It’s not often you hear a leading public official use adjectives that blunt to characterize the practices of a business. But those were the words of Federal Trade Commission Chairman Jon Leibowitz last month announcing new rules to rein in the predatory practices of for-profit debt relief firms.
Responding to more than 3,500 Better Business Bureau complaints filed across the country, the new FTC rules are aimed at curbing widespread abuse of desperate consumers looking for solutions.
“Too many of these companies pick the last dollar out of consumers’ pockets – and far from leaving them better off, push them deeper into debt, even bankruptcy,” Leibowitz added.
At this bankruptcy law firm serving clients in MD and DC, we applaud the efforts after seeing way too many unfortunate victims who have lost hundreds and thousands to the scammers before coming to this office.
Closer to home, since 2003 the FTC has been engaged in an on-going legal battle with Germantown, Maryland-based, AmeriDebt, one of the larger such such firms and its founder, Andris Pukke, which the agency says fleeced some 300,000 customer for $172 million in hidden fees.
As of October 27, 2010 for-profit debt management companies selling over the telephone will no longer be able to charge an upfront fee until the consumer sees results, and then only in proportion to the degree of success, if any.
As of September 27, 2010 the firms will be required to make important disclosures, including:
- How long it will take to see results.
- How much it will cost.
- What are the negative consequences from debt relief programs including a hit to the debtor’s credit score and possible taxes on debt forgiven.