So many consumers have complained about debt settlement companies that the federal government has finally taken some action.
Yesterday, the Federal Trade Commission announced a new restriction on debt settlement companies which is designed to address the growing nationwide problem of so-called debt relief companies making outlandish promises of success, but ultimately failing to do anything.
Up-Front Fees Charged by Debt Settlement Companies to be Prohibited
The new rules, which will take effect in the fall, will prevent debt settlement companies from charging any up-front fees before they settle or reduce a customer’s credit card debt.
I have reported previously that I regularly meet with clients who were promised the moon by debt settlement companies; yet these companies ripped them off after charging large up-front fees, failing to achieve settlements, and leaving the consumers in a worse position than they were to begin with. I ultimately end up filing a bankruptcy proceeding for many of these clients. See: Debt-Settlement Firms Misled Consumers According to FTC .
There Has Been Rampant Abuse by Debt Settlement Companies Across the Country
According to an article in today’s New York Times, attorneys general in more than 20 states have brought enforcement actions against debt-relief companies in the past six years. The FTC has also received one of the highest amount of complaints for debt relief companies than any other type of business. The number of consumer complaints has doubled in the past two years.
Unfortunately, the new rules will not protect everyone, and some loopholes leave many consumers open to abuse. The new rules only cover agreements with debt settlement companies made over the phone. They do not cover agreements made on line or through face-to-face meetings.
The Attorney General accused 35 law firms and two debt collection companies of failing to ensure that servers were following the rules after hiring American Legal Process to serve summonses and complaints. See my post: Bill Collectors Slapped with Class Action Suit .
Written by Craig D. Robins, Esq. and Dean Weber, Esq.
Credit card debts can often be substantially reduced with Debt Negotiation
When you have debt problems, sometimes filing bankruptcy is the best solution. But sometimes it isn’t. When bankruptcy isn’t a perfect fit, debt negotiation may be. This involves negotiating settlements with the creditors who are typically credit card companies and banks.
As the sheer number of people defaulting on their credit cards continues to increase, rising to unprecedented levels, credit card companies are doing something that they have historically scorned: settling credit card accounts for substantially less than what is owed.
With unemployment topping 9 percent and more, this approach by credit card companies has increased drastically. Credit card companies have even gone so far as to authorize front-line employees with the power to cut good deals. We’ve been noticing this in our debt negotiation practice as we’ve been achieving some incredibly good settlements lately.
According to the Federal Reserve, 6.5% of credit card debt was at least 30 days past due in the first quarter – the highest percentage since the Fed began tracking the number in 1991.
What does this all mean for the average consumer who owes tons of money on their credit cards? Well, it means that now may be a very good time — perhaps the BEST time — to settle their debts with the credit card companies.
When considering debt negotiation, we believe that it is very important to retain an experienced debt negotiation attorney – one who is experienced enough to negotiate the best possible settlement. There are many debt settlement companies out there who are not acting in the best interests of the consumer. On several occasions I’ve written posts about this debt settlement companies engaging in false and deceptive practices (for example, please see Debt Settlement Industry Criticized by New York Times ).
As experienced Long Island bankruptcy attorneys dealing with credit card companies on a daily basis, we know that creditors would rather have a piece of something now than absolutely nothing down the road.
This is exactly why now may be the best time to consider your options, such as scheduling a free consultation with an experienced bankruptcy and debt negotiation attorney to discuss your best options for forging a new, debt-free future.
The two debt collection companies that the attorney general shut down are Emanee Development Inc. and Dial Tech LLC, both from Buffalo. In addition, he is seeking to have their principal, Lamont Cooper, make restitution. These two debt collection agencies are now permanently barred from engaging in debt collection.
It was alleged that bill collectors at these companies lied to consumers, threatened them with arrest and sometimes scared them into paying debts they didn’t owe. In addition, the debt collectors wrongly accused debtors of criminal activity, falsely threatened to file lawsuits, sought collections beyond New York’s six-year statute of limitations, and illegally discussed debts with consumers’ neighbors and relatives.
Consequently, some people who felt threatened or intimidated by these techniques sent payments.
Unfortunately, I frequently hear tales of similar conduct from my Long Island bankruptcy clients, even though such conduct is highly illegal and in violation of the federal Fair Debt Collection Practices Act, as well as other consumer protection laws.
In a press release, Cuomo stated “this judgment is the first step in this office’s expanding investigation into debt collectors that violate the rights of consumers and operate outside of the law.”
Last month, Cuomo also began pursuing fraudulent debt settlement companies that were also taking advantage of consumers. See New York Commences Nationwide Investigation Into Debt Settlement Industry — Many Offers to Eliminate Credit Card Debt are False and Misleading and New York Attorney General Andrew Cuomo out to do justice against debt settlement companies who are ripping off the American public.