The IRS may be good for something. BusinessWeek reported yesterday that the IRS has revoked the tax-exempt status of 41 “nonprofit” credit counseling agencies.

You have heard their ads, and if you are wrestling with debt, perhaps you have considered calling them. But many of these credit counseling organizations are nothing more than unscrupulous hucksters willing to prey off of debtors’ desperation. How?

Most will make lofty promises of negotiating lower interest rates and reduced monthly payments with your creditors in exchange for an initial and/or monthly “donation”. The organization will then collect one monthly payment from you and distribute it amongst your creditors. The organizations provide little, if any, actual counseling or education, and most of what they accomplish you can do for yourself.

Debtors may even suffer further at the hands of these scammers in the form of ruined credit. Negotiated repayment amounts may appear as charge-offs on your credit score, and because you cede control of your payments to the organization, many may be late.

There are plenty of resources online to help yourself out of debt, but if you do feel like you need individual attention, there are legitimate credit counselors out there. To find one visit the National Foundation for Credit Counseling.

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