An editorial out of Michigan does a good job of summing up the grassroots feelings of educated consumer activists regarding needed debt settlement regulations.
Here is the editorial:
Pay off your debts for just pennies on the dollar! One phone call can save you from years of financial misery!
Sales pitches like these might sound like they’re coming from a carnival barker. To Gov. Jennifer Granholm and some state officials, they’re just as believable.
That’s why Granholm last week publicly pushed for legislation to regulate companies that promise to settle debts. With many households swimming in red ink and with no regulations now in place, this is a sensible approach that lawmakers should consider.
Governor proposes regulations for debt settlement companies.
Reasonable rules ought to be in place to protect consumers.
First, a distinction. There are two types of companies that help people with their debts. Some offer counseling to help people manage their budgets or work with creditors. They are state-regulated and licensed.
The other — the ones with no regulation — promise to settle debts. They advertise they can arrange payment plans that get people out of financial trouble.
Some of these companies provide a legitimate service. Others do not. The point is, there’s no way of telling.
Granholm last week suggested three ideas:
1. Have debt settlement companies be licensed.
2. Bar them from telling customers to stop paying bills.
3. Allow customers to cancel their debt settlement deals and get their money back.
Those proposals should put most unsavory debt settlement companies out of business. Presumably, they would not affect businesses that actually can help customers get out of debt.
More important, these rules would serve the public. Many families already owe tens of thousands of dollars on their credit cards. The last thing they need is to make more bad decisions.