Credit counseling firm's nonprofit status revoked
The IRS did not give a reason, but the firm has had its share of problems
Hawaii Credit Counseling Service, a company providing credit counseling education and debt repayment programs, has had its non-profit status revoked by the Internal Revenue Service.
The IRS revoked the group's 501(c)(3) registration on Feb. 12.
Mike Haxton of Hawaii Credit Counseling Service said yesterday the group has filed an appeal with the IRS, but declined to comment further.
In the last year, the counseling service, based at 1803 N. King St., is the only Hawaii organization to be added to the list maintained by the IRS.
In May 2006, the IRS took further steps to ensure credit counseling agencies complied with the law. Furthermore, the IRS tightened its review of applications from credit counseling agencies for tax-exempt status.
The IRS does not comment on its reasons for individual revocations.
But Hawaii Credit Counseling has had its share of problems, including allegations against Haxton for using the business as a front to launder the proceeds of illicit drug sales.
In 2003, Haxton, then president of the organization, pled guilty to money laundering charges and was sentenced to three years of supervised release on the condition that he serve a year in prison.
Consumers can protect themselves by checking on the complaint history of an agency, said Steve Levins, executive director of the state Office of Consumer Protection
If the agency is a national organization, consumers can check with the Federal Trade Commission. There is also a National Foundation for Credit Counseling based in Silver Springs, Md.
However, Levins warned that membership in a national organization is no guarantee of legitimacy.
"People have to be careful not to be lulled into the belief that just because the company they're dealing with is a member of a national organization, that the company is going to do a good job," he said. "Some national organizations do have standards, but if they don't audit the company that's a member, it's meaningless."