Considerations in Mergers and Asset Transfers of Credit Counseling Agencies

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This article was originally published in the April 2011 edition of The Independent Counselor, enewsletter of the Association of Independent Consumer Credit Counseling Agencies (AICCCA).

In recent years, the number of tax-exempt credit counseling agencies (“CCAs”) consolidating and dissolving their operations has grown significantly. As more CCAs experience a decrease in revenue due to a drop in debt management plan (“DMP”) enrollment and increased legal and regulatory challenges, CCAs continue to weigh their options for survival and for best serving their communities; among these options are mergers and other combinations with fellow CCAs.

A number of CCAs are having strong years due to housing counseling and other activities, along with related revenue, but there are many other agencies that feel their ability to succeed is less in light of the economy and new regulations. As a consequence, transactions between CCAs have become a frequent topic of conversation.

There are two frequent scenarios that may drive transactions:

first, is a CCA that no longer can make it on its own due to the financial and legal costs of its business, and wants to ensure that its clients and communities can continue to be supported without interruption. Second is the CCA that is looking to expand its scope or depth of services, strategically trim portions of its areas of service by transferring them to others that can engage in the activity, or gain operational efficiencies. Here are some basics to consider when CCAs evaluate the options available...

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Published In: Business Organization Updates, Finance & Banking Updates, Mergers & Acquisitions Updates, Nonprofits Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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