Yesterday I wrote about a statement that The Association of Settlement Companies (USOBA) made about the new consumer protection rules passed by the Federal Trade Commission covering debt settlement companies.
Now today the other trade association, United States Organizations for Bankruptcy Alternatives sends out their press release on the new rules.
First off, I was crying with laughter when I read it and then pissed off because it is so apparent that USOBA has no connection with the real world on these issues.
So let me summarize, the Federal Trade Commission passes new Telemarketing Sales Rules to protect consumers from being screwed by debt settlement companies. In its lengthy investigation, which USOBA barely participated in, the FTC came to the conclusion:
“In the context of the widespread deception in this industry, the advance fee model used by many debt settlement providers causes substantial consumer injury.” – Source
Okay, so a bunch of braniacs at the Federal Trade Commission, in association with Attorneys’ General from 41 states, consumer groups, legal groups, and others came to the conclusion consumers were being screwed with the way debt settlement was being sold.
So let’s run through the USOBA response. Here is what they say in their press release today.
Late last week, the FTC announced several amendments to the Telemarketing Sales Rule that will adversely impact debt settlement providers and the hundreds of thousands of American consumers they support and service.
Bullshit, bullshit, bullshit. The rule does not impact anyone currently enrolled in the old model programs. Debt settlement companies can still finish out their contractual arrangements with those consumers. However, if a debt settlement company says they can’t because they have no new influx of sales revenue coming in to fund the operation, that’s one of the very problems that needed to be corrected with the debt settlement industry. It was running like a ponzi scheme with new sales funding old clients. The money consumers had paid for services had been long spent by the companies before they delivered the services promised. That’s a problem the companies created, not regulators.
While USOBA was pleased to see some of the protections included in the Rule, the Organization was dismayed and disheartened that the Rules will ultimately harm debt-burdened middle class Americans and help unscrupulous credit card and debt collection companies.
Here we go again. Bullshit, bullshit, bullshit. The rule does the opposite, it protects Americans, of all classes from being harmed by the way debt settlement companies were operating. And how in the world would these Americans be harmed by credit card companies and debt collection companies? Debt settlement services will still be permitted and consumers still have legal solutions like bankruptcy.
“This is a tragedy and a disaster for consumers,” John Ansbach, USOBA’s Legislative Director, said. “It’s unfortunate that the Commission chose to ignore the hundreds of consumers who filed comments in support of debt relief providers and instead, with this Rule, handed a victory to those who would harass and even imprison consumers through aggressive debt collection prosecution.”
There is no way in the reality that people live in that the new rules are a tragedy for consumers. And if John Ansbach really believes that then I don’t know what to say to that.
The FTC did not ignore the consumers who filed comments. I think they recognized them for what they were, shills coordinated by the debt settlement companies.
The FTC said in its supplementary information that it did review and considered the 236 comments submitted by individual consumers.
According to the FTC, “Individual consumer testimonials are, by their nature, anecdotal; they do not constitute a representative sample of consumers who have enrolled in debt settlement programs. This is especially true here, where some providers actively solicited positive comments from specific consumers. Ho at 2 (attaching email from debt settlement company encouraging the consumer to send positive comments to the FTC).”
And regarding the abusive collection you speak about, remember that consumers in debt settlement program are still were pursued by collections and sued by creditors. Debt settlement companies have no legal authority to make them stop. If debt collection is the issue here then consumer need to seek legal protection under bankruptcy and not debt settlement anyway.
Several positive provisions in the new amendments include specific required disclosures debt settlement companies must make known to their clients, requirements on advertising (i.e. making truthful and substantiated claims), and best practices to guarantee consumers are educated on the program they are entering.
These would be the very same issues that USOBA members have been engaging in and claiming in their advertisements that USOBA did nothing about. USOBA was also not cooperative in providing member data to the FTC to substantiate consumer results and experiences.
“While we don’t agree with a portion of the regulation as they were announced yesterday, there are many points we do agree on and support,” USOBA Executive Director Jenna Keehnen said. “USOBA has worked tirelessly to ensure consumers have good, safe options when it comes to debt relief and will continue to fight to keep those options available.”
If USOBA wants to work tirelessly to help protect consumers then work tirelessly to make members implement the new rules.
So the way I read that quote is that USOBA is going to fight against the new rules in order to try to keep it business as usual? If so, that’s ridiculous and I can’t wait for that. Boy, will that give me a lot to write about.
Unfortunately, one of the regulations contains unjust restrictions that will have negative consequences for both consumers and the debt settlement industry. Prohibiting companies to charge any fees while services are being rendered will put many debt settlement companies out of business, thus resulting in significant job losses and the elimination of one of the best options for consumers who are drowning in debt. – Source
Unjust restrictions? Do you mean the restrictions against taking money from consumers for services not actually delivered? I do have to agree that the rule does have consequences for the debt settlement industry and consumers. For the debt settlement industry they will not be able to charge or collect a fee till they provide the work. Radical. For consumers, they won’t have to pay for services before they’ve actually been performed.
It’s not the rules that will put debt settlement companies out of business, it’s the stupid, consumer screwing business model many debt settlement companies operate, excuse me, operated, under. Hello USOBA, the debt settlement industry put itself out of business.
Let me help translate “thus resulting in significant job losses and the elimination of one of the best options for consumers who are drowning in debt.” Once you put that through the reality filter what it says is “thus resulting in significant numbers of consumers protected from deceptive and abusive debt settlement practices and the elimination of one of the greatest cash cows for a bunch of USOBA members that ran debt settlement companies. And by the way, we still won’t tell you who our members are.”
I asked the FTC for a comment on the USOBA press release and here is what they said “The rule is based on a comprehensive record, including comments and data submitted by industry organizations, individual businesses, and many others. The Commission carefully considered all of the information and issues raised by the commenters and concluded that the remedies contained in the amendments are appropriate and necessary to protect consumers from deceptive or abusive practices in the telemarketing of debt relief services.”
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