“Lightning striking again
And again and again and again”
--Lou Christie

It is rare for lightening to strike in the same place twice.

The same holds true for Internal Revenue Service audits. Each time the IRS audits a different organization, using different auditors in different parts of the country, it is going to come out with different results.

That is why I found a recent Washington Post article incredible.

The article in the Post reported that the IRS has audited 41 alleged nonprofit organizations that offer credit counseling services, and in ALL 41 cases, the IRS recommended that the organization’s tax exempt status be revoked.

Think about it for a second. Forty-one times in 41 different places, the IRS did an audit and all 41 auditors concluded that the IRS needed to take severe action.

I do not think there is something wrong with the IRS. However, I think there is something wrong with the “nonprofit” credit counseling industry.

 Taking away the tax exempt status is the IRS’ version of the death penalty. No tax exempt organization is going to operate as a tax paying company and survive.

Not one of the 41 companies came away with a clean audit or a slap on the wrist. If the IRS cannot find one single organization that is doing it right, then we need to forget about the current system and start from scratch.

This is not an industry with a problem.  This is an industry that needs to be shut down.

Although shutting down “nonprofit” credit counseling sounds like a good idea, there is a small problem.  Last year, Congress added a bonehead clause to “bankruptcy reform” legislation. The clause REQUIRES anyone wanting to file bankruptcy to spend money on credit counseling.

Because of the new law, people are being forced into credit counseling and as a result, paying big money for it.  Obviously, they are not getting what they paid for.  

The same article said the IRS has begun criminal investigations. I hope every U.S. Attorney puts it on the top of his prosecution list. 

Credit counseling companies were supposedly set up to help the poorest and the most desperate get out of debt.  Instead, Congress has forced these debtors to become prey.

There is no reason for people near bankruptcy to seek credit counseling, even if the credit counselors are on the up and up.  There have been some allegations that credit counselors receive fees from banks issuing credit cards and that going to a credit counselor counts against a person’s credit score.

A person thinking about bankruptcy needs to talk to lawyer who works for them and them alone.

It is obvious that the credit counseling people must of had great lobbyists working for them.  My company would make more money if Congress forced people to come to me but few industries get the sweet deal that the credit counseling people got.   

The whole “bankruptcy reform” bill is an example of Congress at its worst.   The bill was not designed to help working class people or small businesses; it was a bill designed to let the richest credit card issuers get richer.

It was welfare for billion dollar companies. It was also welfare for the Congressmen who received big campaign contributions from the credit card issuers.

Poor people do not attend $1000 political fundraisers unless they are there to wash the dishes afterwards.  

Every Kentucky Congressman, Republican and Democrat, voted for the credit card company welfare bill.   I would love to know their opinions on the recent IRS audits.

Since the “bankruptcy reform” was one of the few triumphs in the second term for the Bush administration, the credit counseling companies cannot claim the IRS audits as political persecution.    

What happens to the people who are laid off or ill and need to file bankruptcy?  The law says they need to go back to the same clowns that the IRS is shutting down.

Now that the IRS’ record is 41 for 41 in audits, I wonder what will happen if they audit every single company that is in the credit counseling business.

If they do, I suspect that lightening will keep striking again and again and again.

Don McNay is President of McNay Settlement Group where we think welfare should be for the needy, not the greedy.   You can write to him at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it or read other things he has written at www.donmcnay.com.  His column is syndicated on the CNHI News Service.