Thank you, Mr. Chairman. I appreciate your conducting this hearing today and all of the work that has gone into this thorough investigation of the credit counseling industry. Americans are carrying enormous amounts of debt. In 2003, consumer debt increased for the first time to more than 2 trillion dollars, according to the Federal Reserve. This is a 28 percent increase since 2000. The Congressional Research Service reports that the percentage of income used for household debt payments, including mortgages, credit cards, and student loans, rose to the highest level in more than a decade in 2001 and remained above 13 percent in 2003. According to the Daily Bankruptcy News, consumer debt is now equal to 110 percent of disposable income. Ten years ago, it was 85 percent, and 20 years ago, it was 65 percent. It is also important to note that when interest rates do eventually rise, consumers will be faced with increasing debt obligations. These are daunting facts.

I have placed tremendous importance on the issue of economic and financial literacy so that individuals are able to make informed financial decisions in today's complex modern economy. We must do more to increase financial literacy in our country to help people better manage their credit. I have sponsored a number of initiatives intended to increase the financial knowledge of students, adults, and investors, and I will continue to pursue these efforts to empower individuals to better manage their finances. In addition to education efforts, we must ensure that people seeking help in dealing with complex issues, such as debt management, are able to locate the assistance they need, and ascertain the quality of such assistance.

More and more working families are trying to survive financially and meet their financial obligations. They seek out help from credit counselors to better manage their debt burdens. It is extremely troubling that unscrupulous credit counselors exploit, for their own personal profit, individuals who are trying to locate the assistance that they need. As debt burdens increase, people will need to seek out more credit counseling.

I am concerned that certain credit counseling agencies have abused their nonprofit, tax-exempt status. People believe, sometimes mistakenly, that they can place blind trust in all nonprofit organizations and that their fees will be lower than those of other credit counseling organizations. Too many individuals may not realize that the credit counseling industry does not deserve the trust that consumers often place in it. The Consumer Federation of America (CFA) found that 46 percent of agencies it surveyed encouraged debt management plan (DMP) participants to view their voluntary contributions as charitable donations. The representation that these fees are voluntary is often misleading and inaccurate.

In addition, many of the fees imposed by credit counseling agencies appear to be excessive. The National Federation of Credit Consumers (NFCC) indicates that the average credit counseling organization in 2001 charged $14 for budget counseling sessions while most banks offered this information for free. Furthermore, the average agency charged $19 to enroll in DMPs, and $12 monthly to service them. Together, these fees equaled $179 in expenses for participants during the first year of enrollment. NFCC has sited that some organizations are charging sliding and fixed monthly account fees as high as $50 and $95, respectively.

Many credit counseling organizations simply lead their customers to debt management plans. This may not be the best option for many consumers. However, certain credit counseling agencies fail to provide consumers with their full range of options and recommendations. For some individuals, bankruptcy is appropriate for their set of circumstances and they may be better off in the long run declaring bankruptcy instead of having an ill-suited debt management plan imposed on them.

This flagrant abuse of individuals seeking assistance to help manage their debts by certain credit counseling organizations is appalling. I intend to introduce legislation that will increase fee disclosures and prohibit certain unfair practices so that consumers are adequately protected. We must act to ensure that vulnerable individuals have access to financial education and counseling that they need. Consumers must be better informed about credit counseling fees, and the possibility that debt management plans may not be appropriate for them. In addition, relevant financial arrangements with lenders or other financial service providers need to be disclosed to consumers. In the past, the majority of credit counseling organizations provided a reliable and valuable service to people in need. We must restore consumer confidence in this troubled industry. I look forward to working with my colleagues to restore trust in the credit counseling industry.

Again, thank you Mr. Chairman for conducting this hearing.