Much-Needed Debt Settlement Regulation

We’ve written a great deal about the abuses and excesses of debt settlement operations lately.

Last month federal legislation was proposed to tighten the screws on unsavory practices in this industry.  It pointed out that while costs vary, ”a company might charge up to 20 percent of the total debt. Fees are usually demanded upfront, even though a settlement may never be secured.”

Why pay someone to do what you can do for yourself?

As we have pointed out, along with consumer advocacy groups,  debtors can always negotiate directly with lenders. The marketing employed by for-profit debt settlement companies has been effective in persuading people that they can’t advocate for themselves with creditors — a crying shame. One reason may be that most for-profit debt settlement companies are actually controlled by a credit card company! Further, the arbitration process used to control disputes over debts may be tainted.

Under the proposed law, “consumers would have the right to cancel a debt settlement contract and get a full refund. The legislation would provide for enforcement through state attorneys general and the Federal Trade Commission. The federal agency also would be given authority to regulate the industry’s advertising and marketing practices.”

While you can negotiate with your creditors to settle your debts for less than full value, without representation by either an attorney or a debt settlement agent, considering settlement of any debt for less than value is a signal that a bankruptcy consultation may be appropriate. An experienced bankruptcy attorney can review your assets, income, and liabilties, in light of your particular circumstances, can then lay out options for dealing with your financial concerns.