Credit Counseling Organizations - Criteria for Exemption - Code Section 501(q)


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