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Debt Consolidation Companies Under Fire
The debt settlement industry -- riding high in this tough economy -- is coming under increasing scrutiny from a variety of regulators, including state legislatures and the Federal Trade Commission.
July 14, 2009 /Financial PR News/ -- Debt Consolidation Companies Under Fire
Article provided by Rosenbaum Law Offices
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In an economy battered by high unemployment, consumers awash in debt are paying increasing attention to debt consolidation companies promising easy debt relief. At the same time, the debt settlement industry is also under increasing scrutiny from consumer advocates, prosecutors, the Federal Trade Commission, regulators, Congress and state legislatures.
Consumer advocates warn that debt consolidation company promises are often too good to be true. Many of the companies charge large up-front fees in addition to monthly payments and a percentage of your debt -- all for services that can ruin your credit score, result in a torrent of collection agency calls and leave you with tax obligations. In many cases, consumers pay thousands of dollars only to find themselves in worse financial shape than when they hired the debt consolidation company.
The New York Times reported on a June convention of debt consolidation professionals, at which a number of attendees predicted a gloomy future for the industry. The business faces legislation, regulation and litigation -- a combination of legal forces it may not survive.
New York Attorney General Andrew M. Cuomo is conducting a broad investigation into an industry often accused of plunging its clients deeper into financial straits. Fourteen companies operating in New York received subpoenas from the attorney general's office and Bureau of Consumer Frauds and Protection.
In May, Cuomo announced the state is suing two of the companies, accusing them of fraud. He said he is seeking restitution for the firms' former clients who he said were bilked out of hard-earned money.
Earlier this year, Texas Attorney General Greg Abbott sued a Richardson, Texas-based debt settlement company, accusing it of failing to negotiate settlements with its clients' creditors.
In 2004, an FTC investigation found that approximately two percent of debt consolidation clients got the help they sought from the companies known for attention-grabbing promises in radio and TV ads.
Article provided by Rosenbaum Law Offices
Visit us at www.rosenbaum-law.com
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