The Post-BAPCPA Credit Counseling Industry: Persistent Conflict of Interest and Questionable Providers

• In Event: 571 - Section on Economic Sociology Roundtables (one-hour)
  In Refereed Roundtable: Table 05. Households and Financialization

Abstract

The 1990s was unquestionably the “Decade of Debt.” The deregulation of retail banking spawned trillion dollar financial providers with high priced consumer loan/credit “innovations." The next decade witnessed the emergence of a new rational calculus that posited that higher household debt was counterbalanced by rising household asset values.
In this context, the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) in 2005 reflects the apex of political influence of the financial services sector as the required pre-filing Credit Counseling course—offered only by authorized nonprofit Credit Counseling Agencies—was mandated to provide consumers with objective information in an effort to counter public misinformation and the presumed economic interest of bankruptcy attorneys.
This article examines how the implementation of BAPCPA has impacted the ability of financially distressed households to make informed decisions in regard to filing for consumer bankruptcy. Specifically, this article examines the emergency of the Credit Counseling Agencies (CCAs) and the role that BAPCPA had in revitalizing CCAs. Furthermore, this article analyzes the rational calculus made by CCAs to develop sophisticated legal schemes to divert resources from the non-for-profit to the for-profit sector, with specific attention to the role of outsourcing. Clearly, the U.S. criminal justice system needs to respond more aggressively to such actions since the entire non-for-profit sectors could be essentially gutted as their financial resources are transferred to private entities.

Authors

• Anita Cristina Butera, Marist College

• Robert D. Manning, Institute for Consumer Financial Services