of 

‘‘counseling services’’ to the extent it 

individualizes the services, asserting 

that these requirements exceed the 

scope of the prepetition briefing 

requirements in 11 U.S.C. 109(h). The 

comments argued that 11 U.S.C. 109(h) 

mandates only a group briefing 

outlining opportunities for available 

credit counseling and does not require 

individuals to obtain counseling per se. 

They urged that EOUST narrow the 

definition of ‘‘counseling services’’ to 

parallel the statutory requirements 

imposed by 11 U.S.C. 109(h). 

Response: Upon review of 11 U.S.C. 

109(h) and 111(c), the purposes 

underlying the BAPCPA, and the 

relevant case law, EOUST has 

determined that the ‘‘briefing’’ 

described in 11 U.S.C. 109(h) and the 

credit counseling described in the 

proposed rule are synonymous. 

Accordingly, EOUST declines to amend 

the proposed rule to limit the definition 

of ‘‘counseling services’’ to exclude 

credit counseling sessions. Furthermore, 

EOUST has determined that, for 11 

U.S.C. 109(h) to be consistent with 11 

U.S.C. 111(c), counseling services must 

address the individual client’s financial 

circumstances. Section 111(c)(2)(E) 

requires ‘‘adequate counseling with 

respect to a client’s credit problems that 

includes an analysis of such client’s 

current financial condition, factors that 

caused such financial condition, and 

how such a client can develop a plan to 

respond to the problems without 

incurring negative amortization of 

debt.’’ 11 U.S.C. 111(c)(2)(E). 

Accordingly, the proposed rule’s 

requirement that ‘‘counseling services’’ 

include a written analysis of each 

client’s current financial condition is 

consistent with the statutory mandate. 

EOUST does not require that such 

analysis take any particular written 

form; for example, the agency may 

convey the written analysis via 

electronic mail. 

To the extent 11 U.S.C. 109(h) 

authorizes ‘‘group’’ briefings, EOUST 

interprets the statute to permit couples 

to attend credit counseling sessions 

jointly. This interpretation is consistent 

with 11 U.S.C. 111(c) and 

accommodates spouses who intend to 

file joint petitions. Furthermore, EOUST 

permits group credit counseling 

sessions by telephone, provided that 

each individual client also receives 

adequate individualized counseling 

with respect to his or her credit 

problems, including an analysis of such 

client’s current financial condition, the 

factors that caused such financial 

condition, and how such a client can 

develop a plan to respond to the 

problems without incurring negative 

amortization of debt, consistent with the 

requirements of 11 U.S.C. 111(c)(2)(E). 

6. Definition of Counseling Services— 

Length of Time [§ 58.12(b)(12)] 

Comment: EOUST received several 

comments that a minimum length 

requirement of 60 minutes for a credit 

counseling session is too long, that such 

a minimum length requirement will 

increase costs, and that EOUST lacks 

the authority to specify a minimum 

length of time for a counseling session. 

Response: The rule does not require 

all counseling sessions to last 60 

minutes. Section 58.12(b)(12) states the 

counseling services ‘‘are typically of at 

least 60 minutes in duration.’’ This 

requirement means that most counseling 

sessions should last approximately 60 

minutes, but that, in some instances, 

less or more time may be appropriate. 

7. Definition of Counseling Services— 

Written Analysis [§ 58.12(b)(12)] 

Comment: EOUST received one 

comment that a written analysis should 

not be required and that electronic or 

verbal analysis should be sufficient. 

Response: Written analysis is 

necessary to protect consumers and to 

verify that the agency provided a 

substantive analysis of the consumer’s 

financial situation. The agency may 

provide the client this analysis via 

email, but it must be written. 

8. Definition of Limited English 

Proficiency [§ 58.12(b)(26)] 

Comment: EOUST received one 

comment seeking revision of this 

definition to clarify its meaning. 

Response: EOUST concurs that a 

technical modification is necessary and 

has revised the definition of the term to 

match that used by the Civil Rights 

Division of the Department of Justice, as 

set forth in Notice, Guidance to Federal 

Financial Assistance Recipients 

Regarding Title VI, Prohibition Against 

National Origin Discrimination 

Affecting Limited English Proficient 

Persons, 67 FR 41,455 (June 18, 2002). 

Though the wording is slightly different, 

the meaning of limited English 

proficiency is essentially the same, i.e. 

individuals who do not speak English as 

their primary language or who have 

difficulty understanding English. 

9. Definition of Material Change 

[§ 58.12(b)(27)] 

Comment: One comment stated that 

staff changes should be deleted from the 

definition of material change since the 

requirement is unnecessarily 

burdensome. 

Response: EOUST agrees that this 

requirement may be overly burdensome. 

Not every change in staff requires 

EOUST notification. The purpose of this 

requirement is to ensure that EOUST 

remains aware of changes in key 

personnel. Because the definition of 

‘‘material change’’ already specifies 

notification for changes in management, 

the rule has been modified to change 

‘‘staff’’ to ‘‘counselors’’ and thereby 

reduce the burden on credit counseling 

agencies. 

10. Definition of Median Family Income 

Comment: One comment noted that 

the rule defines the term ‘‘median 

family income,’’ but then does not use 

it in the rule. 

Response: EOUST has deleted the 

definition of median family income 

from the rule. 

11. Definition of Nonprofit 

[§ 58.12(b)(29)] 

Comment: EOUST received one 

comment suggesting that the definition 

of ‘‘nonprofit’’ require that the credit 

counseling agency has been approved 


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16142 Federal Register / Vol. 78, No. 50 / Thursday, March 14, 2013 / Rules and Regulations 

by the IRS for tax purposes under 

section 501(c)(3) of the Internal Revenue 

Code. 

Response: 11 U.S.C. 111 requires a 

credit counseling agency to be organized 

as a nonprofit entity, but does not 

require tax exempt status. Organization 

as a nonprofit entity is a matter of state 

law, and nonprofit organizations do not 

necessarily qualify for 501(c)(3) taxexempt status, which is a matter of 

federal law. When determining whether 

an agency constitutes a nonprofit entity, 

EOUST takes into consideration 

whether an agency has been approved 

or rejected for 501(c)(3) status, and 

requires an agency to notify EOUST if 

501(c)(3) status is revoked, but taxexempt status is not required under the 

statute to operate as a nonprofit entity. 

12. Definition of Potential Client 

[§ 58.12(b)(31)] 

Comment: One comment stated that 

the rule refers to the term ‘‘potential 

client’’ numerous times, but does not 

define the term. 

Response: EOUST concurs that a 

technical modification is necessary and 

has added a definition of ‘‘potential 

client’’ in the final rule. A ‘‘potential 

client’’ is an individual who seeks, but 

does not receive, counseling services 

from an approved agency. An individual 

may be both a client of the agency from 

which he or she seeks and ultimately 

receives counseling services, and a 

potential client of other agencies from 

whom he or she seeks, but ultimately 

does not receive, counseling services. 

13. Definition of Referral Fees 

[§ 58.12(b)(33)] 

Comment: One comment stated that 

the definition of referral fees contains a 

loophole that would allow an entity to 

charge a referral fee merely by calling it 

something else. 

Response: EOUST has deleted the 

definition of ‘‘locator,’’ eliminating any 

concerns that a loophole exists in the 

definition of referral fees. The revised 

definition of ‘‘referral fees’’ prohibits the 

transfer or passage of any money or 

other consideration between an agency 

and another entity as consideration or in 

exchange for the referral of clients for 

counseling services. The sole exception 

is for fees paid under a fair share 

agreement, as defined elsewhere in the 

rule. 

14. Disclosure of Revocation of 501(c)(3) 

Status [§§ 58.17(c), 58.24(c)(3) and (d)] 

Comment: EOUST received several 

comments that an agency should not 

have to disclose to EOUST when the IRS 

revokes its tax-exempt status because 

the statute does not require tax-exempt 

status. Accordingly, revocation does not 

bear on the credit counseling agency’s 

qualifications as an approved credit 

counseling agency. 

Response: The review process to 

ensure the approval of only qualified 

nonprofit credit counseling agencies 

requires consideration of changes in an 

agency’s 501(c)(3) status. While it is true 

that tax-exempt status is not required for 

approval, any revocation of that status is 

relevant in determining an agency’s 

initial or ongoing qualifications and 

fitness for approval. In particular, if the 

IRS revoked an agency’s nonprofit status 

due to a determination that the agency 

is operating for profit, such a 

determination may disqualify the 

agency. Accordingly, revocation of an 

agency’s 501(c)(3) tax-exempt status, 

though not dispositive, may bear on the 

agency’s qualification and fitness for 

approval by the United States Trustee. 

15. Prohibition on Legal Advice 

[§§ 58.12(b)(25), 58.20(b)] 

Comment: Several comments 

expressed concern about the rule’s 

reference to 11 U.S.C. 110(e)(2) when 

defining legal advice. Some of the 

comments stated that 11 U.S.C. 

110(e)(2)’s definition of legal advice is 

overly broad when applied to credit 

counselors because it includes 

bankruptcy procedures and rights. 

Because counselors are expected to 

explain the basic principles of 

bankruptcy to clients in the course of 

providing counseling services, the 

comments expressed concern that the 

very act of counseling could cause 

counselors to give ‘‘legal advice’’ in 

violation of the rule’s prohibition. 

Another comment supported an 

absolute ban on the provision of legal 

advice by counselors. 

Response: Because of the differences 

among the states concerning the 

definition of the unauthorized practice 

of law, and the resulting difficulty in 

defining ‘‘legal advice,’’ EOUST 

concluded the most appropriate 

approach is to adopt the definition 

Congress provided in 11 U.S.C. 

110(e)(2). EOUST is sensitive to the 

concern that a counselor’s explanation 

of bankruptcy principles to clients may 

be considered ‘‘legal advice,’’ but 

interprets 11 U.S.C. 110(e)(2) to mean 

that counselors shall not advise clients 

concerning the application of 

bankruptcy laws, principles, or 

procedures to a particular individual’s 

circumstances, may not recommend that 

a particular individual should proceed 

in bankruptcy, and may not describe 

how bankruptcy laws, principles, or 

procedures would affect a particular 

individual’s case in the event of a 

bankruptcy filing. Rather, the counselor 

may explain basic bankruptcy 

principles and how such procedures are 

applied generally. 

16. Board Directors [§ 58.20(c) and (d)] 

Comment: EOUST received one 

comment that board directors should 

not be classified as debt relief agencies. 

EOUST also received one comment that 

attorneys who practice bankruptcy law 

or whose firms practice bankruptcy law 

should not be allowed to serve as 

directors or officers of a credit 

counseling agency. 

Response: Board directors, as such, 

are not classified as debt relief agencies 

unless they meet the definition of debt 

relief agencies in 11 U.S.C. 101(12A). 

Furthermore, so long as attorneys meet 

the requirements of 11 U.S.C. § 111 and 

this rule, which require directors, 

officers and board members to be 

independent and not to receive any 

remuneration based on the credit 

counseling services performed by the 

agency, EOUST declines to adopt a 

blanket rule prohibiting attorneys who 

practice bankruptcy from serving in 

positions of authority in a credit 

counseling agency. 

17. Counselor Qualifications [§ 58.20(f)] 

Comment: One comment supported 

the rule’s requirements concerning 

counselor qualifications and another 

comment expressed the opinion that the 

requirements need to be strengthened. 

Yet another comment stated the rule 

failed to allow for a training period for 

inexperienced counselors. 

Response: The counselor qualification 

requirements are meant to ensure that 

counselors possess sufficient expertise 

in financial matters to provide 

substantive counseling to consumers. 

Accordingly, inexperienced counselors 

either must complete a financial course 

of study or must work a minimum of six 

months in a related area to ensure they 

are qualified to act as counselors. Based 

upon experience administering the 

Interim Final Rule and its interactions 

with agencies, EOUST concluded the 

requirements enunciated in this rule are 

sufficient to ensure that counselors will 

be qualified to counsel consumers. 

18. Verification of Identity [§ 58.20(h)] 

Comment: EOUST received two 

comments concerning identity 

verification. One expressed the opinion 

that verification of client identity in the 

context of Internet and telephone 

counseling is impossible, and another 

questioned why no comparable 

verification is required for in-person 

counseling. 


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Response: Establishing an 

individual’s identity in the context of 

telephone and Internet counseling may 

pose difficulties. This does not, 

however, obviate identity verification 

requirements. Indeed, many agencies 

already have implemented effective 

identity verification procedures. For inperson counseling, an individual may 

present his or her driver’s license, or 

similar photo identification, to establish 

his or her identity. Because the 

counselor is physically present and can 

confirm that the photo in the driver’s 

license matches the client, this 

identification procedure is sufficient for 

in-person counseling. In the case of 

Internet and telephone counseling the 

individual is not in the counselor’s 

physical presence and additional 

measures are necessary to confirm the 

individual’s identity. 

19. Toll-Free Telephone Numbers 

[§ 58.20(i)] 

Comment: One comment stated that 

credit counseling agencies should not be 

required to provide toll-free telephone 

numbers to all callers. 

Response: Telephone counseling 

commonly lasts 60 to 90 minutes. For 

individuals experiencing financial 

difficulties, the cost of such a phone call 

may constitute an undue burden. This 

cost should be borne by the credit 

counseling agency, which can spread 

the cost among many different clients. 

20. Special Needs [§ 58.20(k)] 

Comment: One comment stated that 

‘‘special needs’’ should be a defined 

term. 

Response: The term ‘‘special needs’’ is 

in the public vernacular and commonly 

refers to people with disabilities. No 

further clarification is necessary. 

21. Disclosures—Debt Repayment Plans 

(DRPs) [§ 58.20(l)] 

Comment: EOUST received one 

comment that credit counseling 

agencies should disclose the percentage 

of all clients participating in DRPs, and 

the percentage of clients who complete 

DRPs. 

Response: Credit counseling agencies 

currently are required to report to 

EOUST the number of clients enrolled 

in a DRP and the number of clients who 

completed a DRP in Appendix E to the 

credit counseling application. This 

appendix must be submitted to EOUST 

twice a year. 

22. Disclosures—Additional Fees 

[§ 58.20(l)(1)] 

Comment: EOUST received one 

comment requesting clarification of the 

requirement that, when an agency 

charges a separate fee for the certificate 

in addition to counseling, the client 

must consent in writing. The comment 

sought clarification in the case of 

telephone and Internet counseling, and 

suggested that clients be able to consent 

verbally or electronically in such cases. 

Response: EOUST concludes that the 

rule should not have specific 

instructions for circumstances that arise 

infrequently as most agencies do not 

charge a separate fee for the issuance of 

the certificate. Accordingly, the rule has 

been amended to strike the specific and 

additional instructions for credit 

counseling agencies that charge separate 

fees for certificates (§ 58.22(g) of the 

proposed rule). Instead, the final rule 

requires the general disclosures to 

include disclosure of all fees, including 

any additional fees for certificates. This 

is not an additional burden on agencies 

as the proposed rule, and Interim Final 

Rule, already require agencies to 

disclose their fee policy before 

rendering services. 

23. Mandatory Disclosures [§ 58.20(l)] 

Comment: EOUST received two 

comments concerning the number of 

mandatory disclosures. One comment 

stated that the number of mandatory 

disclosures is excessive and should be 

reduced to avoid confusing clients; the 

comment suggested deleting paragraphs 

58.20(l)(4), (5), and (7) as unnecessary, 

and allowing mandatory disclosures 

made pursuant to paragraphs (6), (8), 

and (12) to be given during the 

counseling session rather than before. 

Another comment, however, 

recommended adding complaint 

procedures. 

EOUST also received a comment 

recommending that, to the extent a 

credit counseling agency is also 

approved as a provider of a personal 

financial management instructional 

course pursuant to 11 U.S.C. 111(d), the 

agency be able to state that the United 

States Trustee has reviewed those 

services. 

Response: While there are a number 

of disclosures, they are necessary to 

protect consumers. Section 111(c)(2)(D) 

requires the inclusion of paragraphs (4), 

(5) and (6). 11 U.S.C. 111(c)(2)(D). 

Paragraph (7) alerts consumers that 

agencies do not accept or give referral 

fees to increase consumer confidence in 

the integrity of the credit counseling 

industry. Paragraphs (8) and (12) inform 

consumers that the agency must provide 

a certificate promptly, and that a 

certificate will be provided only if the 

individual completes the credit 

counseling. This disclosure is 

particularly important to eliminate 

misunderstandings between the agency 

and client, and to make clear to clients 

that they must complete credit 

counseling before receiving a credit 

counseling certificate. 

Though the proposed rule did not 

prohibit agencies from informing 

consumers that they were also, where 

applicable, approved debtor education 

providers, the rule did not expressly 

allow it. To reduce a restriction on 

agencies, paragraph (l)(11) has been 

revised to permit a credit counseling 

agency to disclose that, to the extent 

that an agency is also approved as a 

provider of a personal financial 

management instructional course 

pursuant to 11 U.S.C. 111(d), the United 

States Trustee has reviewed those 

debtor education services. 

Credit counseling agencies already are 

obligated to develop complaint 

procedures. Requiring disclosure of 

such procedures before providing 

services is not necessary, especially 

since additional disclosures could 

dilute the effectiveness of those already 

required. 

24. Section 502(k) [§ 58.20(l)(9)] 

Comment: Several comments objected 

to the requirement that agencies provide 

each client the opportunity to have the 

agency negotiate an alternative payment 

schedule as contemplated in 11 U.S.C. 

502(k). The comments stated that this is 

often unnecessary, will increase costs, 

and will possibly subject the agencies to 

additional state regulation. 

Response: EOUST concurs and has 

modified the rule to reduce the burden 

on agencies. Sections 109, 111, and 

502(k) do not confer upon debtors the 

absolute right to negotiate alternative 

repayment schedules with creditors, nor 

do they require agencies to negotiate 

alternative payment schedules on behalf 

of clients. Agencies who, in their 

business discretion, decide not to 

provide this service and wish to refer 

clients to another agency for negotiation 

of alternative payment schedules must 

refer clients to other approved agencies 

that provide the service. Accordingly, 

the rule has been revised to eliminate 

the requirement that agencies offer this 

service and instead requires agencies to 

disclose whether or not they provide 

this service and any additional fees 

clients may incur upon referral to 

another approved agency. 

25. Background Checks [§ 58.20(n)] 

Comment: EOUST received several 

comments concerning background 

checks. One comment stated that 

agencies should be able to choose 

between state and federal criminal 

background checks for counselors due 

to cost. Another comment stated the FBI 


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background check should encompass 

the counselor’s entire criminal history, 

and, where only the state background 

check is available, the background 

check should encompass all states 

where the counselor lived during the 

preceding two years, rather than the 

past five years. Two comments 

recommended that EOUST require 

criminal background checks of all 

employees. 

Response: EOUST recognizes that 

agencies incur costs associated with 

conducting background checks. The cost 

of complying with the background 

check requirement, however, is 

warranted because counselors are privy 

to clients’ private financial information, 

and, in some cases, handle client funds. 

A five-year state history, encompassing 

all states where the counselor has 

resided or worked, as opposed to a twoyear history, is necessary to ensure that 

the counselor has not committed any 

crimes involving fraud, dishonesty, or 

false statements within the recent past. 

Investigation of the preceding two years 

is insufficient to ensure an individual 

qualifies as a counselor. The final rule 

clarifies the proposed rule’s five-year 

background check requirement to mean 

agencies should conduct a state 

background check for each state in 

which a counselor has either lived or 

worked during the preceding five years. 

However, EOUST declines to require 

criminal background checks of all 

employees. Such a requirement would 

place an undue burden on agencies and 

is unwarranted for employees, such as 

clerical and janitorial staff, who have no 

substantive contact with consumers or 

client funds. Furthermore, the final 

rule’s background check is designed to 

strike an appropriate balance ensuring 

consumers are protected without 

imposing too high a burden on 

individuals attempting to reintegrate 

into society. See Letter from Eric H. 

Holder, Jr., Att’y Gen., Dep’t of Justice, 

to State Attorneys General (Apr. 18, 

2011) (concerning collateral 

consequences of criminal convictions) 

(on file with the Department of Justice, 

Civil Rights Division). Maintaining this 

balance, section 58.20(n)(2) of this rule 

generally prohibits credit counseling 

agencies from employing as a counselor 

a person who has been convicted of a 

felony or crime of dishonesty, but 

allows for waiver of this prohibition by 

the United States Trustee if 

circumstances warrant a waiver. Written 

requests for waivers of this prohibition 

should be directed to the EOUST. 

26. Recordkeeping Requirements 

[§ 58.20(o)] 

Comment: EOUST received several 

comments concerning recordkeeping 

requirements. A number of comments 

sought to limit the recordkeeping 

requirements to actual clients only, as 

opposed to actual and potential clients; 

in addition, one comment sought to 

reduce the retention period for hard 

copies of signed certificates from the 

two years set forth in the rule to 180 

days. 

Response: Certain recordkeeping 

requirements, such as the requirement 

to maintain records concerning the 

numbers of potential clients who seek 

counseling in languages other than 

English, are necessary to advance the 

underlying purpose of the statute and to 

assist the EOUST in ensuring that 

counseling services are available to the 

broadest range of consumers. 

Accordingly, the final rule retains most 

recordkeeping requirements regarding 

‘‘potential clients,’’ but eliminates the 

recordkeeping requirements as to 

‘‘potential clients’’ in two instances— 

namely, concerning ethical obligations 

of directors, officers, trustees, and 

supervisors concerning the financial 

decisions potential clients make after 

requesting counseling services, and the 

prohibition of bundling or tying 

agreements as to potential clients. In 

those instances, the reference to 

‘‘potential clients’’ does not advance a 

legitimate regulatory objective. 

The requirement that agencies retain 

hard copies of signed certificates for two 

years has been deleted. The final rule no 

longer requires agencies to provide 

original signatures on certificates in 

recognition of electronic filing in the 

bankruptcy courts and the technology 

used to generate certificates. Copies of 

such certificates shall be retained for 

180 days from the date of issuance. 

27. Additional Minimum Requirements 

[§ 58.20(p)6)] 

Comment: One comment objected to 

the rule’s requirement that agencies take 

no action to limit clients from bringing 

claims against agencies ‘‘under any 

applicable law, including but not 

limited to 11 U.S.C. § 111(g)(2).’’ The 

comment expressed the opinion that the 

phrase ‘‘any applicable law’’ exceeds 

the scope of section 111(g)(2). 

Response: To reduce the burden on 

credit counseling agencies, the rule has 

been amended to strike the reference to 

‘‘any applicable law.’’ 

28. Advertising [§ 58.20(p)(8)] 

Comment: EOUST received one 

comment suggesting that the phrase 

‘‘approval does not endorse or assure 

the quality of an Agency’s services’’ 

should be deleted. The comment 

claimed advertising is protected speech 

and the quoted phrase raises doubts in 

the mind of the consumer concerning 

the meaning of approval. 

Response: This disclaimer is 

necessary to inform consumers that, 

although the agency is approved to issue 

credit counseling certificates, such 

approval does not constitute a 

government guarantee or endorsement 

of the quality of the agency’s services. 

This disclaimer protects consumers who 

otherwise might infer that approval 

means all agency actions automatically 

carry the approval or endorsement of 

the federal government. In addition, 

after obtaining approval, a credit 

counseling agency may change its 

business practices or employ 

unqualified counselors and EOUST may 

not learn of these changes in quality 

immediately. Finally, advertising 

constitutes commercial speech and is 

subject to regulations that directly 

advance a substantial governmental 

interest, provided there exists a 

reasonable fit between the regulations 

and the governmental interest. As 

EOUST has a substantial interest in 

ensuring that the public is not misled 

regarding the meaning of agency 

approval, and as the disclaimer is 

narrowly tailored to advance EOUST’s 

interest without otherwise controlling or 

otherwise limiting the content of a 

credit counseling agency’s 

advertisements, the disclaimer is 

reasonable. 

29. Exposure to Commercial Advertising 

and Sale of Personal Information 

[§ 58.20(p)(10)] 

Comment: One comment stated the 

protections in § 58.20(p)(10) are 

insufficient, and that agencies should 

not be permitted to market any services 

or sell any information to consumers. 

Response: No change is necessary. As 

written, the rule prohibits agencies from 

marketing any product during the 

counseling services. In addition, the 

rule strictly forbids agencies from 

selling a consumer’s information 

without the consumer’s prior written 

consent. Strengthening this prohibition 

by prohibiting agencies from selling a 

consumer’s information, even when the 

consumer consents, would infringe on 

the rights of consumers to make 

informed decisions and to consent 

voluntarily to commercial agreements. 

30. Fees [§ 58.21(a)] 

Comment: EOUST received numerous 

comments regarding the determination 

of reasonable fees. Comments spanned 


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suggestions for the dollar amount of a 

reasonable fee, ranging from $60 to 

$100; to suggestions that a fee, to be 

reasonable, should be charged per 

counseling session regardless of 

whether one debtor or a married couple 

attends the session; to suggestions that 

the proposed $50 reasonable fee is 

unreasonable and should be adjusted for 

regional variations; to suggestions that 

the EOUST should review the amount of 

the reasonable fee annually, rather than 

every four years. A number of comments 

stated that the establishment of a fixed 

reasonable fee runs afoul of the market 

economy, and that competition will 

keep fees low while taking regional 

variations and cost changes into 

account. One comment expressed the 

concern that the proposed reasonable 

fee and fee waiver requirements would 

render it unable to cover the costs of 

providing counseling services. Another 

comment criticized the determination 

that fees in excess of $50 per client were 

unreasonable, stating that, if EOUST 

places limits on reasonable counseling 

fees, EOUST should limit all other fees 

incurred in a bankruptcy case, 

including, without limitation, attorney’s 

fees, filing fees, and court fees. 

Response: EOUST has considered 

carefully the comments concerning both 

the amount of a reasonable fee and the 

policies underlying the establishment of 

a fixed fee, both in the context of the 

policies underlying the statute and 

taking into account the experiences of 

approved agencies since passage of the 

Interim Final Rule, and has determined: 

(a) Fees in excess of $50 per person are 

not presumptively reasonable; (b) 

EOUST shall review the amount of the 

presumptively reasonable fee one year 

after the effective date of the rule, and 

then periodically, but not less 

frequently than every four years; (c) 

agencies may request permission to 

charge a larger fee, which EOUST will 

consider on a case-by-case basis; and (d) 

whether a credit counseling agency 

charges fees for a counseling session per 

individual or per couple is within the 

business discretion of the agency. 

EOUST acknowledges that local 

variations in income, cost of living, 

overhead, inflation, and other factors 

may influence and lead to inter-agency 

differences in determining the 

reasonableness of counseling fees. 

However, based on EOUST’s experience 

with approved agencies, the $50 

presumptively reasonable fee 

adequately incorporates the costs 

associated with complying with the 

statute and rule, taking into account the 

requirement that agencies operate as 

nonprofit entities, and taking into 

account the increasing prevalence of 

telephone and Internet counseling, both 

of which are associated with lower costs 

than in-person counseling. The rule 

permits agencies to exceed the 

presumptively reasonable fee after 

receiving approval from EOUST by 

demonstrating, at a minimum, that its 

costs for delivering the counseling 

services justify the requested fee. The 

agency bears the burden of establishing 

that its proposed fee is reasonable. Such 

requests may occur at the time of the 

agency’s annual re-application for 

approval to provide counseling services, 

or at any other time the agency deems 

necessary. Agencies that have 

previously submitted requests to charge 

more than $50, and have been granted 

permission to do so, will not be required 

to resubmit such requests if the agency 

continues to charge that fee in the same 

amount. Of course, any new requests 

must be submitted to EOUST for 

approval. EOUST does not have 

authority to approve fees for attorneys 

or other professionals in the same 

manner as credit counseling agencies, 

and lacks authority to limit such 

professional fees and court costs. 

31. Fee Waivers [§ 58.21(b)] 

Comment: EOUST received numerous 

comments concerning the requirement 

that agencies offer counseling services at 

a reduced cost, or waive the fee entirely, 

for clients who are financially unable to 

pay. The proposed rule requires 

agencies to waive or reduce fees for 

clients whose income is less than 150 

percent of the poverty guidelines 

updated periodically in the Federal 

Register by the U.S. Department of 

Health and Human Services under the 

authority of 42 U.S.C. 9902(2), as 

adjusted from time to time, for a 

household or family of the size involved 

in the fee determination (the ‘‘poverty 

level’’). 

While one comment expressed 

concern that the association between the 

poverty level and the determination of 

a client’s ability to pay necessitated 

further study and assessment of 

financial impact on the agencies, 

another comment objected to the use of 

150 percent of the poverty level as a 

mandatory fee waiver requirement, 

arguing that the 150 percent standard 

was unsustainable and would lead to 

severe agency financial losses. One 

comment cautioned that a nationwide 

objective standard would unduly impact 

agencies in areas with higher 

concentrations of low income clients. 

Another comment suggested permitting 

or implementing a schedule of 

discounts for clients whose incomes fall 

below the poverty guidelines, but who 

can afford to pay some amount, while 

yet another comment suggested not only 

that a client should bear the burden of 

demonstrating inability to pay, but that 

a client should affirmatively request the 

fee waiver. One comment criticized 

mandatory fee waivers as an ‘‘unfunded 

mandate.’’ 

Response: Based on these comments 

and EOUST’s existing fee waiver data, 

EOUST has revised the rule to reduce 

the burden on agencies while still 

maintaining adequate protection for 

consumers. EOUST acknowledges that 

standardization may not take into 

account local differences, and may have 

a disparate impact on agencies located 

in geographic areas of concentrated low 

income. Although a credit counseling 

agency may apply to EOUST to increase 

its counseling fee, such fee increases 

ultimately shift the fee burden to those 

clients more able to pay. 

Furthermore, a mandatory fee waiver 

for clients with income at or below 150 

percent of the poverty level likely 

would result in a substantial increase in 

the number of fee waivers granted. 

Although some commentators urged 

EOUST to adopt rigid criteria requiring 

agencies to offer services without 

charge, such an inflexible rule would be 

inconsistent with similar court practices 

concerning waiver of court filing fees for 

in forma pauperis debtors that do not 

require the wholesale waiver of filing 

fees for all debtors with incomes below 

a certain income level. Under BAPCPA, 

debtors earning less than 150 percent of 

the poverty level are eligible to apply for 

a waiver of the court filing fee and the 

court determines whether an eligible 

debtor has the ability to pay the filing 

fee. Not all debtors who are eligible for 

a waiver of the filing fee apply, and not 

all debtors who apply are eligible. 

Fewer than two percent of debtors 

ultimately obtain a waiver of court filing 

fees. In comparison, based on available 

data from 2005, approximately 30 

percent of chapter 7 debtors are eligible 

to apply for a waiver of the court filing 

fee. If EOUST were to require agencies 

to adopt a mandatory fee waiver policy 

with respect to all such debtors, some 

agencies could suffer severe financial 

losses that would render them unable to 

provide services, reducing capacity to 

serve the overall debtor population. As 

of July 2009, according to self-reporting 

by approved credit counseling agencies, 

without the proposed mandatory fee 

waiver, 10.8 percent of certificates were 

issued at no cost, with another 22.1 

percent issued at reduced cost. 

In response to these concerns, EOUST 

has adopted a rebuttable presumption of 

a mandatory fee waiver or fee reduction 

policy for clients whose income is less 

than the poverty level, based on the in 


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forma pauperis standard set forth in 28 

U.S.C. 1930(f)(1). Under this rebuttable 

presumption policy, instead of waiving 

the fee entirely, an agency may charge 

a client a reduced fee if the agency 

determines that the client does, in fact, 

have the ability to pay some of the fee; 

the amount may be determined using a 

sliding scale, of the agency’s design, that 

takes into account the client’s financial 

circumstances. If the agency determines 

that the client has the ability to pay 

some of the fee, there is no minimum 

amount by which the agency should 

reduce the fee; the amount of fee 

reduction is entirely dependent upon 

the client’s ability to pay as determined 

by the client’s financial circumstances. 

This rebuttable presumption satisfies 

the statutory mandate that counseling 

services be provided without regard to 

a client’s ability to pay the fee while 

taking into account the agency’s need to 

generate sufficient income from fees to 

cover operational costs. Accordingly, 

this policy establishes a uniform, 

objective standard by which agencies, 

clients, and EOUST can evaluate client 

entitlement to a fee waiver or a fee 

reduction depending on each particular 

client’s ability to pay. 

Furthermore, because agencies obtain 

personal financial information from 

clients in the context of performing the 

analysis of the client’s financial 

condition required by 11 U.S.C. 

111(c)(2)(E), a fee waiver or fee 

reduction policy based on a comparison 

of the client’s household income against 

the poverty level can be performed with 

ease. Having just reviewed the client’s 

financial information, a credit 

counseling agency is in the best position 

to make a determination whether the 

client is eligible for a fee waiver or fee 

reduction. The agency makes the 

determination of whether to grant the 

fee waiver or fee reduction when the 

agency is counseling the client; the 

agency need not consult with EOUST 

before making its determination. EOUST 

will review an agency’s fee waiver 

policies and statistics during the 

agency’s annual review or during a 

quality of service review. Finally, 

because the poverty level is updated 

periodically and takes into account the 

client’s household size, this policy 

accounts for nationwide changes in the 

cost of living over time. 

Establishing a presumptively 

mandatory but rebuttable fee waiver or 

fee reduction policy for clients whose 

household income falls at or below 150 

percent of the poverty level recognizes 

agencies’ need to generate sufficient 

income from fees to cover operational 

costs in light of the statutory mandate. 

To the extent a credit counseling agency 

believes the fee waiver policy set forth 

in the rule adversely impacts its 

financial viability, the agency may 

apply to EOUST to increase its fee. The 

agency shall demonstrate that its costs 

of delivering counseling services 

(including opportunity costs associated 

with waived or foregone fees) justify the 

proposed fee. The rates of both full and 

partial fee waivers based on client 

income levels, and the mechanisms by 

which agencies implement the 

rebuttable presumption, are subject to 

EOUST scrutiny during the annual 

application review for each approved 

agency and during quality of service 

reviews to assess compliance with 11 

U.S.C. 111 and this final rule. 

To permit EOUST to periodically 

evaluate the cost and business impact of 

this mandatory fee waiver policy on 

clients and agencies, and determine 

whether agencies are applying the 

mandatory fee waiver policy uniformly 

and fairly, the rule has been amended to 

add a new section, § 58.21(b)(2), 

requiring the United States Trustee to 

review the basis for the mandatory fee 

waiver policy one year after the effective 

date of the rule, and then periodically, 

but not less frequently than every four 

years. When reviewing the basis for the 

mandatory fee waiver or fee reduction 

policy, EOUST may consider the impact 

on both agencies and clients by 

evaluating data from agencies 

concerning the counseling fees, 

increases to such fees, and rates of total 

and partial fee waiver. By retaining the 

mandatory, objective fee waiver policy 

but requiring its periodic review, 

EOUST advances the statutory mandate 

that counseling services be provided 

without regard to the client’s ability to 

pay, while enabling EOUST to revisit 

the objective standard in light of agency 

operational costs and impact on clients. 

The reasonableness of agency 

determinations will continue to be 

subject to EOUST oversight during the 

application process, during on-site 

reviews, and in the course of resolving 

specific complaints. 

32. Delivery of Certificates—to Whom 

[§ 58.22(a)] 

Comment: EOUST received several 

comments concerning delivery of 

certificates to a client’s attorney. The 

proposed rule required a client to 

authorize, in writing, the delivery of the 

credit counseling certificate to the 

client’s attorney. The comments 

expressed the opinion that requiring a 

client to provide written consent to a 

credit counseling agency is inefficient, 

particularly when the client receives 

counseling by telephone or Internet. In 

such instances, the comments provide 

that mail transmission of written 

consent to a credit counseling agency 

delays the delivery of the certificate. 

Rather than requiring written consent, 

the rule should permit the client to 

verbally authorize the agency to send 

the certificate to the client’s attorney. 

Response: EOUST agrees that written 

consent to deliver a certificate to a 

client’s attorney is unnecessary and 

unduly impedes the efficiency of 

telephone and Internet counseling. 

Accordingly, the rule has been revised 

to permit verbal authorization to send a 

certificate to a client’s attorney. In the 

case of Internet counseling, electronic 

mail authorization or an electronic 

affirmation (such as a radio button or a 

box on a web page) is sufficient. 

33. Delivery of Certificates—Time 

[§ 58.22(a) and (c)] 

Comment: Several comments objected 

to the requirement that a credit 

counseling agency deliver the certificate 

to a client within one business day of 

completion of counseling; three 

comments suggested that agencies 

should have three business days to 

deliver the certificate. Several 

comments expressed uncertainty about 

the meaning of the word ‘‘deliver.’’ 

Some comments suggested that three 

business days were necessary to 

complete delivery by mail, while others 

suggested that electronic mail is an 

appropriate delivery method. 

One comment also sought 

clarification about when Internet 

counseling is ‘‘complete’’ and suggested 

that completion should be defined 

specifically. The comment noted that, in 

the case of Internet counseling, agencies 

and clients are uncertain whether 

counseling is considered complete 

when the client finishes the online 

course or whether further interaction 

with a counselor is necessary. 

Response: The requirement that a 

credit counseling agency send the 

certificate to a client within one 

business day accords the agency 

adequate time and is commercially 

reasonable. The term ‘‘deliver’’ has been 

changed to ‘‘send’’ to encompass a wide 

range of transmission methods. To the 

extent a credit counseling agency is 

unable to send the certificate within the 

specified time because of extenuating 

circumstances, such as problems with 

generating or printing the certificate, 

illness of the counselor, or other 

circumstances beyond the agency’s 

control, EOUST can evaluate such 

incidents on a case-by-case basis. 

The rule also has been revised to 

clarify that, in the case of Internet 

counseling and automated telephone 

counseling, counseling is not complete 


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until the client has engaged in 

interaction with a counselor, whether by 

electronic mail, live chat, or telephone, 

following the automated portion of the 

counseling session. Personal interaction 

has utility as a means of verifying and 

confirming client identity, and is 

necessary to meet the statutory 

objectives set forth in 11 U.S.C. 

111(c)(2)(E) that agencies assess each 

client’s current financial condition, the 

factors that caused such financial 

condition, and how the client can 

develop a plan to respond to those 

problems. 

34. Certificates—Budget Analysis 

[§ 58.22(b)] 

Comment: Two comments objected to 

the requirement that the budget analysis 

the counselor prepares for the client be 

attached to the certificate. One comment 

suggested that, because of the nature of 

prebankruptcy counseling, data 

contained in such a budget analysis may 

be unreliable and, if filed with the 

bankruptcy court, may prejudice the 

debtor client. Another comment 

expressed the opinion that requiring 

attachment of the budget analysis to the 

certificate may violate client privacy. 

Response: EOUST agrees that 11 

U.S.C. 109 and 521 do not require the 

agency to attach the budget analysis to 

the credit counseling certificate. 

Accordingly, the final rule deletes this 

requirement and reduces the burden on 

credit counseling agencies. 

35. Certificates—Original Signature 

[§ 58.22(l)(2)] 

Comment: Several comments objected 

to the requirement that certificates 

generated for electronic filing must be 

generated in paper form as well and 

must bear the original signature of the 

counselor. The comments criticized the 

requirement as expensive and timeconsuming, and noted that the rule 

contains precautions against creation of 

forged or fraudulent certificates. 

Response: EOUST agrees and has 

reduced the burden on credit counseling 

agencies by deleting the requirement 

that, when a certificate is generated for 

electronic filing with the court, the 

agency must provide the client a paper 

certificate bearing the counselor’s 

original signature as well. 

36. Certificates—Time of Completion 

[§ 58.22(n)(3)] 

Comment: One comment noted that 

certificates should contain not only the 

date but also the time that counseling 

was completed. 

Response: EOUST concurs that a 

technical modification is necessary and 

has revised the rule to require 

certificates to contain both the date and 

the time that counseling was completed; 

the time must include the time zone. 

This technical modification does not 

impose an additional burden as the 

proposed rule required certificates to 

contain the date of completion. 

Including the time and time zone is a 

minor modification to the date on the 

certificate. 

37. Certificates—Legal Name [§ 58.22(o)] 

Comment: EOUST received several 

comments concerning the display of two 

names on the certificate when a third 

party (such as an attorney-in-fact acting 

under a valid power of attorney) 

completes counseling on behalf of the 

client. The comment expressed doubt 

that a certificate can display two names 

rather than one. Several comments 

expressed the opinion that, rather than 

leaving open the possibility that a third 

party can complete counseling on behalf 

of the client under certain 

circumstances, the rule expressly 

should prohibit third parties from taking 

counseling on behalf of clients. 

Response: Certificates may display 

more than one name (e.g., John Doe, as 

Attorney-In-Fact for Jane Doe). No 

clarification is necessary to permit such 

a display, and the display of both names 

removes the need for agencies to engage 

in legal analysis concerning the proper 

party to list on the certificate, while 

providing full disclosure to courts and 

other parties concerning the client’s 

participation in counseling. 

Furthermore, EOUST declines to 

prohibit third parties from completing 

counseling on behalf of a client under 

appropriate circumstances, such as 

under a valid power of attorney 

sufficient to authorize the individual to 

file a bankruptcy petition on behalf of 

a client. To the extent state law 

authorizes powers of attorney, EOUST 

does not object to the completion of 

counseling by duly authorized 

attorneys-in-fact on behalf of clients. 

38. Fees—Additional Counseling 

[§ 58.22(p)] 

Comment: EOUST received a 

comment that, if a client seeks prebankruptcy counseling from an 

approved agency and enters into a DRP, 

and then the client decides to file for 

bankruptcy more than 180 days after the 

initial counseling session, the agency 

should be entitled to additional 

compensation for further counseling 

services. 

Response: EOUST disagrees and no 

change has been made to the rule. 

Because the pursuit of alternatives to 

bankruptcy is one of the principal goals 

of the BAPCPA, debtors who pursued 

bankruptcy alternatives in the spirit of 

the BAPCPA, such as DRPs, should not 

be penalized for doing so by paying 

twice for credit counseling. Rather, 

agencies must provide additional 

counseling sufficient to enable the client 

to comply with the statutory 

requirement at no additional cost to the 

client. 

39. Debt Repayment Plans [§ 58.23(d), 

(e) and (f)] 

Comment: One comment expressed 

uncertainty why the rule includes 

financial requirements (including 

bonding and insurance requirements) 

for agencies offering DRPs. 

Response: Because DRPs are an 

alternative to bankruptcy and require a 

credit counseling agency to handle 

client funds, EOUST seeks to ensure 

that agencies offering DRPs safeguard 

client funds and fulfill fiduciary 

obligations toward clients. Accordingly, 

the rule contains financial bonding and 

insurance requirements for any agency 

offering DRPs to protect client funds 

and to ensure that disbursements on 

behalf of clients are made. 

40. Surety Bond Percentage [§ 58.23(d) 

and (f)] 

Comment: EOUST received two 

comments suggesting that the surety 

bond percentage should be higher for 

first time applicants. 

Response: EOUST declines to adopt 

this requirement, finding that the 

current bonding requirements are 

sufficient for all applicants, including 

first-time applicants. However, EOUST 

has determined that DRP client 

protection may continue to be 

necessary, under certain circumstances, 

in the event an approved credit 

counseling agency ceases to offer DRP 

services to individuals who received 

counseling from such agency pursuant 

to 11 U.S.C. 109(h). Although such 

agencies need not maintain EOUST 

approved bonds and insurance if they 

transfer their existing DRP clients to 

other approved agencies within a 

specified period of time, to the extent 

such agencies continue to service the 

DRP accounts of these existing clients 

after ceasing to offer DRP services to 

new clients, they must continue to 

maintain sufficient bonding and 

insurance requirements to protect client 

funds and to ensure that disbursements 

on behalf of clients are made for the life 

of those clients’ DRP terms. 

Executive Order 12866 

This rule has been drafted and 

reviewed in accordance with Executive 

Order 12866, ‘‘Regulatory Planning and 

Review,’’ section 1(b), The Principles of 


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16148 Federal Register / Vol. 78, No. 50 / Thursday, March 14, 2013 / Rules and Regulations 

Regulation. The Department has 

determined that this rule is a 

‘‘significant regulatory action.’’ 

Accordingly, this rule has been 

reviewed by the Office of Management 

and Budget (‘‘OMB’’). 

The Department has also assessed 

both the costs and benefits of this rule 

as required by section 1(b)(6) and has 

made a reasoned determination that the 

benefits of this regulation justify its 

costs. The costs considered in this 

regulation include the required costs for 

the submission of an application. Costs 

considered also include the cost of 

establishing and maintaining the 

approved list in each federal judicial 

district. In an effort to minimize the 

burden on applicants, the application 

keeps the number of items on the 

application to a minimum. 

The costs to an applicant of 

submitting an application will be 

minimal. The anticipated costs are the 

photocopying and mailing of the 

requested records, along with the 

salaries of the employees who complete 

the applications. Based upon the 

available information, experience with 

the credit counseling industry, and 

informal communications with credit 

counseling agencies, EOUST anticipates 

that the cost for submitting an 

application should equal approximately 

$500 per application for agencies. This 

cost is not new. It is the same cost that 

credit counseling agencies incurred 

when applying under the Interim Final 

Rule. 

Agencies that offer DRPs also must 

obtain a surety bond in the amount of 

either (1) two percent of the agency’s 

disbursements made during the twelve 

months immediately prior to the 

submission of the application from all 

trust accounts attributable to the federal 

judicial districts (or, if not feasible to 

determine, the states) in which the 

agency seeks approval from the United 

States Trustee; or (2) equal to the 

average daily balance maintained for the 

six months immediately prior to 

submission of the application in all trust 

accounts attributable to the federal 

judicial districts (or, if not feasible to 

determine, the states) in which the 

agency seeks approval from the United 

States Trustee. In addition, credit 

counseling agencies that offer debt 

repayment plans must obtain employee 

fidelity insurance in a face amount 

equal to 50 percent of the surety bond. 

Credit counseling agencies are entitled 

to receive a credit for any state surety 

bond or employee fidelity insurance 

already obtained. 

Although credit counseling agencies 

may charge a fee for providing the credit 

counseling services in accordance with 

this rule, agencies must provide credit 

counseling without regard to a client’s 

ability to pay the fee. Based upon the 

available information, current practice 

of many credit counseling agencies, 

experience with the credit counseling 

industry, and communications with 

credit counseling agencies, EOUST 

presumes $50 to be a reasonable fee for 

credit counseling. The United States 

Government Accountability Office, after 

conducting a study on credit 

counseling, found that $50 was the 

typical rate charged by credit counseling 

agencies and that industry observers 

and consumer advocates considered this 

amount to be reasonable. 

The amount presumed to be 

reasonable for credit counseling fees 

will be reviewed one year after the 

effective date of this rule and then 

periodically, but not less frequently 

than every four years. The amount 

presumed to be reasonable will be 

published by notice in the Federal 

Register and identified on the EOUST 

Web site. In addition, all credit 

counseling agencies must waive or 

reduce the fee if the client demonstrates 

a lack of ability to pay the fee, which 

shall be presumed if the client’s current 

household income is less than 150 

percent of the poverty level, as adjusted 

from time to time, for a household or 

family of the size involved in the fee 

determination. A credit counseling 

agency may rebut this presumption if it 

determines, based on income 

information provided by the client in 

connection with counseling services, 

that the client is able to pay the fee in 

a reduced amount. Please refer to the 

Regulatory Flexibility Act section for 

more analysis on the surety bond and 

insurance requirements, and for a 

discussion on fees and fee waivers. 

Additionally, credit counseling 

agencies will incur de minimus 

recordkeeping costs. For instance, an 

agency will be required to maintain 

various records, such as records on 

which it relied in submitting its 

application; copies of the semi-annual 

reports; financial statements; ordinary 

business records; records on counseling 

services provided in languages other 

than English; fees; fee waiver and fee 

reduction statistics; complaints; and 

records enabling the agency to issue 

replacement certificates. All of these 

records combined should not equal 

more than a few pages or megabytes of 

information. Moreover, the increased 

specificity in this rule regarding records 

retention requirements reduce the 

burden on agencies because the Interim 

Final Rule required agencies to maintain 

business records, but did not specify 

which records needed to be kept, nor for 

how long. With implementation of this 

rule, agencies no longer need to keep 

every record for an unspecified amount 

of time in case such records are 

requested during an annual review or 

quality of service review. 

The number of credit counseling 

agencies that ultimately will apply for 

approval is unknown, though EOUST 

currently has approved approximately 

170 agencies. The annual hour burden 

on agencies is estimated to be 10 hours. 

This estimate is based on consultations 

with individuals in the credit 

counseling industry, and experience 

with credit counseling agencies who 

completed the initial applications. 

EOUST consulted with the Federal 

Trade Commission and with the Internal 

Revenue Service in drafting this rule 

and concludes that the rule does not 

have an adverse effect upon either 

agency. 

The benefits of this rule include the 

development of standards that increase 

consumer protections, such as a limit on 

the presumption of reasonable fees, the 

requirement that agencies provide 

adequate disclosures concerning 

agencies’ policies, and the preservation 

of clients’ rights under 11 U.S.C. 502(k). 

This rule also provides for greater 

supervision by the United States Trustee 

to ensure agencies employ proper 

procedures to safeguard client funds. 

These benefits justify its costs in 

complying with Congress’ mandate that 

a list of approved credit counseling 

agencies be established. Public Law 

109–8, § 106(e)(1). 

Executive Order 13132 

This rule will not have a substantial 

direct effect on the States, on the 

relationship between the national 

government and the States, or on the 

distribution of power and 

responsibilities among the various 

levels of government. Therefore, in 

accordance with Executive Order 13132, 

it is determined that this rule does not 

have sufficient federalism implications 

to warrant the preparation of a 

Federalism Assessment. 

Paperwork Reduction Act 

The information collection 

requirements contained in this rule have 

been approved by OMB in accordance 

with the Paperwork Reduction Act of 

1995, 44 U.S.C. §§ 3501 to 3520, and 

assigned OMB control number 1105– 

0084 for form EOUST–CC1, the 

‘‘Application for Approval as a 

Nonprofit Budget and Credit Counseling 

Agency.’’ The Department notes that full 

notice and comment opportunities were 

provided to the general public through 

the Paperwork Reduction Act process, 


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and that the applications and associated 

requirements were modified to take into 

account the concerns of those who 

commented in this process. 

Regulatory Flexibility Act 

In accordance with the Regulatory 

Flexibility Act, 5 U.S.C. 605(b), the 

Director has reviewed this rule and, by 

approving it, certifies that, although it 

will affect a substantial number of small 

entities, the rule will not have a 

significant economic impact upon them. 

In 2006, when EOUST conducted a 

survey of the 119 credit counseling 

agencies that were approved at the time 

of the survey, 98 agencies responded to 

the survey, and 82 (or 84 percent) of 

those agencies qualified as small 

businesses under the Small Business 

Administration’s guidelines. See 13 CFR 

§ 121.201. Of the 82 agencies that 

qualified as small businesses, 91 percent 

of them reported that the cost to obtain 

a surety bond and insurance in 

accordance with specifications 

enunciated in the proposed rule 

amounted to less than one percent of 

gross revenue. Additionally, 90 percent 

of the agencies that qualified as small 

businesses reported that the cost was 

less than one percent of total 

expenditures. For the remaining ten 

percent of agencies, only three agencies 

reported the surety bond and insurance 

requirements equaled more than two 

percent of gross revenue; five reported 

that they equaled more than two percent 

of total expenditures, only one of which 

reported the surety bond and insurance 

requirements equaled three percent of 

gross revenue and expenditures. From 

this data, it is apparent that the surety 

bond and insurance requirements do not 

impose a significant economic impact 

on a substantial number of small 

entities. 

This rule also sets forth guidance 

concerning the reasonable fee a credit 

counseling agency may charge (a 

presumptively reasonable fee of $50), 

and the criteria for determining fee 

waiver eligibility (presumed eligibility 

at household income of 150 percent of 

the poverty level). EOUST sought to 

establish formal guidance concerning 

fees, fee waivers and fee reductions 

based on a client’s ‘‘ability to pay the 

fee’’ using objective criteria, taking into 

account the potential financial impact 

on the agencies as well as the needs of 

clients. 11 U.S.C. 111(c)(2)(B). 

After carefully evaluating the credit 

counseling industry, EOUST based its 

fee guidance on current industry 

practice. Nearly 90 percent of approved 

credit counseling agencies charge $50 or 

less. According to a U.S. Government 

Accountability Office (‘‘GAO’’) report in 

2007, the mean fee for credit counseling 

among all agencies was $47. See U.S. 

Gov’t Accountability Office, GAO–07– 

203, Bankruptcy Reform: Value of Credit 

Counseling Requirement is Not Clear 30 

(2007) (the ‘‘GAO Report’’). As of 2011, 

the mean fee for credit counseling 

among all agencies is $48. Among the 

ten largest credit counseling agencies 

(by certificate volume), nearly all charge 

$50 or less in fees. Only one of the ten 

largest agencies charges more than $50 

(the agency in question charges $55 for 

counseling in person with a $10 

discount for counseling by Internet). 

Three of the ten largest agencies charge 

substantially less than $50: one charges 

$36; another charges $30 ($50 for 

telephone counseling); and yet another 

charges $25. According to EOUST 

records, fee policies have not changed 

among the ten largest agencies since 

2006. 

In 2011, EOUST took a random 

sampling of ten credit counseling 

agencies that were not among the ten 

largest agencies to determine these 

agencies’ fees. Of these ten agencies, 

nine charge $50 and the other agency 

charges $25. Accordingly, a $50 

presumptively reasonable fee not only 

strikes an appropriate balance between 

the financial condition of prospective 

debtors and the financial viability of 

approved credit counseling agencies, 

but constitutes general practice in the 

credit counseling industry. Thus, 

establishing a presumptively reasonable 

fee of $50 does not impose a significant 

economic impact on credit counseling 

agencies. Rather, it embodies a fee 

structure already widespread in the 

industry. 

Regarding fee waivers, similar to the 

requirement to charge ‘‘reasonable’’ fees, 

the requirement to waive fees when a 

client cannot pay is mandated by 

statute. 11 U.S.C. 111(c)(2)(B). With 

respect to the development of the fee 

waiver standard, the GAO undertook a 

study concerning, among other things, 

the incidence of fee waivers based on 

ability to pay. The GAO noted that the 

Interim Final Rule did not provide 

specific guidance on the criteria 

agencies should use to determine a 

client’s ability to pay. See GAO Report 

at 29–32. The GAO noted variations in 

the rate of fee waivers and 

recommended that EOUST adopt clearer 

guidance to agencies to reduce 

uncertainty among agencies concerning 

appropriate fee waiver criteria, to 

improve transparency concerning 

EOUST’s assessment of fee waiver 

policies, and to increase the availability 

of fee waivers by setting clear minimum 

benchmarks for ability to pay. Id. at 32, 

40–41. 

Among the ten largest credit 

counseling agencies, eight use 

household income at or below 150 

percent of the poverty level as the 

threshold for determining eligibility for 

a fee waiver. One agency considers the 

debtor’s income, housing status, and 

existence of severe hardship. The other 

agency uses household income at or 

below 100 percent of the poverty level 

as the threshold for determining 

eligibility for a fee waiver. In 2011, 

EOUST took a random sampling of ten 

credit counseling agencies that were not 

among the ten largest agencies to 

determine these agencies’ fee waiver 

policies. Seven of the agencies use the 

150 percent of poverty level standard; 

one uses the in forma pauperis or pro 

bono standard without specifying 150 

percent; one uses 125 percent of the 

poverty level; and one uses 100 percent 

of the poverty level as the threshold for 

determining eligibility for a fee waiver. 

In the proposed rule, EOUST 

proposed a bright-line standard 

establishing entitlement to a fee waiver 

for clients with household income equal 

to or less than 150 percent of the 

poverty level. That standard was based 

on the in forma pauperis standard set 

forth in 28 U.S.C. 1930(f)(1), which 

permits the bankruptcy court to waive 

filing fees for eligible individuals. The 

proposed rule standard did not grant 

agencies the discretion to determine 

whether clients otherwise were able to 

pay the fees. 

Subsequently, EOUST received and 

considered comments to the proposed 

rule. EOUST agreed that 

implementation of the proposed 

standardized fee waiver raised some 

policy concerns. Because 

standardization fails to take into 

account local differences, disparate 

impact on agencies may result when 

agencies located in geographic areas of 

concentrated low income individuals 

are required to grant fee waivers at a 

higher rate than those in more affluent 

areas. Although an agency may apply to 

EOUST to increase its counseling fee by 

demonstrating that its costs of 

delivering services (including 

opportunity costs associated with 

waived or reduced fees) justify the 

proposed fee, increases in fees 

ultimately shift the fee burden to those 

clients more able to pay. As of July 

2009, according to self-reporting by 

approved credit counseling agencies, 

without the proposed mandatory fee 

waiver, 10.8 percent of certificates were 

issued at no cost, with another 22.1 

percent issued at reduced cost. In 

comparison, based on available data 

from 2005, approximately 30 percent of 

chapter 7 debtors were eligible to apply 


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16150 Federal Register / Vol. 78, No. 50 / Thursday, March 14, 2013 / Rules and Regulations 

for a waiver of the court filing fee 

pursuant to the 150 percent in forma 

pauperis standard. Based on this 

analysis, EOUST concluded that if 

agencies were subject to a mandatory fee 

waiver policy with respect to all such 

debtors based on the in forma pauperis 

standard, some agencies might suffer 

financial losses that would render them 

unable to provide services, reducing 

capacity to serve the overall potential 

debtor population. 

Accordingly, EOUST revised this rule 

to include a rebuttable presumption to 

the objective fee waiver standard. In 

adopting the presumption, EOUST seeks 

to balance the need for an objective fee 

waiver standard and complying with 11 

U.S.C. 111(c)(2)(B) with agencies’ need 

to collect adequate fees for services 

provided. Under the rebuttable 

presumption, a client with household 

income equal to or less than 150 percent 

of the poverty level is presumptively 

entitled to a fee waiver, but the agency 

may determine, based on information it 

receives during the counseling session, 

that the client actually is able to pay the 

fee in part. In that case, the agency may 

charge the client a reduced fee, taking 

into account the client’s actual ability to 

pay. This rebuttable presumption 

balances the need for an objective fee 

waiver standard, consumer protection, 

and the need to ensure agency 

compliance with the Bankruptcy Code 

with the agencies’ need to collect 

adequate fees. 

Additionally, although EOUST 

considered indexing fee waivers to 

client income, EOUST determined that 

such an indexing system fails to take 

into account the variation in ability to 

pay for clients at the same income level. 

For example, two clients may have 

income at 150 percent of the poverty 

level, but one client lives in a rent-free 

home and has few expenses while the 

other has significant expenses, such as 

accumulated medical debts or child 

support payments. An inflexible 

indexing standard does not take into 

account the individual’s actual ability to 

pay the fee, as set forth in 11 U.S.C. 

111(c)(2)(B). EOUST concluded that 

each agency should determine each 

client’s eligibility based on the client’s 

individual financial circumstances. 

Unfunded Mandates Reform Act of 

1995 

This rule does not require the 

preparation of an assessment statement 

in accordance with the Unfunded 

Mandates Reform Act of 1995, 2 U.S.C. 

1531. This rule does not include a 

federal mandate that may result in the 

annual expenditure by State, local, and 

tribal governments, in the aggregate, or 

by the private sector, of more than the 

annual threshold established by the Act 

($100 million). Therefore, no actions 

were deemed necessary under the 

provisions of the Unfunded Mandates 

Reform Act of 1995. 

Small Business Regulatory Enforcement 

Fairness Act of 1996 

This rule is not a major rule as 

defined by section 804 of the Small 

Business Regulatory Enforcement 

Fairness Act of 1996, 5 U.S.C. 801 et 

seq. This rule will not result in an 

annual effect on the economy of $100 

million or more; a major increase in 

costs or prices; or significant adverse 

effects on competition, employment, 

investment, productivity, and 

innovation; or on the ability of United 

States-based companies to compete with 

foreign-based companies in domestic 

and export markets. 

Privacy Act Statement 

Section 111 of title 11, United States 

Code, authorizes the collection of this 

information. The primary use of this 

information is by the United States 

Trustee to approve nonprofit budget and 

credit counseling agencies. The United 

States Trustee will not share this 

information with any other entity unless 

authorized under the Privacy Act, 5 

U.S.C. 552a et seq. EOUST has 

published a System of Records Notice 

that delineates the routine use 

exceptions authorizing disclosure of 

information. 71 FR 59,818, 59,827 

(October 11, 2006), JUSTICE/UST–005, 

Credit Counseling and Debtor Education 

Files and Associated Records. 

Public Law 104–134 (April 26, 1996) 

requires that any person doing business 

with the federal government furnish a 

Social Security Number or Tax 

Identification Number. This is an 

amendment to section 7701 of title 31, 

United States Code. Furnishing the 

Social Security Number and other data 

is voluntary, but failure to do so may 

delay or prevent action on the 

application. 

List of Subjects in 28 CFR Part 58 

Administrative practice and 

procedure, Bankruptcy, Credit and 

debts. 

Accordingly, for the reasons set forth 

in the preamble, Part 58 of chapter I of 

title 28 of the Code of Federal 

Regulations is amended as follows: 

PART 58—[AMENDED] 

■ 1. The authority citation for Part 58 

continues to read as follows: 

Authority: 5 U.S.C. 301, 552; 11 U.S.C. 

109(h), 111, 521(b), 727(a)(11), 1141(d)(3), 

1202, 1302, 1328(g), 28 U.S.C. 509, 510, 586, 

589b. 

■ 2. Sections 58.12 through 58.14 are 

added to read as follows: 

§ 58.12 Definitions. 

(a) The following definitions apply to 

§§ 58.12 through and including 58.24 of 

this Part and the applications and other 

materials agencies submit in an effort to 

establish they meet the requirements 

necessary to become an approved 

nonprofit budget and credit counseling 

agency. 

(b) These terms shall have these 

meanings: (1) The term ‘‘accreditation’’ 

means the recognition or endorsement 

that an accrediting organization bestows 

upon an agency because the accrediting 

organization has determined the agency 

meets or exceeds all the accrediting 

organization’s standards; 

(2) The term ‘‘accrediting 

organization’’ means either an entity 

that provides accreditation to agencies 

or provides certification to counselors, 

provided, however, that an accrediting 

organization shall: 

(i) Not be an agency or affiliate of any 

agency; and 

(ii) Be deemed acceptable by the 

United States Trustee; 

(3) The term ‘‘adequate counseling’’ 

means the actual receipt by a client from 

an approved agency of all counseling 

services, and all other applicable 

services, rights, and protections 

specified in: 

(i) 11 U.S.C. 109(h); 

(ii) 11 U.S.C. 111; and 

(iii) This part; 

(4) The term ‘‘affiliate of an agency’’ 

includes: 

(i) Every entity that is an affiliate of 

the agency, as the term ‘‘affiliate’’ is 

defined in 11 U.S.C. 101(2), except that 

the word ‘‘agency’’ shall be substituted 

for the word ‘‘debtor’’ in 11 U.S.C. 

101(2); 

(ii) Each of an agency’s officers and 

each of an agency’s directors; and 

(iii) Every relative of an agency’s 

officers and every relative of an agency’s 

directors; 

(5) The term ‘‘agency’’ and the term 

‘‘budget and credit counseling agency’’ 

shall each mean a nonprofit 

organization that is applying under this 

part for United States Trustee approval 

to be included on a publicly available 

list in one or more United States district 

courts, as authorized by 11 U.S.C. 

111(a)(1), and shall also mean, 

whenever appropriate, an approved 

agency; 

(6) The term ‘‘application’’ means the 

application and related forms, including 

appendices, approved by the Office of 


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Management and Budget as form 

EOUST–CC1, Application for Approval 

as a Nonprofit Budget and Credit 

Counseling Agency, as it shall be 

amended from time to time; 

(7) The term ‘‘approved agency’’ 

means an agency currently approved by 

a United States Trustee under 11 U.S.C. 

111 as an approved nonprofit budget 

and credit counseling agency eligible to 

be included on one or more lists 

maintained under 11 U.S.C. 111(a)(1); 

(8) The term ‘‘approved list’’ means 

the list of agencies currently approved 

by a United States Trustee under 11 

U.S.C. 111, as currently published on 

the United States Trustee Program’s 

Internet site, which is located on the 

United States Department of Justice’s 

Internet site; 

(9) The term ‘‘audited financial 

statements’’ means financial reports 

audited by independent certified public 

accountants in accordance with 

generally accepted accounting 

principles as defined by the American 

Institute of Certified Public 

Accountants; 

(10) The term ‘‘certificate’’ means the 

certificate identified in 11 U.S.C. 

521(b)(1) that an approved agency shall 

provide to a client after the client 

completes counseling services; 

(11) The term ‘‘client’’ means an 

individual who both seeks and receives 

(or sought and received) counseling 

services from an approved agency; 

(12) The term ‘‘counseling services’’ 

means all counseling required by 11 

U.S.C. 109(h) and 111, and this part 

including, without limitation, services 

that are typically of at least 60 minutes 

in duration and that shall at a minimum 

include: 

(i) Performing on behalf of, and 

providing to, each client a written 

analysis of that client’s current financial 

condition, which analysis shall include 

a budget analysis, consideration of all 

alternatives to resolve a client’s credit 

problems, discussion of the factors that 

caused such financial condition, and 

identification of all methods by which 

the client can develop a plan to respond 

to the financial problems without 

incurring negative amortization of debt; 

and 

(ii) Providing each client the 

opportunity to have the agency 

negotiate an alternative payment 

schedule with regard to each unsecured 

consumer debt under terms as set forth 

in 11 U.S.C. 502(k) or, if the client 

accepts this option and the agency is 

unable to provide this service, the 

agency shall refer the client to another 

approved agency in the appropriate 

federal judicial district that provides it; 

(13) The term ‘‘counselor 

certification’’ means certification of a 

counselor by an accrediting organization 

because the accrediting organization has 

determined the counselor meets or 

exceeds all the accrediting 

organization’s standards for counseling 

services or related areas, such as 

personal finance, budgeting, or credit or 

debt management; 

(14) The term ‘‘criminal background 

check’’ means a report generated by a 

state law enforcement authority 

disclosing the entire state criminal 

history record, if any, of the counselor 

for whom the criminal background 

check is sought, for every state where 

the counselor has resided or worked 

during any part of the immediately 

preceding five years. If a criminal 

background check is not available for, or 

is not authorized by state law in, each 

of the states where the counselor has 

resided or worked during any part of the 

immediately preceding five years, the 

agency shall instead obtain at least 

every five years a sworn statement from 

each counselor attesting to whether the 

counselor has been convicted of a 

felony, or a crime involving fraud, 

dishonesty, or false statements; 

(15) The term ‘‘debt repayment plan’’ 

means any written document suggested, 

drafted, or reviewed by an approved 

agency that either proposes or 

implements any mechanism by which a 

client would make payments to any 

creditor or creditors if, during the time 

any such payments are being made, that 

creditor or those creditors would forbear 

from collecting or otherwise enforcing 

their claim or claims against the client; 

provided, however, that any such 

written document shall not constitute a 

debt repayment plan if the client would 

incur a negative amortization of debt 

under it; 

(16) The term ‘‘Director’’ means the 

person designated or acting as the 

Director of the Executive Office for 

United States Trustees; 

(17) The term ‘‘entity’’ shall have the 

meaning given that term in 11 U.S.C. 

101(15); 

(18) The term ‘‘fair share’’ means 

payments by a creditor to an approved 

agency for administering a debt 

repayment plan; 

(19) The terms ‘‘fee’’ and ‘‘fee policy’’ 

each mean the aggregate of all fees, 

contributions, and payments an 

approved agency charges clients for 

providing counseling services; ‘‘fee 

policy’’ shall also mean the objective 

criteria the agency uses in determining 

whether to waive or reduce any fee, 

contribution, or payment; 

(20) The term ‘‘final decision’’ means 

the written determination issued by the 

Director based upon the review of the 

United States Trustee’s decision either 

to deny an agency’s application or to 

remove an agency from the approved 

list; 

(21) The term ‘‘financial benefit’’ 

means any interest equated with money 

or its equivalent, including, but not 

limited to, stocks, bonds, other 

investments, income, goods, services, or 

receivables; 

(22) The term ‘‘governmental unit’’ 

shall have the meaning given that term 

in 11 U.S.C. 101(27); 

(23) The term ‘‘independent 

contractor’’ means a person or entity 

who provides any goods or services to 

an approved agency other than as an 

employee and as to whom the approved 

agency does not: 

(i) Direct or control the means or 

methods of delivery of the goods or 

services being provided; 

(ii) Make financial decisions 

concerning the business aspects of the 

goods or services being provided; and 

(iii) Have any common employees; 

(24) The term ‘‘languages offered’’ 

means every language other than 

English in which an approved agency 

provides counseling services; 

(25) The term ‘‘legal advice’’ shall 

have the meaning given that term in 11 

U.S.C. 110(e)(2); 

(26) The term ‘‘limited English 

proficiency’’ refers to individuals who: 

(i) Do not speak English as their 

primary language; and 

(ii) Have a limited ability to read, 

write, speak, or understand English; 

(27) The term ‘‘material change’’ 

means, alternatively, any change: 

(i) In the name, structure, principal 

contact, management, counselors, 

physical location, counseling services, 

fee policy, language services, or method 

of delivery of an approved agency; or 

(ii) That renders inapplicable, 

inaccurate, incomplete, or misleading 

any statement an agency or approved 

agency previously made: 

(A) In its application or related 

materials; or 

(B) To the United States Trustee; 

(28) The term ‘‘method of delivery’’ 

means one or more of the three methods 

by which an approved agency can 

provide some component of counseling 

services to its clients, including: 

(i) ‘‘In person’’ delivery, which 

applies when a client primarily receives 

counseling services at a physical 

location with a credit counselor 

physically present in that location, and 

with the credit counselor providing oral 

and/or written communication to the 

client at the facility; 

(ii) ‘‘Telephone’’ delivery, which 

applies when a client primarily receives 

counseling services by telephone; and 


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(iii) ‘‘Internet’’ delivery, which 

applies when a client primarily receives 

counseling services through an Internet 

Web site; 

(29) The term ‘‘nonprofit’’ means, 

alternatively: 

(i) An entity validly organized as a 

not-for-profit entity under applicable 

state or federal law, if that entity 

operates as a not-for-profit entity in full 

compliance with all applicable state and 

federal laws; or 

(ii) A qualifying governmental unit; 

(30) The term ‘‘notice’’ in § 58.24 

means the written communication from 

the United States Trustee to an agency 

that its application to become an 

approved agency has been denied or to 

an approved agency that it is being 

removed from the approved list; 

(31) The term ‘‘potential client’’ 

means an individual who seeks, but 

does not receive, counseling services 

from an approved agency. 

(32) The term ‘‘qualifying government 

unit’’ means any governmental unit that, 

were it not a governmental unit, would 

qualify for tax-exempt status under 26 

U.S.C. 501(c)(3), or would qualify as a 

nonprofit entity under applicable state 

law; 

(33) The term ‘‘referral fees’’ means 

money or any other valuable 

consideration paid or transferred 

between an approved agency and 

another entity in return for that entity, 

directly or indirectly, identifying, 

referring, securing, or in any other way 

encouraging any client or potential 

client to receive counseling services 

from the approved agency; provided, 

however, that ‘‘referral fees’’ shall not 

include fees paid to the agency under a 

fair share agreement; 

(34) The term ‘‘relative’’ shall have 

the meaning given that term in 11 U.S.C. 

101(45); 

(35) The term ‘‘request for review’’ 

means the written communication from 

an agency to the Director seeking review 

of the United States Trustee’s decision 

either to deny the agency’s application 

or to remove the agency from the 

approved list; 

(36) The term ‘‘state’’ means state, 

commonwealth, district, or territory of 

the United States; 

(37) The term ‘‘tax waiver’’ means a 

document sufficient to permit the 

Internal Revenue Service to release 

directly to the United States Trustee 

information about an agency; 

(38) The term ‘‘trust account’’ means 

an account with a federally insured 

depository institution that is separated 

and segregated from operating accounts, 

which an approved agency shall 

maintain in its fiduciary capacity for the 

purpose of receiving and holding client 

funds entrusted to the approved agency; 

and 

(39) The term ‘‘United States Trustee’’ 

means, alternatively: 

(i) The Executive Office for United 

States Trustees; 

(ii) A United States Trustee appointed 

under 28 U.S.C. 581; 

(iii) A person acting as a United States 

Trustee; 

(iv) An employee of a United States 

Trustee; or 

(v) Any other entity authorized by the 

Attorney General to act on behalf of the 

United States under this part. 

§ 58.13 Procedures all agencies shall 

follow when applying to become approved 

agencies. 

(a) An agency applying to become an 

approved agency shall obtain an 

application, including appendices, from 

the United States Trustee. 

(b) The agency shall complete the 

application, including its appendices, 

and attach the required supporting 

documents requested in the application. 

(c) The agency shall submit the 

original of the completed application, 

including completed appendices and 

the required supporting documents, to 

the United States Trustee at the address 

specified on the application form. 

(d) The application shall be signed by 

an agency representative who is 

authorized under applicable law to sign 

on behalf of the applying agency. 

(e) The signed application, completed 

appendices, and required supporting 

documents shall be accompanied by a 

writing, signed by the signatory of the 

application and executed on behalf of 

the signatory and the agency, certifying 

the application does not: 

(1) Falsify, conceal, or cover up by 

any trick, scheme or device a material 

fact; 

(2) Make any materially false, 

fictitious, or fraudulent statement or 

representation; or 

(3) Make or use any false writing or 

document knowing the same to contain 

any materially false, fictitious, or 

fraudulent statement or entry. 

(f) The United States Trustee shall not 

consider an application, and it may be 

returned if: 

(1) It is incomplete; 

(2) It fails to include the completed 

appendices or all of the required 

supporting documents; or 

(3) It is not accompanied by the 

certification identified in paragraph (e) 

of this section. 

(g) The United States Trustee shall not 

consider an application on behalf of an 

agency, and it shall be returned if: 

(1) It is submitted by any entity other 

than the agency; or 

(2) Either the application or the 

accompanying certification is executed 

by any entity other than an agency 

representative who is authorized under 

applicable law to sign on behalf of the 

agency. 

(h) By the act of submitting an 

application, an agency consents to the 

release and disclosure of its name, 

contact information, and nonconfidential business information 

relating to the services it provides on 

the approved list should its application 

be approved. 

§ 58.14 Automatic expiration of agencies’ 

status as approved agencies. 

(a) Except as provided in § 58.15(c), if 

an approved agency was not an 

approved agency immediately prior to 

the date it last obtained approval to be 

an approved agency, such an approved 

agency shall cease to be an approved 

agency six months from the date on 

which it was approved unless the 

United States Trustee approves an 

additional one year period. 

(b) Except as provided in § 58.15(c), if 

an approved agency was an approved 

agency immediately prior to the date it 

last obtained approval to be an 

approved agency, such an agency shall 

cease to be an approved agency one year 

from the date on which it was last 

approved to be an approved agency 

unless the United States Trustee 

approves an additional one year period. 

■ 3. Sections 58.15 through 58.17 are 

revised to read as follows: 

§ 58.15 Procedures all approved agencies 

shall follow when applying for approval to 

act as an approved agency for an additional 

one year period. 

(a) To be considered for approval to 

act as an approved agency for an 

additional one year term, an approved 

agency shall reapply by complying with 

all the requirements specified for 

agencies under 11 U.S.C. 109(h) and 

111, and under this part. 

(b) Such an agency shall apply no 

later than 45 days prior to the expiration 

of its six month probationary period or 

annual period to be considered for 

approval for an additional one year 

period, unless a written extension is 

granted by the United States Trustee. 

(c) An approved agency that has 

complied with all prerequisites for 

applying to act as an approved agency 

for an additional one year period may 

continue to operate as an approved 

agency while its application is under 

review by the United States Trustee, so 

long as either the application for an 

additional one year period is timely 

submitted, or an agency receives a 


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written extension from the United States 

Trustee. 

§ 58.16 Renewal for an additional one year 

period. 

If an approved agency’s application 

for an additional one year period is 

approved, such renewal period shall 

begin to run from the later of: 

(a) The day after the expiration date 

of the immediately preceding approval 

period; or 

(b) The actual date of approval of such 

renewal by the United States Trustee. 

§ 58.17 Mandatory duty of approved 

agencies to notify United States Trustees of 

material changes. 

(a) An approved agency shall 

immediately notify the United States 

Trustee in writing of any material 

change. 

(b) An approved agency shall 

immediately notify the United States 

Trustee in writing of any failure by the 

approved agency to comply with any 

standard or requirement specified in 11 

U.S.C. 109(h) or 111, this part, or the 

terms under which the United States 

Trustee approved it to act as an 

approved agency. 

(c) An approved agency shall 

immediately notify the United States 

Trustee in writing of any of the 

following events: 

(1) Notification by the Internal 

Revenue Service or by a state or local 

taxing authority that the approved 

agency has been selected for audit or 

examination regarding its tax-exempt 

status, or any notification of a 

compliance check by the Internal 

Revenue Service or by a state or local 

taxing authority; 

(2) Revocation or termination of the 

approved agency’s tax-exempt status by 

any governmental unit or by any 

judicial officer; 

(3) Cessation of business by the 

approved agency or by any office of the 

agency, or withdrawal from any federal 

judicial district(s) where the approved 

agency is approved; 

(4) Any investigation of, or any 

administrative or judicial action brought 

against, the approved agency by any 

governmental unit; 

(5) Termination or cancellation of any 

surety bond or fidelity insurance; 

(6) Any administrative or judicial 

action brought by any entity that seeks 

recovery against a surety bond or 

fidelity insurance; 

(7) Any action by a governmental unit 

or a court to suspend or revoke the 

approved agency’s articles of 

incorporation, or any license held by the 

approved agency, or any authorization 

necessary to engage in business; 

(8) A suspension, or action to 

suspend, any accreditation held by the 

approved agency, or any withdrawal by 

the approved agency of any application 

for accreditation, or any denial of any 

application of the approved agency for 

accreditation; 

(9) A change in the approved agency’s 

nonprofit status under any applicable 

law; 

(10) Any change in the banks or 

financial institutions used by the 

agency; and 

(11) [reserved]. 

(d) An agency shall notify the United 

States Trustee in writing if any of the 

changes identified in paragraphs (a) 

through (c) of this section occur while 

its application to become an approved 

agency is pending before the United 

States Trustee. 

(e) An approved agency whose name 

or other information appears incorrectly 

on the approved list shall immediately 

submit a written request to the United 

States Trustee asking that the 

information be corrected. 

■ 4. Sections 58.18 through 58.24 are 

added to read as follows: 

§ 58.18 Mandatory duty of approved 

agencies to obtain prior consent of the 

United States Trustee before taking certain 

actions. 

(a) By accepting the designation to act 

as an approved agency, an agency agrees 

to obtain approval from the United 

States Trustee, prior to making any of 

the following changes: 

(1) Cancellation or change in the 

amount of the surety bond or employee 

fidelity bond or insurance; 

(2) The engagement of an independent 

contractor to provide counseling 

services or to have access to, possession 

of, or control over client funds; 

(3) Any increase in the fees, 

contributions, or payments received 

from clients for counseling services or a 

change in the agency’s fee policy; 

(4) Expansion into additional federal 

judicial districts; 

(5) Any changes to the method of 

delivery the approved agency employs 

to provide counseling services; or 

(6) Any changes in the approved 

agency’s counseling services. 

(b) An agency applying to become an 

approved agency shall also obtain 

approval from the United States Trustee 

before taking any action specified in 

paragraph (a) of this section. It shall do 

so by submitting an amended 

application. The agency’s amended 

application shall be accompanied by a 

contemporaneously executed writing, 

signed by the signatory of the 

application, that makes the 

certifications specified in § 58.13(e). 

(c) An approved agency shall not 

transfer or assign its United States 

Trustee approval to act as an approved 

agency. 

§ 58.19 Continuing requirements for 

becoming and remaining approved 

agencies. 

(a) To become an approved agency, an 

agency must affirmatively establish, to 

the satisfaction of the United States 

Trustee, that the agency at the time of 

approval: 

(1) Satisfies every requirement of this 

part; and 

(2) Provides adequate counseling to 

its clients. 

(b) To remain an approved agency, an 

approved agency shall affirmatively 

establish, to the satisfaction of the 

United States Trustee, that the approved 

agency: 

(1) Has satisfied every requirement of 

this part; 

(2) Has provided adequate counseling 

to its clients; and 

(3) Would continue to satisfy both 

paragraphs (b)(1) and (2) of this section 

in the future. 

§ 58.20 Minimum qualifications agencies 

shall meet to become and remain approved 

agencies. 

To meet the minimum qualifications 

set forth in § 58.19, and in addition to 

the other requirements set forth in this 

part, agencies and approved agencies 

shall comply with paragraphs (a) 

through (p) of this section on a 

continuing basis: 

(a) Compliance with all laws. An 

agency shall comply with all applicable 

laws and regulations of the United 

States and each state in which the 

agency provides counseling services 

including, without limitation, all laws 

governing licensing and registration. 

(b) Prohibition on legal advice. An 

agency shall not provide legal advice. 

(c) Structure and organization. An 

agency shall: 

(1) Be lawfully organized and 

operated as a nonprofit entity; and 

(2) Have a board of directors, the 

majority of which: 

(i) Are not relatives; 

(ii) Are not employed by such agency; 

and 

(iii) Will not directly or indirectly 

benefit financially from the outcome of 

the counseling services provided by 

such agency. 

(d) Ethical standards. An agency 

shall: 

(1) Not engage in any conduct or 

transaction, other than counseling 

services, that generates a direct or 

indirect financial benefit for any 

member of the board of directors or 


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trustees, officer, supervisor, or any 

relative thereof; 

(2) Ensure no member of the board of 

directors or trustees, officer, or 

supervisor receives any commissions, 

incentives, bonuses, or benefits 

(monetary or non-monetary) of any kind 

that are directly or indirectly based on 

the financial or legal decisions any 

client makes after requesting counseling 

services; 

(3) Ensure no member of the board of 

directors or trustees, officer or 

supervisor is a relative of an employee 

of the United States Trustee, a trustee 

appointed under 28 U.S.C. 586(a)(1) or 

(b) for any federal judicial district where 

the agency is providing or is applying to 

provide counseling services, a federal 

judge in any federal judicial district 

where the agency is providing or is 

applying to provide counseling services, 

a federal court employee in any federal 

judicial district where the agency is 

providing or is applying to provide 

counseling services, or a certified public 

accountant that audits the agency’s trust 

account; 

(4) Not enter into any referral 

agreement or receive any financial 

benefit that involves the agency paying 

to or receiving from any entity or person 

referral fees for the referral of clients to 

or by the agency, except payments 

under a fair share agreement; 

(5) Not enter into agreements 

involving counseling services that create 

a conflict of interest; and 

(6) Not provide counseling services to 

a client with whom the agency has a 

lender-borrower relationship. 

(e) Use of credit counselors. An 

agency shall have a credit counselor 

provide the counseling services to each 

of the agency’s clients. The credit 

counselor shall interact with the client 

regarding the accuracy of the 

information obtained from the client 

and the alternatives available to the 

client for dealing with his or her current 

financial situation, including the plan 

developed to address such financial 

situation. 

(f) Credit counselor training, 

certification and experience. An agency 

shall: 

(1) Use only counselors who possess 

adequate experience providing credit 

counseling, which shall mean that each 

counselor either: 

(i) Holds a counselor certification and 

who has complied with all continuing 

education requirements necessary to 

maintain his or her counselor 

certification; or 

(ii) Has successfully completed a 

course of study and worked a minimum 

of six months in a related area such as 

personal finance, budgeting, or credit or 

debt management. A course of study 

shall include training in counseling 

skills, personal finance, budgeting, or 

credit or debt management. A counselor 

shall also receive annual continuing 

education in the areas of counseling 

skills, personal finance, budgeting, or 

credit or debt management; 

(2) Demonstrate adequate experience, 

background, and quality in providing 

credit counseling, which shall mean 

that, at a minimum, the agency shall 

either: 

(i) Have experience in providing 

credit counseling for the two years 

immediately preceding the relevant 

application date; or 

(ii) For each office providing 

counseling services, employ at least one 

supervisor who has met the 

qualifications in paragraph (f)(2)(i) of 

this section for no fewer than two of the 

five years preceding the relevant 

application date; 

(3) If offering any component of 

counseling services by a telephone or 

Internet method of delivery, use only 

counselors who, in addition to all other 

requirements, demonstrate sufficient 

experience and proficiency in providing 

such counseling services by those 

methods of delivery, including 

proficiency in employing verification 

procedures to ensure the person 

receiving the counseling services is the 

client, and to determine whether the 

client has completely received 

counseling services. 

(g) No variation in services. An agency 

shall ensure that the type and quality of 

services do not vary based on a client’s 

decision whether to obtain a certificate 

in lieu of other options that may or may 

not be suggested by the agency. 

(h) Use of the telephone and the 

Internet to deliver a component of client 

services. An agency shall: 

(1) Not provide any client diminished 

counseling services because the client 

receives any portion of those counseling 

services by telephone or Internet; 

(2) Confirm the identity of the client 

before receiving counseling services by 

telephone or Internet by: 

(i) Obtaining one or more unique 

personal identifiers from the client and 

assigning an individual access code, 

user ID, or password at the time of 

enrollment; and 

(ii) Requiring the client to provide the 

appropriate access code, user ID, or 

password, and also one or more of the 

unique personal identifiers during the 

course of delivery of the counseling 

services. 

(i) Services to hearing and hearingimpaired clients and potential clients. 

An agency shall furnish toll-free 

telephone numbers for both hearing and 

hearing-impaired clients and potential 

clients whenever telephone 

communication is required. The agency 

shall provide telephone amplification, 

sign language services, or other 

communication methods for hearingimpaired clients or potential clients. 

(j) [reserved]. 

(k) Services to clients and potential 

clients with special needs. An agency 

that provides any portion of its 

counseling in person shall comply with 

all federal, state and local laws 

governing facility accessibility. An 

agency shall also provide or arrange for 

communication assistance for clients or 

potential clients with special needs who 

have difficulty making their service 

needs known. 

(l) Mandatory disclosures to clients 

and potential clients. Prior to providing 

any information to or obtaining any 

information from a client or potential 

client, and prior to rendering any 

counseling service, an agency shall 

disclose: 

(1) The agency’s fee policy, including 

any fees associated with generation of 

the certificate; 

(2) The agency’s policies enabling 

clients to obtain counseling services for 

free or at reduced rates based upon the 

client’s lack of ability to pay. To the 

extent an agency publishes information 

concerning its fees on the Internet, such 

fee information must include the 

agency’s policies enabling clients to 

obtain counseling for free or at reduced 

rates based upon the client’s lack of 

ability to pay; 

(3) The agency’s policy to provide free 

bilingual counseling services or 

professional interpreter assistance to 

any limited English proficient client; 

(4) The agency’s funding sources; 

(5) The counselors’ qualifications; 

(6) The potential impacts on credit 

reports of all alternatives the agency 

may discuss with the client; 

(7) The agency’s policy prohibiting it 

from paying or receiving referral fees for 

the referral of clients, except under a 

fair share agreement; 

(8) The agency’s obligation to provide 

a certificate to the client promptly upon 

the completion of counseling services; 

(9) A statement that the client has the 

opportunity 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), and a 

statement whether or not the agency 

will provide this service. If the agency 

does not provide this service, it shall 

disclose that it may refer the client to 

another approved agency, and shall 

disclose that clients may incur 

additional fees in connection with such 

a referral; 


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(10) The fact that the agency might 

disclose client information to the United 

States Trustee in connection with the 

United States Trustee’s oversight of the 

agency, or during the investigation of 

complaints, during on-site visits, or 

during quality of service reviews; 

(11) The fact that the United States 

Trustee has reviewed only the agency’s 

credit counseling services (and, if 

applicable, its services as a provider of 

a personal financial management 

instructional course pursuant to 11 

U.S.C. 111(d)), and the fact that the 

United States Trustee has neither 

reviewed nor approved any other 

services the agency provides to clients; 

and 

(12) The fact that a client will receive 

a certificate only if the client completes 

counseling services. 

(m) Complaint Procedures. An agency 

shall employ complaint procedures that 

adequately respond to clients’ concerns. 

(n) Background checks. An agency 

shall: 

(1) Conduct a criminal background 

check at least every five years for each 

person providing credit counseling, and 

(2) Not employ anyone as a counselor 

who has been convicted of any felony, 

or any crime involving fraud, 

dishonesty, or false statements, unless 

the United States Trustee determines 

circumstances warrant a waiver of this 

prohibition against employment. 

(o) Agency records. An agency shall 

prepare and retain records that enable 

the United States Trustee to evaluate 

whether the agency is providing 

adequate counseling and acting in 

compliance with all applicable laws and 

this part. All records, including 

documents bearing original signatures, 

shall be maintained in either hard copy 

form or electronically in a format widely 

available commercially. Records that the 

agency shall prepare and retain for a 

minimum of two years, and permit 

review by the United States Trustee 

upon request, shall include: 

(1) Upon the filing of an application 

for probationary approval, all 

information requested by the United 

States Trustee as an estimate, projected 

to the end of the probationary period, in 

the form requested by the United States 

Trustee; 

(2) After probationary or annual 

approval, and for so long as the agency 

remains on the approved list, semiannual reports of historical data (for the 

periods ending June 30 and December 

31 of each year), of the type and in the 

form requested by the United States 

Trustee; these reports shall be submitted 

within 30 days of the end of the 

applicable periods specified in this 

paragraph; 

(3) Annual audited financial 

statements, including the audited 

balance sheet, statement of income and 

retained earnings, and statement of 

changes in financial condition; 

(4) Books, accounts, and records to 

provide a clear and readily 

understandable record of all business 

conducted by the agency, including, 

without limitation, copies of all 

correspondence with or on behalf of the 

client, including the contract between 

the agency and the client and any 

amendments thereto; 

(5) Records concerning the delivery of 

services to clients and potential clients 

with limited English proficiency and 

special needs, and to hearing-impaired 

clients and potential clients, including 

records: 

(i) Of the number of such clients and 

potential clients, and the methods of 

delivery used with respect to such 

clients and potential clients; 

(ii) Of which languages are offered or 

requested and the type of language 

support used or requested by such 

clients or potential clients (e.g., 

bilingual instructor, in-person or 

telephone interpreter, translated web 

instruction); 

(iii) Detailing the agency’s provision 

of services to such clients and potential 

clients; and 

(iv) Supporting any justification if the 

agency did not provide services to such 

potential clients, including the number 

of potential clients not served, the 

languages involved, and the number of 

referrals provided; 

(6) Records concerning the delivery of 

counseling services to clients for free or 

at reduced rates based upon the client’s 

lack of ability to pay, including records 

of the number of clients for whom the 

agency waived all of its fees under 

§ 58.21(b)(1)(i), the number of clients for 

whom the agency waived all or part of 

its fees under § 58.21(b)(1)(ii), and the 

number of clients for whom the agency 

voluntarily waived all or part of its fees 

under § 58.21(c); 

(7) Records of complaints and the 

agency’s responses thereto; 

(8) Records that enable the agency to 

verify the authenticity of certificates 

their clients file in bankruptcy cases; 

and 

(9) Records that enable the agency to 

issue replacement certificates. 

(p) Additional minimum 

requirements. An agency shall: 

(1) Provide records to the United 

States Trustee upon request; 

(2) Cooperate with the United States 

Trustee by allowing scheduled and 

unscheduled on-site visits, complaint 

investigations, or other reviews of the 

agency’s qualifications to be an 

approved agency; 

(3) Cooperate with the United States 

Trustee by promptly responding to 

questions or inquiries from the United 

States Trustee; 

(4) Assist the United States Trustee in 

identifying and investigating suspected 

fraud and abuse by any party 

participating in the credit counseling or 

bankruptcy process; 

(5) Not exclude any client or creditor 

from a debt repayment plan because the 

creditor declines to make a fair share 

contribution to the agency; 

(6) Take no action that would limit, 

inhibit, or prevent a client from bringing 

an action or claim for damages against 

an agency, as provided in 11 U.S.C. 

111(g)(2); 

(7) Refer clients and prospective 

clients for counseling services only to 

agencies that have been approved by a 

United States Trustee to provide such 

services; 

(8) Comply with the United States 

Trustee’s directions on approved 

advertising, including without 

limitation those set forth in Appendix A 

to the application; 

(9) Not disclose or provide to a credit 

reporting agency any information 

concerning whether a client has 

received or sought instruction 

concerning credit counseling or 

personal financial management from an 

agency; 

(10) Not expose the client to 

commercial advertising as part of or 

during the client’s receipt of any 

counseling services, and never market 

or sell financial products or services 

during the counseling session provided, 

however, this provision does not 

prohibit an agency from generally 

discussing all available financial 

products and services; 

(11) Not sell information about any 

client or potential client to any third 

party without the client or potential 

client’s prior written permission; 

(12) If the agency is tax-exempt, 

submit a completed and signed tax 

waiver permitting and directing the 

Internal Revenue Service to provide the 

United States Trustee with access to the 

Internal Revenue Service’s files relating 

to the agency; 

(13) Comply with the requirements 

elsewhere in this part concerning fees 

for credit counseling services and fee 

waiver policies; and 

(14) Comply with the requirements 

elsewhere in this part concerning 

certificates. 


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§ 58.21 Minimum requirements to become 

and remain approved agencies relating to 

fees. 

(a) If a fee for, or relating to, credit 

counseling services is charged by an 

agency, such fee shall be reasonable: 

(1) A fee of $50 or less for credit 

counseling services is presumed to be 

reasonable and an agency need not 

obtain prior approval of the United 

States Trustee to charge such a fee; 

(2) A fee exceeding $50 for credit 

counseling services is not presumed to 

be reasonable and an agency must 

obtain prior approval from the United 

States Trustee to charge such a fee. The 

agency bears the burden of establishing 

that its proposed fee is reasonable. At a 

minimum, the agency must demonstrate 

that its cost for delivering such services 

justify the fee. An agency that 

previously received permission to 

charge a higher fee need not reapply for 

permission to charge that fee during the 

agency’s annual review. Any new 

requests for permission to charge more 

than previously approved, however, 

must be submitted to EOUST for 

approval; and 

(3) The United States Trustee shall 

review the amount of the fee set forth in 

paragraphs (a)(1) and (2) of this section 

one year after the effective date of this 

part and then periodically, but not less 

frequently than every four years, to 

determine the reasonableness of the fee. 

Fee amounts and any revisions thereto 

shall be determined by current costs, 

using a method of analysis consistent 

with widely accepted accounting 

principles and practices, and calculated 

in accordance with the provisions of 

federal law as applicable. Fee amounts 

and any revisions thereto shall be 

published in the Federal Register. 

(b)(1) An agency shall waive the fee 

in whole or in part whenever a client 

demonstrates a lack of ability to pay the 

fee. 

(i) A client presumptively lacks the 

ability to pay the fee if the client’s 

household current income is less than 

150 percent of the poverty guidelines 

updated periodically in the Federal 

Register by the U.S. Department of 

Health and Human Services under the 

authority of 42 U.S.C. 9902(2), as 

adjusted from time to time, for a 

household or family of the size involved 

in the fee determination. 

(ii) The presumption shall be 

rebutted, and the agency may charge the 

client a reduced fee, if the agency 

determines, based on income 

information the client submits in 

connection with counseling services, 

that the client is able to pay the fee in 

a reduced amount. Nothing in this 

section requires an agency to charge a 

fee to clients whose household income 

exceeds the amount set forth in 

paragraph (b)(1)(i) of this section, or 

who are able to demonstrate ability to 

pay based on income as described in 

this section. 

(iii) An agency shall disclose its fee 

policy, including the criteria on which 

it relies in determining a client’s 

eligibility for reduced fees, and the 

agency’s policy for collecting fees 

pursuant to paragraph (b)(1)(ii) of this 

section, in accordance with § 58.20(l)(2). 

(2) The United States Trustee shall 

review the basis for the mandatory fee 

waiver policy set forth in paragraph 

(b)(1) of this section one year after the 

effective date of this part and then 

periodically, but not less frequently 

than every four years, to determine the 

impact of that fee waiver policy on 

clients and agencies. Any revisions to 

the mandatory fee waiver policy set 

forth in paragraph (b)(1) of this section 

shall be published in the Federal 

Register. 

(c) Notwithstanding the requirements 

of paragraph (b) of this section, an 

agency may also waive fees based upon 

other considerations, including, but not 

limited to: 

(1) The client’s net worth; 

(2) The percentage of the client’s 

income from government assistance 

programs; 

(3) Whether the client is receiving pro 

bono legal services in connection with 

a filed or anticipated bankruptcy case; 

or 

(4) If the combined current monthly 

income, as defined in 11 U.S.C. 

101(10A), of the client and his or her 

spouse, when multiplied times twelve, 

is equal to or less than the amounts set 

forth in 11 U.S.C. 707(b)(7). 

(d) An agency shall not require a 

client to purchase counseling services in 

connection with the purchase of any 

other service offered by the agency. 

§ 58.22 Minimum requirements to become 

and remain approved agencies relating to 

certificates. 

(a) An approved agency shall send a 

certificate only to the client who took 

and completed the counseling services, 

except that an approved agency shall 

instead send a certificate to the attorney 

of a client who took and completed 

counseling services if the client 

specifically directs the agency to do so. 

In the case of Internet counseling and 

automated telephone counseling, 

counseling is not complete until the 

client has engaged in interaction with a 

counselor, whether by electronic mail, 

live chat, or telephone, following the 

automated portion of the counseling 

session. 

(b) An approved agency shall attach to 

the certificate the client’s debt 

repayment plan (if any). 

(c) An approved agency shall send a 

certificate to a client no later than one 

business day after the client completed 

counseling services. If a client has 

completed counseling services, an 

agency may not withhold certificate 

issuance for any reason. An agency may 

not consider counseling services 

incomplete based solely on the client’s 

failure to pay the fee. 

(d) If an approved agency provides 

other financial counseling in addition to 

counseling services, and such other 

financial counseling satisfies the 

requirements for counseling services 

specified in 11 U.S.C. 109(h) and 111, 

and this part, a person completing such 

other financial counseling is a client 

and the approved agency shall send a 

certificate to the client no later than one 

business day after the client’s request. 

The approved agency shall not charge 

the client any additional fee except any 

separate fee charged for the issuance of 

the certificate, in accordance with 

§ 58.20(l)(1). 

(e) An approved agency shall issue 

certificates only in the form approved 

by the United States Trustee, and shall 

generate the form using the Certificate 

Generating System maintained by the 

United States Trustee, except under 

exigent circumstances with notice to the 

United States Trustee. 

(f) An approved agency shall have 

sufficient computer capabilities to issue 

certificates from the United States 

Trustee’s Certificate Generating System. 

(g) An approved agency shall issue a 

certificate to each client who completes 

counseling services. Spouses receiving 

counseling services jointly shall each 

receive a certificate. 

(h) An approved agency shall issue a 

replacement certificate to a client who 

requests one. 

(i) An approved agency shall not file 

certificates with the court. 

(j) Only an authorized officer, 

supervisor or employee of an approved 

agency shall issue a certificate, and an 

approved agency shall not transfer or 

delegate authority to issue certificates to 

any other entity. 

(k) An approved agency shall 

implement internal controls sufficient to 

prevent unauthorized issuance of 

certificates. 

(l) An approved agency shall ensure 

the signature affixed to a certificate is 

that of an officer, supervisor or 

employee authorized to issue the 

certificate, in accordance with 

paragraph (j) of this section, which 

signature shall be either: 

(1) An original signature; or 


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(2) In a format approved for electronic 

filing with the court (most typically in 

the form/s/name of counselor). 

(m) An approved agency shall affix to 

the certificate the exact name under 

which the approved agency is 

incorporated or organized. 

(n) An approved agency shall identify 

on the certificate: 

(1) The specific federal judicial 

district requested by the client; 

(2) Whether counseling services were 

provided in person, by telephone or via 

the Internet; 

(3) The date and time (including the 

time zone) on which counseling services 

were completed by the client; and 

(4) The name of the counselor that 

provided the counseling services. 

(o) An approved agency shall affix the 

client’s full, accurate name to the 

certificate. If the counseling services are 

obtained by a client through a duly 

authorized representative, the certificate 

also shall set forth the name of the legal 

representative and legal capacity of that 

representative. 

(p) If an individual enters into a debt 

repayment plan after completing credit 

counseling, upon the client’s request 

after the completion or termination of 

the debt repayment plan, the approved 

agency shall: 

(1) Provide such additional credit 

counseling as is necessary at such time 

to comply with the requirements 

specified in 11 U.S.C. 109(h) and 111, 

and this part, including reviewing the 

client’s current financial condition and 

counseling the client regarding the 

alternatives to resolve the client’s credit 

problems; 

(2) Send a certificate to the client no 

later than one business day after the 

client completed such additional 

counseling; and 

(3) Not charge the client any 

additional fee except any separate fee 

charged for the issuance of the 

certificate, in accordance with 

§ 58.20(l)(1). 

§ 58.23 Minimum financial requirements 

and bonding and insurance requirements 

for agencies offering debt repayment plans. 

If an agency offers or has offered debt 

repayment plans, an agency shall 

possess adequate financial resources to 

provide continuing support services for 

such plans over the life of any debt 

repayment plan, and provide for the 

safekeeping of client funds, which shall 

include: 

(a) Depositing all client funds into a 

deposit account, held in trust, at a 

federally insured depository institution. 

Each such trust account shall be 

established in a fiduciary capacity and 

shall be in full compliance with federal 

law such that each client’s funds shall 

be protected by federal deposit 

insurance up to the maximum amount 

allowable by federal law. 

(b) Keeping and maintaining books, 

accounts, and records to provide a clear 

and readily understandable record of all 

business conducted by the agency, 

including without limitation, all of the 

following: 

(1) Separate files for each client’s 

account that include copies of all 

correspondence with or on behalf of the 

client, including: 

(i) All agreements with all entities, 

including the contract between the 

agency and the client and any 

amendments thereto; 

(ii) The analysis of the client’s budget; 

(iii) Correspondence between the 

agency and the client’s creditors; 

(iv) The notice given to creditors of 

any debt repayment plan; and 

(v) All written statements of account 

provided to the client and subsidiary 

ledgers concerning any debt repayment 

plan; 

(2) A trust account general ledger 

reflecting all deposits to and 

disbursements from all trust accounts, 

which shall be kept current at all times; 

(3) A reconciliation of the trust 

accounts, prepared at least once a 

month; and 

(4) An operating account general 

ledger reflecting all of the agency’s 

financial transactions involving the 

agency’s operating account, which shall 

be kept current at least on a monthly 

basis. 

(c) Allowing an independent certified 

public accounting firm to audit the trust 

accounts annually in accordance with 

generally accepted accounting 

principles as defined by the American 

Institute of Certified Public Accountants 

and any Statement of Work prepared by 

the United States Trustee, which audit 

shall include: 

(1) A report of all trust account 

activity including: 

(i) The balance of each trust account 

at the beginning and end of the period; 

(ii) The total of all receipts from 

clients and disbursements to creditors 

during the reporting period; 

(iii) The total of all disbursements to 

the agency; and 

(iv) The reconciliation of each trust 

account; 

(2) A report of all exceptions (e.g., 

discrepancies, irregularities, and errors) 

found, regardless of materiality; and 

(3) An evaluation of the agency’s trust 

account internal controls and its 

computer operations to determine 

whether it provides a reasonable 

assurance that the trust funds are 

safeguarded against loss from 

unauthorized use or disposition. 

(d) Obtaining a surety bond payable to 

the United States, as follows: 

(1) Subject to the minimum amount of 

$5,000, the amount of such surety bond 

shall be the lesser of: 

(i) Two percent of the agency’s 

disbursements made during the twelve 

months immediately prior to 

submission of the application from all 

trust accounts attributable to the federal 

judicial districts (or, if not feasible to 

determine, the states) in which the 

agency seeks approval from the United 

States Trustee; or 

(ii) Equal to the average daily balance 

maintained for the six months 

immediately prior to submission of the 

application in all trust accounts 

attributable to the federal judicial 

districts (or, if not feasible to determine, 

the states) in which the agency seeks 

approval from the United States Trustee; 

(2) The agency may receive an offset 

or credit against the surety bond amount 

determined under paragraph (d)(1) of 

this section if: 

(i) The agency has previously 

obtained a surety bond, or similar cash, 

securities, insurance (other than 

employee fidelity insurance), or letter of 

credit in compliance with the licensing 

requirements of the state in which the 

agency seeks approval from the United 

States Trustee; 

(ii) Such surety bond, or similar cash, 

securities, insurance (other than 

employee fidelity insurance), or letter of 

credit provides protection for the clients 

of the agency; 

(iii) Such surety bond, or similar cash, 

securities, insurance (other than 

employee fidelity insurance), or letter of 

credit, is written in favor of the state or 

the appropriate state agency; and 

(iv) The amount of the offset or credit 

shall be the lesser of: 

(A) The principal amount of such 

surety bond, or similar cash, securities, 

insurance (other than employee fidelity 

insurance), or letter of credit; or 

(B) The surety bond amount 

determined under paragraph (d)(1) of 

this section; 

(3) If an agency has contracted with 

an independent contractor to administer 

any part of its debt repayment plans: 

(i) Except as provided in paragraphs 

(d)(3)(ii) and (d)(3)(iii) of this section, 

the independent contractor shall: 

(A) Be an approved agency; or 

(B) If the independent contractor is 

not an approved agency, then the 

independent contractor shall: 

(1) Be specifically covered under the 

agency’s surety bond required under 

paragraph (d)(1) of this section; or 

(2) Have a surety bond that meets the 

requirements of paragraph (d)(1) of this 

section; and 


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(3) Agree in writing to allow the 

United States Trustee to audit the 

independent contractor’s trust accounts 

for the debt repayment plans 

administered on behalf of the agency 

and to review the independent 

contractor’s internal controls and 

administrative procedures; 

(ii) If the independent contractor 

holds funds for transmission for five 

days or less, then the amount of the 

required surety bond under paragraph 

(d)(3)(i)(B) of this section shall be 

$500,000; 

(iii) If the independent contractor 

performs only electronic fund transfers 

on the agency’s behalf, then the 

independent contractor need not satisfy 

the requirements of paragraph (d)(3)(i) 

of this section during such time as the 

independent contractor is authorized by 

the National Automated Clearing House 

Association to participate in the 

Automated Clearing House system. 

(e) Obtaining either adequate 

employee bonding or fidelity insurance, 

as follows: 

(1) Subject to the minimum amount 

set forth below, the amount of such 

bonding or fidelity insurance shall be 50 

percent of the surety bond amount 

calculated under paragraph (d)(1) of this 

section, prior to any offset or credit that 

the agency may receive under paragraph 

(d)(2) of this section; provided, 

however, that at a minimum, the 

employee bond or fidelity insurance 

must be $5,000; 

(2) An agency may receive an offset or 

credit against the employee bond or 

fidelity insurance amount determined 

under paragraph (e)(1) of this section if: 

(i) The agency has previously 

obtained an employee bond or fidelity 

insurance in compliance with the 

requirements of a state in which the 

agency seeks approval from the United 

States Trustee; and 

(ii) The deductible does not exceed a 

reasonable amount considering the 

financial resources of the agency; and 

(iii) The amount of the offset or credit 

shall be the lesser of: 

(A) The principal amount of such 

employee bond or fidelity insurance; or 

(B) The employee bond or fidelity 

insurance amount determined under 

paragraph (e)(1) of this section. 

(f) An agency that ceases to offer debt 

repayment plans to individuals who 

receive counseling from such agency 

pursuant to 11 U.S.C. 109(h) shall, 

concerning any debt repayment plans it 

services that remain in existence with 

respect to such individuals as of the 

date it ceases to offer debt repayment 

plans to new clients, continue to 

comply with all of the requirements of 

this section. 

(1) The agency may seek a waiver of 

the bonding and insurance requirements 

set forth in paragraphs (d) and (e) of this 

section if: 

(i) The agency has in effect, as of the 

date it ceases to offer debt repayment 

plans, a written agreement to transfer all 

such debt repayment plans to another 

approved agency for servicing, provided 

that: 

(A) Transfers to another approved 

agency pursuant to such agreements 

must be completed within 60 days of 

the date the agency ceases to offer debt 

repayment plans to individuals who 

receive counseling from such agency 

pursuant to 11 U.S.C. § 109(h); and 

(B) The agency provides written 

notice to clients whose debt repayment 

plans it intends to transfer within the 

time described in paragraph (f)(1)(i)(A) 

of this section, identifying the approved 

agency to which the clients’ plans will 

be transferred, any fees associated with 

servicing by the approved agency, and 

any fees associated with the transfer; or 

(ii) In the reasonable determination of 

the United States Trustee, taking into 

account the facts and circumstances 

surrounding the agency’s business and 

the terms of the bond, compliance with 

the bonding and insurance requirements 

set forth in paragraphs (d) and (e) of this 

section would impose an undue 

hardship on the agency. 

§ 58.24 Procedures for obtaining final 

agency action on United States Trustees’ 

decisions to deny agencies’ applications 

and to remove approved agencies from the 

approved list. 

(a) The United States Trustee shall 

remove an approved agency from the 

approved list whenever an approved 

agency requests its removal in writing. 

(b) The United States Trustee may 

issue a decision to remove an approved 

agency from the approved list, and 

thereby terminate the approved agency’s 

authorization to provide counseling 

services, at any time. 

(c) The United States Trustee may 

issue a decision to deny an agency’s 

application or to remove an agency from 

the approved list whenever the United 

States Trustee determines that the 

agency has failed to comply with the 

standards or requirements specified in 

11 U.S.C. 109(h) or 111, this part, or the 

terms under which the United States 

Trustee designated it to act as an 

approved agency, including, but not 

limited to, finding any of the following: 

(1) The agency is not employing 

adequate procedures for safekeeping of 

client funds or paying client funds, 

which could result in a loss to a client; 

(2) The agency’s surety bond has been 

canceled; 

(3) Any entity has revoked the 

agency’s nonprofit status, even if that 

revocation is subject to further 

administrative or judicial litigation, 

review or appeal; 

(4) Any entity has suspended or 

revoked the agency’s license to do 

business in any jurisdiction; or 

(5) Any United States district court 

has removed the agency under 11 U.S.C. 

§ 111(e). 

(d) If the Internal Revenue Service 

revokes an agency’s tax exempt status, 

the United States Trustee shall promptly 

commence an investigation to determine 

whether any of the factors set forth in 

paragraphs (c)(1) through (5) of this 

section exist. 

(e) The United States Trustee shall 

provide to the agency in writing a notice 

of any decision either to: 

(1) Deny the agency’s application; or 

(2) Remove the agency from the 

approved list. 

(f) The notice shall state the reason(s) 

for the decision and shall reference any 

documents or communications relied 

upon in reaching the denial or removal 

decision. To the extent authorized by 

law, the United States Trustee shall 

provide to the agency copies of any such 

documents that were not supplied to the 

United States Trustee by the agency. 

The notice shall be sent to the agency 

by overnight courier, for delivery the 

next business day. 

(g) Except as provided in paragraph (i) 

of this section, the notice shall advise 

the agency that the denial or removal 

decision shall become final agency 

action, and unreviewable, unless the 

agency submits in writing a request for 

review by the Director no later than 21 

calendar days from the date of the 

notice to the agency. 

(h) Except as provided in paragraph 

(i) of this section, the decision to deny 

an agency’s application or remove an 

agency from the approved list shall take 

effect upon: 

(1) The expiration of the agency’s time 

to seek review from the Director, if the 

agency fails to timely seek review of a 

denial or removal decision; or 

(2) The issuance by the Director of a 

final decision, if the agency timely seeks 

such review. 

(i) The United States Trustee may 

provide that a decision to remove an 

agency from the approved list is 

effective immediately and deny the 

agency the right to provide counseling 

services whenever the United States 

Trustee finds any of the factors set forth 

in paragraphs (c)(1) through (5) of this 

section. 

(j) An agency’s request for review 

shall be in writing and shall fully 

describe why the agency disagrees with 


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Federal Register / Vol. 78, No. 50 / Thursday, March 14, 2013 / Rules and Regulations 16159 

the denial or removal decision, and 

shall be accompanied by all documents 

and materials the agency wants the 

Director to consider in reviewing the 

denial or removal decision. The agency 

shall send the original and one copy of 

the request for review, including all 

accompanying documents and 

materials, to the Office of the Director 

by overnight courier, for delivery the 

next business day. To be timely, a 

request for review shall be received at 

the Office of the Director no later than 

21 calendar days from the date of the 

notice to the agency. 

(k) The United States Trustee shall 

have 21 calendar days from the date of 

the agency’s request for review to 

submit to the Director a written 

response regarding the matters raised in 

the agency’s request for review. The 

United States Trustee shall provide a 

copy of this response to the agency by 

overnight courier, for delivery the next 

business day. 

(l) The Director may seek additional 

information from any party in the 

manner and to the extent the Director 

deems appropriate. 

(m) In reviewing the decision to deny 

an agency’s application or remove an 

agency from the approved list, the 

Director shall determine: 

(1) Whether the denial or removal 

decision is supported by the record; and 

(2) Whether the denial or removal 

decision constitutes an appropriate 

exercise of discretion. 

(n) Except as provided in paragraph 

(o) of this section, the Director shall 

issue a final decision no later than 60 

calendar days from the receipt of the 

agency’s request for review, unless the 

agency agrees to a longer period of time 

or the Director extends the deadline. 

The Director’s final decision on the 

agency’s request for review shall 

constitute final agency action. 

(o) Whenever the United States 

Trustee provides under paragraph (i) of 

this section that a decision to remove an 

agency from the approved list is 

effective immediately, the Director shall 

issue a written decision no later than 15 

calendar days from the receipt of the 

agency’s request for review, unless the 

agency agrees to a longer period of time. 

The decision shall: 

(1) Be limited to deciding whether the 

determination that the removal decision 

should take effect immediately was 

supported by the record and an 

appropriate exercise of discretion; 

(2) Constitute final agency action only 

on the issue of whether the removal 

decision should take effect immediately; 

and 

(3) Not constitute final agency action 

on the ultimate issue of whether the 

agency should be removed from the 

approved list; after issuing the decision, 

the Director shall issue a final decision 

by the deadline set forth in paragraph 

(n) of this section. 

(p) In reaching a decision under 

paragraphs (n) and (o) of this section, 

the Director may specify a person to act 

as a reviewing official. The reviewing 

official’s duties shall be specified by the 

Director on a case-by-case basis, and 

may include reviewing the record, 

obtaining additional information from 

the participants, providing the Director 

with written recommendations, and 

such other duties as the Director shall 

prescribe in a particular case. 

(q) An agency that files a request for 

review shall bear its own costs and 

expenses, including counsel fees. 

(r) When a decision to remove an 

agency from the approved list takes 

effect, the agency shall: 

(1) Immediately cease providing 

counseling services to clients and shall 

not provide counseling services to 

potential clients; 

(2) No later than three business days 

after the date of removal, send all 

certificates to all clients who completed 

counseling services prior to the agency’s 

removal from the approved list; 

(3) No later than three business days 

after the date of removal, return all fees 

to clients and potential clients who had 

paid for counseling services, but had not 

completely received them; and 

(4) Transfer any debt repayment plans 

that the agency is administering to 

another approved agency. 

(s) An agency must exhaust all 

administrative remedies before seeking 

redress in any court of competent 

jurisdiction. 

Dated: February 14, 2013. 

Clifford J. White III, 

Director, Executive Office for United States 

Trustees. 

[FR Doc. 2013–04361 Filed 3–13–13; 8:45 am] 

BILLING CODE 4410–40–P 

DEPARTMENT OF JUSTICE 

28 CFR Part 58 

[Docket No EOUST 104] 

RIN 1105–AB31 

Application Procedures and Criteria for 

Approval of Providers of a Personal 

Financial Management Instructional 

Course by United States Trustees 

AGENCY: Executive Office for United 

States Trustees (‘‘EOUST’’), Justice. 

ACTION: Final rule. 

SUMMARY: This final rule (‘‘rule’’) sets 

forth procedures and criteria United 

States Trustees shall use when 

determining whether applicants seeking 

to become and remain approved 

providers of a personal financial 

management instructional course 

(‘‘providers’’) satisfy all prerequisites of 

the United States Code, as implemented 

under this rule. Under the current law, 

individual debtors must participate in 

an instructional course concerning 

personal financial management 

(‘‘instructional course’’ or ‘‘debtor 

education’’) before receiving a discharge 

of debts. The current law enumerates 

mandatory prerequisites and minimum 

standards applicants seeking to become 

approved providers must meet. Under 

this rule, United States Trustees will 

approve applicants for inclusion on 

publicly available provider lists in one 

or more federal judicial districts if an 

applicant establishes it meets all the 

requirements of the United States Code, 

as implemented under this rule. After 

obtaining such approval, a provider 

shall be authorized to provide an 

instructional course in a federal judicial 

district during the time the provider 

remains approved. 

EOUST intends to add to its 

regulations governing debtor education 

providers, two new provisions not 

previously included in the proposed 

rule. The first provision will amend 

section 58.30(c)(5) to require providers 

to notify the United States Trustee of 

certain actions pursuant to 11 U.S.C. 

111(g)(2) or other consumer protection 

statutes, such as an entry of judgment or 

mediation award, or the provider’s entry 

into a settlement order, consent decree, 

or assurance of voluntary compliance. 

The second provision will amend 

section 58.33(i) to require a provider to 

assist an individual with limited 

English proficiency by expeditiously 

directing the individual to a provider 

that can provide instruction in the 

language of the individual’s choice. 

Because these provisions were not 

discussed in the proposed rule 

published on November 14, 2008, 

EOUST will publish another Notice of 

Proposed Rulemaking requesting public 

comment with respect to these two 

provisions. 

DATES: Effective Date: This rule is 

effective April 15, 2013. 

ADDRESSES: EOUST, 441 G Street, NW., 

Suite 6150, Washington, DC, 20530. 

FOR FURTHER INFORMATION CONTACT: 

Doreen Solomon, Assistant Director for 

Oversight on (202) 307–2829 (not a tollfree number), Wendy Tien, Deputy 

Assistant Director for Oversight on (202) 

307–3698 (not a toll-free number), or 

Larry Wahlquist, Office of the General 


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