Shenanigans and actions of the debt settlement industry members and their trade associations will do more to further limit the activities of the debt settlement industry.
Rather than embrace the FTC rules and come out in support of fair and reasonable directives from the Federal Trade Commission to protect consumers from debt relief, debt settlement, and debt negotiation companies, groups are fighting back.
Some of the push back has come in talk to sue the FTC for lack of authority in putting forth the new telemarketing sales rules, other recent talk has been to form offshore entities to market services back into the United States in an effort to circumvent the FTC TSR.
In my opinion, all of that is foolish and shortsighted.
The original Debt Settlement Consumer Protection Act (DSCPA) is still sitting in Congress and just today there were hearings held on the bill. Congressional members are actively watching the debt settlement industry for reasons why the bill should be passed if companies are going to not get behind the FTC telemarketing sales rules.
The DSCPA severely limits the amount debt settlement companies can charge to only 5% to 10% of the amount of debt reduced. This is significantly less than the FTC rules permit, in fact the FTC rules set no cap.
Fox News in Missouri is reporting that:
U.S. Senator Claire McCaskill spent the morning holding a hearing on the issue. She and Senator Charles Schumer from New York are trying to pass legislation to prevent more people from becoming victims.
The senators say that the “Debt Settlement Consumer Protection Act” would provide “greater disclosure to consumers, limit fees that debt settlement firms can charge, and provide additional enforcement power to state and federal official to crack down on these abusive and predatory companies.” – Source
“These people are making a lot of money because they are making people pay up front and then when they don’t get anything, the people are helpless to get their money back,” Sen. McCaskill said.
“This is an inherently deceptive industry, unfair, designed to do nothing other than drain fees from financial vulnerable consumers,” Dave Angle with the Missouri Consumer Protection Division said.
This is one thing I am not going to be wrong on, the debt settlement industry is not going to embrace the new regulation and it will drive tougher legislation to be passed.
At some point the debt settlement industry needs to be happy for what they have rather than to continuing to fight back against any regulation which results in them losing more.
It seems the trade associations fighting back are being pushed around by members that pay dues but I predict that once the new regulations, including the DSCPA are passed, many of those members will flee the debt settlement industry and move on to other opportunities they feel will be more profitable.
I have asked USOBA for a public comment on this issue.
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