remedy state regulators, members of Congress and state legislators — and the New York State Attorney General, Andrew Cuomo” src=”http://longislandbankruptcyblog.com/wp-content/uploads/2009/06/debt-mark-stephen.jpg” alt=”Debt settlement companies are being investigated by Federal Trade Commission, state regulators, members of Congress and state legislators — and the New York State Attorney General, Andrew Cuomo” width=”270″ />Written by Craig D. Robins, Esq.
Times Article Highlights Problems With Debt Settlement Companies
The New York Times, in an article published on June 10, 2009, drew attention to the problems with debt settlement companies, observing that the debt settlement industry is in the cross hairs of the Federal Trade Commission, state regulators, members of Congress and state legislators.
The article stated that many consumer advocates loathe the way the debt settlement companies solicit consumers. According to The Times, the common complaint is that “debt settlement companies are more interested in helping themselves earn fees than aiding their beleaguered clients.”
“Their ads promise the clients will get out of debt but, critics say, the reality is that they often become even more enmeshed.”
The Times quoted one debt settlement company spokesman who conceded that “there are a lot of bad apples in this industry.”
New York Is Investigating the Debt Settlement Industry
There is a Major Distinction Between Debt Negotiation and Debt Settlement
The services offered by debt settlement companies are very different from debt negotiation services offered by certain law firm such as my own. With debt settlement companies, the consumer makes monthly payments to the company, and the company first applies these payments to their own fees before any settlement is actually made.
Debt settlement companies will often sign up consumers who they know, or should have known, would not be able to complete the program. What’s more, the companies keep the fees even when services are not provided!
Debt negotiation offered by attorneys, however, is much different and involves negotiating settlements with the creditors. The client typically does not pay any advance fees, other than an initial retainer.
Consumers Using Debt Settlement Services Often Get Into Worse Financial Shape
In my Long Island bankruptcy practice, I cannot tell you how often we get clients who complain to us that they hired a debt settlement company, only to get into deeper financial difficulty after the company neglected to follow through on their promises of settling debts. Debt settlement companies are unregulated and their are numerous horror stories of these companies steeling escrowed funds and going out of business.