FTC-On Benefits Of Debt Settlement

Their has been a long standing perception that the FTC has only a negative view of debt settlement companies. With so much misperception and negative press, allow me to try to put things into perspective. Commissioner Rosch of the FTC has taken the following view:

a debt settlement firm can advocate on the consumer’s behalf, especially in cases where consumers are reluctant, embarrassed, or even afraid to contact their creditors directly,” Commissioner Rosch said to the conference attendees. “A debt settlement firm also may be able to provide individualized attention to consumers, taking a holistic approach to all of the consumer’s unsecured debt owed to several creditors, rather than just the amount owed to a particular creditor.

“Managing the complete debt picture and focusing on restoring the consumer’s financial health has always been a critical value proposition of debt management professionals–nice to hear it from the FTC.

In Addition, the commissioner gave the following "best practices" suggestions to the industry:

“limit their performance claims to those they can adequately Substantiate”; not “misrepresent the benefits of debt settlement”; “disclose, clearly and conspicuously, the negative impact that participation in a program may have on a consumer’s credit score, and how long that impact may linger. This disclosure should not be made only in the written contract, but in the ad itself”; and “if a debt settlement firm promises to refund debt settlement service fees to consumers if their debt settlement negotiations are unsuccessful, the firm must honor that promise.”

Additionally, the Commissioner indicated he was not impressed with attempts at self regulation, by the industry as a whole. The above items from an article at the following link: Real Benefits on Debt Settlement Industry.

The National Foundation For Credit Counseling estimates a completion rate for Debt Management programs among its members to be 21%, the rate for successful completion of a good debt settlement program is often double that.

So why so much negative publicity about debt settlement? First, in my opinion, when the sub-prime mortgage business ended, many unscrupulous mortgage brokers found a new career, it was debt settlement. They were not trained to be counselors, only sales people, looking to close deals. Any deal would do. The same way they approached mortgages, they approached their new found careers in settlement. No full disclosure, no truth in advertising, just get the deal done.

Second, their will forever be a battle between non-profit Debt Management Companies, and Debt Settlement Companies, and for profit companies. Non-profits are controlled by the banks, and get paid a percentage of what their clients pay, by the banks. Additionally, the banks control and dictate the terms they are able to offer their clients. Debt Settlement directly competes with them.

I do agree that to many debt settlement companies simply do not do the right thing, which has tarnished the entire industry. Consumers need to be very careful when choosing a settlement company, or even any debt management company. Make sure you are being counseled and not pushed, or sold, or pressured.

If you would like to speak with a counselor, please visit:American Debt Enders.

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Written By:
Steven Ciantro
Member National Foundation of Certified Credit Counselors
American Debt Enders
help@americandebtenders.com
877-766-2465

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