Fraud in the Industry

FTC Accuses Debt Settlement Companies of Fraud

If you were considering the services of a debt settlement company to help you in managing your credit card debt, you should know that they have been targeted by the FTC (Federal Trade Commission), state attorneys general, and other consumer advocacy groups for fraud and misleading marketing practices. The FTC last year had proposed a change to the TSR, or telemarketing sales rule that would include regulating the debt relief services industry, disallowing these companies from charging any advance fees.

About ten years ago, similar action was taken against the credit repair industry with the “Credit Repair Organizations Act,” which only allowed a handful of companies to operate with legitimacy.

This may be a positive step towards protecting consumers; however, the question remains how far regulations or punitive action will extend to the debt settlement industry. There is also some concern whether the services that the debt settlement companies offered will fall into the hands of the domain of the already questionable counseling industry.

It is the opinion of some that this is a step towards putting more control into the hands of the credit counseling industry, which has been tied too closely to the banks and credit card companies and fraught with conflict of interest.

In my opinion, unless you are able and willing to do a bankruptcy, do-it-yourself debt settlement remains the least expensive and safest avenue for debt management.