CRN Supports Changes to the Telemarketing Rule Just Announced by the FTC

Yesterday, the FTC announced important changes to the Telemarketing Sales Rule, http://www.ftc.gov/opa/2010/07/tsr.shtm. The changes are intended to protect consumers with too much credit card debt from abusive debt settlement practices. One of the most important changes is that settlement firms will no longer be able to charge consumers up-front fees to settle their debts as of 10/27/10.

Overall, I am thrilled that the FTC is reigning in abusive debt settlement firms. For too long, these firms have been allowed to prey on consumers with too much credit card debt. Sadly, in far too many instances, consumers who worked with such firms saw their financial situations grow worse, not better, because of the large up-front fees they had to pay, and many of those consumers eventually ended up in bankruptcy.

The rules will shape the industry and promote the best practices moving forward.

I am concerned that some settlement firms may charge a large fee at the back end of their work for consumers. I have always contended that the fee amount charged by a debt settlement service provider directly correlates to how long it will take an individual to be successful in settling all of their debts. Program duration is directly attributable to increased risk of aggressive collection efforts such as filing lawsuits against a consumer in order to collect.

When consumers are looking into debt settlement as one of the few legitimate options available to deal with crushing debt, it is IMPERATIVE that they still weigh the COST for the service.

I will be posting more detailed comments about the amendments soon. Stay tuned!

Media’s Lack of Understanding About Debt Settlement’s Potential for Consumers

is Frustrating and Bad for Consumers

Sure, there are exceptions, but I’ve found that most media run the other way when it comes to covering debt settlement. They seem completely unwilling to get educated about do-it-yourself settlement options and about ethical debt settlement firms like CRN, that provide debt-stressed consumers with a valuable service and charge them fairly for that service, unlike most debt settlement firms. Instead, they either ignore debt settlement or they paint debt settlement firms with a broad brushstroke, characterizing every firm in the industry as a rip off.

Not only is this characterization unfair to those members of the settlement industry that truly want to help consumers get out of debt, but it’s also unfair to consumers who are burdened down with debt and looking for a way out. If they work with the right firm, debt settlement can be a great solution for many of those consumers. Yet, most media reports scare consumers about settlement and warn them to steer clear.

With countless consumers struggling to deal with mountains of debt and with the consumer bankruptcy rate on the rise, the media is doing consumers a disservice by not providing them with fair and balanced information about debt settlement. By fair and balanced I mean:

• explaining the goal of debt settlement

• detailing when settlement is an appropriate option and how it compares to other debt management options

• educating consumers about how to settle their own debts and the resources available to help them

• telling consumers how to chose a reputable debt settlement firm

• warning consumers about the warning signs that a firm is not on the up and up

So, I am issuing the media a challenge: Get informed about debt settlement! Understand how it can (and should) work and who it’s right for, warn consumers about the bad firms, and inform them about the good ones. Under the right circumstances, debt settlement can be a great option for consumers and every bit as legitimate an option as debt consolidation, working with a credit counseling agency or filing for bankruptcy. So, it’s time for the media to inform consumers who are drowning in debt that there is another option available to them — debt settlement.

Every day I receive a daily Google alert in my e-mail inbox that features links to articles, press releases and blogs about some aspect of debt settlement. It’s one of the ways that I stay abreast of what is happening in my industry and it’s the kind of information that any financially-troubled consumer might find by searching on the Internet for helpful resources using key words like debt settlement, debt problems, debt settlement firms, or debt negotiation. However, I’ve been dismayed to see that more often than most of what I read in these alerts is not factual and appears to have been written by debt settlement firms or their representatives with the goal of getting unsuspecting consumers who are confused and scared about their financial situation to work with them.

Here are common examples of the kinds of misleading blather I read in the alerts that show up in my e-mail box each morning:

• Press releases that supposedly are announcing news about a particular debt settlement firm or some aspect of settlement. In fact, the releases contain no news content of any sort and are being used by unethical firms to get consumers to click through to their web sites. At least one of the wire services transmitting these “press releases” appears to be little more than a vehicle for posting articles on the web and not a true wire service at all.

• Poorly written articles about settlement with titles that have been chosen to make it appear as though the articles actually provide valuable advice and information to consumers who need help managing their debts. In fact the information in these articles is marginally useful at best and sometimes totally misleading. You’ll find the real purpose of these articles in a closing paragraph where readers are encouraged to contact a debt relief network, which the articles claim is comprised of highly ethical settlement firms with proven track records for helping consumers. Don’t believe it!

• Half-written blog posts about some aspect of debt that are surrounded by lots of ads for debt settlement firms. I assume that the agenda of whoever writes these posts is less about completing the post and providing readers with truly useful advice and information and more about getting readers to click on one or more of the ads.

• For-profit debt settlement organizations that use names to make them sound like they are non-profits or that imply that they are affiliated with a federal government debt settlement program. The theory here is that consumers will be more apt to trust a non-profit or a firm that’s affiliated with the government. Fact: Debt settlement firms are businesses, not nonprofits, and there is no federal debt settlement program.

• Articles, blogs and press releases encouraging consumers to visit specific debt settlement forums before choosing a debt settlement firm. Supposedly, consumers who participate in these forums will have an opportunity to communicate directly with other consumers who are working happily with a debt settlement firm or who have already settled their debts with the help of a particular firm. Although there are legitimate forums where consumers can obtain truly useful information, some forums have been created by debt settlement firms or their representatives and if you participate in one of them, the consumers you communicate will be nothing more than people who are being paid by the firms to share information with you, to gain your trust and to recommend the firms to you. Other forums work a little differently. For example, in some of them, someone will try to get you to provide him with your name and e-mail address and then that individual will sell your information to a debt settlement firm. Not long after, the firm will contact you offering to help you resolve your debt problem.

Obviously you must be very, very careful when you search for debt settlement assistance online because there are a lot of firms out there who are willing to use underhanded and misleading tactics to gain your trust and who are all too ready to promise you the moon, take your money and give you little or nothing of real value in return. Therefore, before you share any information with anyone on a debt settlement forum, before you agree to work with any debt settlement firm or to pay the firm money, check it out with the Better Business Bureau, http://www.bbb.org/us/Find-Business-Reviews and with your state attorney general’s office, http://www.naag.org/attorneys_general.php. In other words, when it comes to debt settlement the old adage caveat emptor, or buyer beware, definitely applies.

Michael Bovee