Are New Rules To Stop Debt Relief Tough Enough? No.

New rules went into effect October 27 that aim to protect consumers from companies engaged in abusive, deceptive, and exploitative debt relief activities. But the rules are too narrow in scope to offer all the protection that the should. The rules take the form of amendments to the Telemarketing Sales Rule, or TSR.

"Too many of these companies pick the last dollar out of consumers' pockets, and far from leaving them better off, push them deeper into debt, even bankruptcy," said Jon Leibowitz, chairman of the Federal Trade Commission, in a statement describing the new rules. As explained by MarketWatch,

The rules call for debt-relief companies to make specific disclosures to consumers about what will happen, what it will cost, how long it might take and what kind of results to expect, including any negative consequences.

The regulations, which extend the TSR rules to cover calls consumers make to firms in response to debt-relief ads, also will ban companies from misrepresenting what they can do.

The most significant change outlaws for-profit companies that sell debt-relief services over the telephone from charging fees before they settle or reduce credit-card or other unsecured debt.

The ban on up front fees will prevent the abuse that is core to the debt relief business -- taking people's money and then not doing anything to help them.

But the problem with the new rules is that they only cover activities that conducted over the phone, since the rules are appended to the TSR. They don't also extend to debt relief scams that operate over the Internet or through face-to-face solicitations.

Another challenge is the sheer size of the debt relief business. As MarketWatch reports: "In 2002, for example, there were only eight debt-relief companies in the business. Today there are at least 2,000, and they're managing a total of about $20 billion in credit-card and other unsecured debt, according to the Association of Settlement Companies, a trade organization."

The Better Business Bureau has reported logging a huge number of calls about debt relief scams from all 50 states. Commenting recently on the new rules, the BBB stated:

Since the start of the recession in December of 2007, the Better Business Bureau has received more than 6,000 complaints from consumers about debt relief or debt settlement companies. Typically, complainants say they were charged large up-front fees in exchange for the empty promise that the company would significantly reduce or eliminate their debt.

“The debt relief industry has flourished in the current economy and you can bet that many unscrupulous companies are feverishly trying to figure out ways to get around the new laws, such as relying less on telephones to solicit new customers,” said Alison Southwick, BBB spokesperson. “While these new rules provide effective new protections, consumers still need to be on the lookout for deceptive debt relief services.”

Comments

[Vuitton]

What a wonderful post! this is my first time i visit here. I found so many interesting stuff in your blog especially its discussion.I'd like to recommend something to you, you'll like it.I find my favoraite replica hermes handbags shop,in this shop