Legal Services Speaks Out About Non-Profit Credit Counseling

There has been a lot of attention focused on rogue debt settlement companies over the past year. And now that battle is mostly over with the introduction of the FTC telemarketing sales rules, as I have predicted, more attention will now turn towards non-profit debt relief services.

The non-profit market will become polluted with companies that will attempt to evade the telemarketing sales rules by becoming state or federal non-profits. The loophole; the FTC has no authority to regulate non-profits. But the big danger for all non-profits is as the bad guys wander in it will create scrutiny under the authority of the newly formed Consumer Financial Protection Bureau. Regulation paints with a broad brush.

Recently the South Brooklyn Legal Services spoke out about their concern over non-profit debt relief help.

South Brooklyn Legal Services Consumer Rights Unit Chief Johnson Tyler testified that new Federal Trade Commission (FTC) regulations for these groups will be very helpful in cutting down on widespread theft by these groups, by 1) requiring full disclosure, 2) forbidding misrepresentation by the companies, and 3) banning collection of fees prior to a debt actually being settled.

However, he also pointed out that loopholes may still exist. The FTC rules primarily apply to debt settlement companies that loop customers in via interstate telephone conversations; they won’t necessarily help with 1) nonprofits, 2) debt settlement companies that have a face-to-face meeting before payment, and 3) debt settlement companies that communicate with customers via internet and email.

“How bad can these non-profits be? An SBLS client lost $2,291 to a supposed nonprofit, Consumer Counseling Inc. of Florida,” Tyler testified.

“Spend a few minutes on-line and you can find plenty of debt settlement companies reachable by subway. Such companies may be exempted from the FTC rule if they have a face-to-face meeting before accepting payment. Such companies that fall into this gray zone include Mission Settlement that victimized another SBLS client., as well as Debt Rescue Corp. in Coney Island, EMD Debt Settlement on Park Avenue in Manhattan, Alpha Settlement in Brooklyn, and Nationwide Credit Solutions Inc. in Queens,” Tyler testified. – Source


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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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