In an article on CreditCards.com, Dave Leuthold, the executive director of The Association of Settlement Companies (TASC) and the CEO of Century Negotiations, Inc. (CNI) is quoted as making the following statement.
“We’re disappointed that the FTC came out with this ruling, especially with regards to the advance fee ban,” Leuthold said in a telephone interview. “It’s just a fact that companies need revenue coming in prior to the actual settlement being made.”
He said creditors normally “won’t agree to a settlement unless that money can be paid” all at once or within a short period following the negotiation. “Most of our clients don’t have any money saved up.”
Waiting to charge fees until there is a settlement will create “a big financial burden to a lot of debt settlement companies. They just aren’t going to be able remain in the business to help anyone.”
“Now, there are going to be very, very few companies that are going to be able to service clients,” he added. Leuthold estimated that there are about 1,000 companies currently offering debt settlement services in the United States. – Source
After reading this my initial reaction was, “Are you nuckin futs?”
The FTC Telemarketing Sales Rules that were announced on July 29, 2010 and will go into effect in October do not make it difficult or impossible to settle debt. Nor do they make it impossible for a debt settlement company to exist. They don’t even limit fees.
But what the new rules do, after considerable investigation and comments, is label the current and past business model of the debt settlement industry with its advance and front-loaded fees as deceptive and abusive by saying:
In the context of the widespread deception in this industry, the advance fee model used by many debt settlement providers causes substantial consumer injury.
As I observed in my review of the new rules, that the debt settlement trade assocaitions, TASC included, developed little to no credibility with the Federal Trade Commission throughout the rule making process.
Overall the FTC appears to have placed little to no weight or credence on the testimony or supplied facts of the debt settlements trade associations of The Association of Settlement Companies (TASC) and the United States Organization of Bankruptcy Alternatives (USOBA). I agree with that approach. Neither trade association seems to have assisted in the process of regulation and protection of consumers with anything other than a self-serving interest to protect members, to fight and obstruct the process, and to provide little to no independently substantiated data to support their claims.
If the trade associations decide to band together to challenge the new FTC rules in court, it appears clear it will be seen by regulators and others as nothing more than a desperate attempt of an industry whose members have been labeled as engaging in deceptive and abusive practices to continue those bad acts.
I stand by my previous observation that the debt settlement trade associations did more to close down the debt settlement industry for its members that work as a collaborative partner to embrace regulation of members and protection of consumers. – Source
And the quote attributed to the TASC executive director makes me believe the either arrogance or ignorance of the debt settlement industry as it now stands today is going to make for a hard landing of many players who believe the messages TASC and USOBA put out.
Let’s just say for a moment that TASC will mount a legal challenge to the new rules, what are they left with? The label of a deceptive industry with abusive practices is already out there. If the ruling is challenged it will only give steam and momentum to the Debt Settlement Consumer Protection Act that is sitting in Congress. That legislation actually limits fees. And if TASC or USOBA want to fight that, the Consumer Financial Protection Bureau is right behind and coming to regulate them. This battle is over.
TASC and USOBA need to listen to what the investigations, consumer groups, regulators and legislators are saying and change their ways.
At the very least, stop pretending you will win and start planning for a new alternative reality in which you must comply with the new FTC TSR.
And listen very carefully, please, you don’t want to repeat your mistakes of fighting back against regulation or you will get less than you’ve got now. I can’t imagine the debt settlement industry wants to risk the wrath of the Debt Settlement Consumer Protection Act passing and the limitation of fees to 5% or 10%. That bill is not done yet, it’s just waiting for the debt settlement industry to start pushing back.
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For the record, the argument that the new rules create a burden on consumers is just nonsensical. Without the continued practice of the front loaded debt settlement fees, consumers will be able to offer full payment settlement offers to creditor sooner, will not pay for services they did not receive, and will be less likely to suffer under the lies and misrepresentation currently offered by many of the members of TASC and the secret USOBA society.
The industry says waiting to charge fees until there is a settlement will create “a big financial burden to a lot of debt settlement companies,” but that’s just another anti-consumer message which reinforces the need for change. So I guess the message is the companies come first and screw the financial burden the front loaded fees put on the consumers.
I also have no patience or sympathy for the statements “They just aren’t going to be able remain in the business to help anyone.” For far too long debt settlement companies have been able to remain in business to serve primarily themselves. And what’s the alternative? Should the public feel sorry for TASC and USOBA members and keep them in business to continue abusive and deceptive practices?
The new rules don’t put companies out of business, they put themselves out of business by embarking and continuing a business model which took advantage of consumers in an abusive and deceptive manner. The trade associations had every chance to stop that practice and instead they fought back against every effort to change it.
The industry never listened to the shouts from the gathering crowds and instead wanted to continue their abusive and deceptive ways regardless of the public outcry.
Let me state the obvious, the new FTC telemarketing sales rules simply require providers of debt relief services to use factual material in their claims, give new disclosures in their marketing, and collect a fee of any amount for a service they actually perform. If TASC, USOBA or any debt settlement company wants to fight back against that, you are going to lose.
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