Here is a copy of an email that was sent to Attorney’s General to support continued efforts to rein in debt settlement.
Dear Mr. Attorney General:
As Chairman of the United States Senate Committee that oversees consumer protection, I have been very concerned by the growth of consumer financial scams during the recent economic downturn. I am writing to share with you results of an investigation I recently asked the Government Accountability Office (GAO) to conduct into the debt settlement industry. It is my hope that this information will assist you in your efforts to protect citizens of your state from the deceptive claims and practices of this industry.
I initiated the GAO investigation after hearing numerous reports that debt settlement companies were taking advantage of financially distressed consumers. In exchange for large up-front fees, debt settlement companies promise to help struggling consumers significantly reduce their credit card debts. According to allegations made by numerous state law enforcement officials and consumer advocates, however, debt settlement companies do not help most consumers reduce their debts. In fact, the debt settlement industry’s practices tend to increase consumers’ debts and significantly harm their credit scores.
To find out what is actually happening to consumers, I asked GAO’s Forensic Audits and Special Investigations team to determine whether debt settlement companies are engaged in deceptive, unfair or otherwise abusive marketing practices. Attached you will find a copy of the report, “Debt Settlement: Fraudulent, Abusive, and Deceptive Practices Pose Risk to Consumers,” that GAO prepared in response to my request and presented as testimony before my Committee on April 22, 2010. The report describes 20 case studies in which GAO investigators made covert telephone calls to companies offering debt settlement services. The report compares the representations made on those phone calls to the evidence gathered by the Federal Trade Commission (FTC) and State Attorneys General in enforcement cases. In sum, the GAO found that debt settlement companies engage in fraudulent, deceptive and abusive practices that pose a risk to consumers.
I applaud the work that the State Attorneys General have already done to fight debt settlement industry abuses, including more than 128 separate cases they have already brought against individual debt settlement companies. In addition, I am grateful that Assistant Attorneys General from a number of states were willing to share their expertise on the debt settlement industry with the GAO investigators and with my Committee staff. I look forward to working with you to end abuses in the debt settlement industry and to address other consumer protection issues. I have instructed GAO to share with you information, upon your request, about the identity of the companies contacted during the investigation.
The Senator also said:
As consumer debt has risen, some for-profit debt settlement companies have emerged with offers to negotiate – for a fee – with consumers’ creditors to accept a lump sum settlement for 40 to 60 cents on the dollar for amounts owed on credit cards and other unsecured debt.
“I am in the people protection business,” said Rockefeller. “We must do all we can to protect every single West Virginia consumer – always – and that is what I am trying to do each and every day in the Senate Commerce Committee. This investigation in to debt settlement scams reveals the underbelly of fraudsters trying to rip off people in helpless situations. That is just plain wrong and we are working to bring it to a stop.”
Rockefeller continued, “The West Virginia Attorney General’s office and consumer protection division have a good track record of standing up for consumers – and they’ve already fought back against debt settlement scams and I applaud them for their work. I thank Attorney General McGraw and the state for acting on these terrible scams and I hope that the information contained in the Committee’s investigation leads to even more consumer protection for West Virginians and all Americans.”
“The debt settlement approach to debt relief has serious legal consequences and should only be offered by persons licensed to practice law in West Virginia,” said Attorney General McGraw. “The work of Senator Rockefeller and the GAO will go a long way towards shutting down this unlawful industry which victimizes consumers already facing dire financial circumstances, leaving them in worse shape than before.”
A link to a Good Morning America clip on debt settlement industry scams is available here.
Rockefeller sent letters to the Attorneys General of all 50 states, and to the Attorneys General of the District of Columbia, Guam, American Samoa, Puerto Rico, the Northern Mariana Islands and the Virgin Islands.