What has the IRS done to stop abuses in the credit counseling industry?

The IRS has revoked, terminated or proposed revocation of over half of the organizations examined. By rigorously reviewing new applications, we are able to prevent abusive organizations from obtaining tax exemption or continuing to hide behind their tax exempt status. Working with other IRS divisions, we developed a process to evaluate entities related to credit counseling organizations, such as related for-profit businesses, preparers and individuals. In addition, we are coordinating our efforts closely with state enforcement officials and the Federal Trade Commission. 

To help identify organizations that provide credit counseling services, we added a question to Form 990 (Part IV, 9), which asks whether or not the organization provided credit counseling, debt management, credit repair, or debt negotiation services.  If the organization answers in the affirmative, it must complete Schedule D, which requires organizations to report on certain amounts held in escrow or custodial accounts for debtors.