The Internal Revenue Service has revoked the tax-exempt status of more than 30 credit-counseling firms, which collectively account for more than half of the industry's revenue.
The IRS began its audits of more than 60 credit-counseling firms two years ago after consumers complained about deceptive business practices -- such as high fees, pressure tactics and inadequate educational services. About half of the industry's funding comes from banks and credit-card issuers that pay the counseling firms a percentage of money recovered through repayment plans. Currently, most banks require counselors to be tax-exempt to receive the funds.
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