FTC Testifies on Consumer Protection from Debt Relief Scams

The Federal Trade Commission recently reported about its testimony before the Senate’s committee on Commerce, Science and Transportation. The matter at hand was protecting Americans in financial distress from fraudsters posing as those with debt relief products and services.

The Issue

Unfortunately, there are a variety of ways someone who’s already struggling with debt can lose even more financial ground: debt relief scammers often con people looking for help out of money they can’t afford. Some such organizations:

Falsely claim non-profit status: This can lull customers into a false sense of security and push them to hand over money to someone less than trustworthy.
Demand upfront payment: Many scammers, it seems, require consumers to pay hefty fees before any service has been provided. Once they have the money, the scammers do little or nothing to ease a customer’s debt load.
Collect disproportionate payments: Rather than charging small fees to help consumers get money to their creditors, some services reportedly take generous helpings for themselves and put only tiny amounts toward debts.
Give consumers bad advice: Some scammers have apparently instructed consumers to avoid contacting their creditors, their lawyers or a credit counselor—all of whom would likely provide better guidance than the scammer.

What the FTC Is Doing

To combat such practices and protect consumers from giving their money to hucksters, the FTC has taken several steps, including:

Passing new rules for how debt relief services can be marketed over the phone to consumers
Bringing 23 lawsuits in the past seven years against companies that falsely claim to be non-profit organizations, debt settlement services or debt negotiators
Working with state attorneys general to enforce and enhance legislation to protect consumers
Trying and settling cases on behalf of more than half a million consumers who have been victimized

How It Affects You

So what does all this FTC action mean for you? If you’re struggling with debt, it could mean a lot. First of all, new FTC regulations about how debt relief services can be marketed mean that you’ll likely have more information when trying to make a decision about your finances.

Taking steps to get out of debt is rarely easy, and if you’re weighing your debt elimination options (which include credit counseling, debt negotiation, debt settlement and personal bankruptcy), it’s important for you to have complete and accurate information about what you’re getting yourself into.

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