Modernized federal oversight needed for debt settlement companies

The troubling practices of debt settlement companies (DSCs) should be addressed by Congress and federal agencies, America’s Credit Unions and other financial services organizations wrote to House and Senate Committees Friday. Despite the Federal Trade Commission’s Telemarketing Sales Rule (TSR), enforcement actions and consumer complaints indicate many continue to engage in deceptive and harmful practices.

“We urge your committee to examine the debt settlement industry and consider enacting legislation to modernize federal oversight, such as legislation to codify key protections currently found in the TSR as well as establishing additional safeguards to ensure that consumers receive accurate information, understand the risks involved, and are protected from practices that may exacerbate—rather than alleviate—their financial hardship,” the organizations wrote.

The letter contains examples of predatory behavior harming consumers, as well as deceptive marketing efforts from DSCs.

The TSR contains some restrictions, but does not “comprehensively regulate all debt settlement practices or advertising,” and the organizations express willingness to work with Congress on updating the rule’s regulatory framework.

Read the full letter