The law is the result of widespread abuse in an industry that victimized consumers who in some cases have been required to go through credit counseling as part of the new federal bankruptcy laws.

The new credit counseling law does not take effect until next year -- which means right now, if you respond to a credit counseling ad, chances are you'll get someone looking to make a profit at your expense.

Bettie and William Yarwood are lucky. At one point, the Tacoma couple had 41 creditors.

"We paid our bills on time, I mean we had no problem," said Bettie. "Then he retired."

William retired from the military, but the couple's bills remained on active duty. The original balance in 1999 was $116,98.21.

"A hundred and 16 thousand, 98 dollars and 21 cents," Bettie repeated, shaking her head as the couple sat in the living room writing out their monthly payment to a credit counseling agency.

Lucky for them, they contacted one of the few truly non-profit credit counseling agencies in the Puget Sound region.

Consumer Counseling Northwest helped consolidate all their bills, negotiate lower interest rates with creditors and work out a payment plan that would allow them to pay their debt and still have money to live on.

The Yarwood's paid a nominal monthly donation to help cover some of the organization's administrative expenses. "Fifteen dollars a month! All this time! Fifteen dollars a month!"

By contrast, an IRS audit this year found many credit counseling companies charging exorbitant up-front fees, and high monthly fees, with poor or no financial review.

Renee Chamkunthod, the credit counseling specialist assigned to the Yardwood's account, says many for-profit companies get big percentages back from creditors when people make their monthly payments.

"And a lot of these places that are open now won't take like hospital bills, doctor bills, because they get no percentage back on them," she said at CCNW's office in University Place. "We take everything. We don't care. We take everything."

The new law, recently signed by President Bush, limits the percentage a creditor can pay back a credit counseling agency. It also prohibits charging up-front fees based on total debt. Many companies charge an initial payment that's equal to the monthly payment a you would make under the debt management plan.

In the Yarwood's case, they would have had to pay $2,000 up front before they even stared consolidating and paying off their debts. Until recently, $2,000 a month is the amount they've been sending Consumer Counseling Northwest which in turn distributed payments to their various creditors.

Under the new law, credit counselors will also have to do a complete review of your debt and income situation and your living expenses -- and tailor a plan that suits your financial needs so consumers who need help will be able to stick to a budget, get budgeting and debt management classes, and keep up their monthly payments like Bettie and William.

"The list starts getting a little shorter, and a little shorter," Bettie said as she thumbed through the spiral notebooks where she kept track of every single bill.

On by one, the bills get paid off. As we sat in their living room, Bettie filled out money orders for the couple's final bill payment to Consumer Counseling Northwest.

"One thousand four hundred sixty eight dollars and twenty four cents," Bettie read the amounts that will be distributed to wipe out the last balanced still owed to their creditors.

"That's the final payoff."

More than $116,000 paid in full with the help of the same non-profit credit counselor they started with seven years ago.

"It's wonderful!" said Renee Chamkunthod. "I'm just thrilled. They've been around so long, I'm going to miss them!"

Again, until the new law kicks in next year there's still a high risk the credit counselor you come across will be looking for big profit.

So ask about fees and do not sign with anyone who wants big up front payments.

If you're already with one of the profit companies and want to change to a non-profit, you may be stuck. Many creditors will only approve you for one credit counseling arrangement in one year, and a maximum of two in five years, so you really have to know who you're dealing with.

For More Information:

http://www.azstarnet.com/business/145737

http://www.irs.gov/newsroom/article/0,,id=156996,00.html

http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre41.htm

http://www.nfcc.org/

http://ccnw.org/