On Debt Setlement
The FTC has issued a final ruling on telemarketing debt settlement. Read more here
ABC Good Morning America produced a news story on the dangers and risks of debt settlement, watch it here
Government Accountability Office
On April 22, 2010, the US Senate Committee on Commerce Science and Transportation met to discuss the Debt Settlement Industry. This US Senate Committee oversees the activities of the Federal Trade Commission (FTC) and sought to discover the findings of the FTC with regards to the debt settlement industry. The GAO (Government Accountability Office) sought to determine if the findings in the proposed FTC rulemaking on debt settlement companies was accurate. The report did a study of 20 debt settlement companies. The undercover consumer report overwhelmingly verified that the findings of the FTC were accurate. Indeed, fraudulent claims and large upfront fees left consumers more damaged. In fact, less than 10% of all consumers actually were successful, not the 35% success the Associations seem to claim.
The Federal Trade Commission
Federal Trade Commission has issued an alert and have a proposed rulemaking regarding debt settlement. To learn about Facts for Consumers “Knee Deep in Debt” visit http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre19.shtm
HOW TO FILE A COMPLAINT. Shows how to file a complaint, and offers examples of what complaints the FTC handles. In English and Spanish.
JOB SCAMS. Helps job seekers avoid being conned by employment scams.
New York Times article entitled “Peddling Relief, Firms Put Debtors in a Deeper Hole: Credit Settlement Industry Under Fire”
(Courtesy of Money Talks News)
If you’re considering debt settlement to solve a debt problem, or know someone who is, here’s some required reading.
This is the summary of the conclusions reached after an investigation of the debt settlement industry by the Government Accountability Office.
For more detail, here’s the complete GAO report. It’s called Debt Settlement: Fraudulent, Abusive, and Deceptive Practices Pose Risk to Consumers.
Read the GAO report and you’ll learn that undercover GAO investigators contacted 20 debt settlement companies pretending to be consumers with debt problems. Here’s a few of the things they documented:
Seventeen of the 20 companies GAO called while posing as fictitious consumers said they collect up-front fees before settling debts — a practice FTC has labeled as harmful.
Nearly all of the companies advised GAO’s fictitious consumers to stop paying their creditors, including accounts that were still current: something that would obviously prove highly detrimental to credit scores.
GAO found that some debt settlement companies claimed unusually high success rates — as high as 100 percent. FTC and state investigations have typically found that less than 10 percent of consumers successfully complete these programs.
How to recognize a debt settlement come-on.
Since debt settlement companies rarely label themselves as debt settlement companies, it’s important to be able to differentiate these companies from other types of more reliable and less controversial debt relief agencies.
Debt settlement is simply offering to pay less than what you owe to fully satisfy a debt. So one way you’ll recognize a debt settlement ad is that it will say something like "reduce your debt 40-60%!" Debt settlement is the only technique (other than bankruptcy) that promises to reduce the amount you actually owe.
Credit counseling, on the other hand, normally offers to help you set up a payment plan to repay your debts in full, albeit with potentially lower rates and reduced fees.
Bottom line? I can’t say that all debt settlement companies are bad, some may genuinely care about you and act in your best interests, but I can now say with greater confidence that many are worth avoiding.
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