What does Internal Revenue Code section 501(q) require for credit counseling organizations exempt under Code section 501(c)(3) or 501(c)(4)?

In addition to general legal requirements of section 501(c)(3) or 501(c)(4) , an organization must meet the following rules:

  • Services – Must provide credit counseling services tailored to the specific needs and circumstances of the consumer
  • Loans – Cannot make loans to debtors unless no fees or interest
  • Credit Repair – Can only provide incidental services to improve consumer credit records and credit history, and cannot charge a separate fee for such services
  • Ability to Pay – Cannot refuse services based on ability to pay or ineligibility/unwillingness of consumer to enroll in a debt management plan (“DMP”)
  • Fee Policy – Must charge reasonable fees and provide waivers if consumer is unable to pay
  • Board Composition – Majority of members must represent broad interests of the public; maximum of 49 percent can be employed by organization or benefit from it
  • Ownership – Cannot own more than 35 percent of an entity that is involved in the credit counseling or similar business
  • Referrals – Cannot pay for referrals or receive amounts for providing referrals for debt management plans