Federal Oversight of the Debt Relief Industry: A More Effective Means of Deterring Illegal Debt Settlement Schemes
22 Pages Posted: 30 Jul 2014 Last revised: 3 Feb 2015
Date Written: April 1, 2014
Abstract
The revolving debt of American consumers has recently been on the rise. While this growth may be a sign of emergence from the Great Recession, many Americans struggle to manage their debt and often turn to the debt relief industry for help. Debt settlement companies often promise to settle an individual’s debt for pennies on the dollar but end up stringing the individual along and taking what little money they had left without settling their debt. A historical lack of uniformity in state laws and a general lack of scrutiny have allowed these companies wide latitude to act in ways that harm indebted individuals.
Some debt settlement companies can be helpful to those searching for a way to overcome seemingly insurmountable debt. However, without proper oversight, many debt settlement companies can and will continue to deceive and abuse cash-strapped individuals.
Current penalties for noncompliance with the law are not sufficient to deter deceptive and abusive debt relief schemes. In order to achieve greater deterrence, federal action is needed.
Although regulating the debt relief industry has largely been under the purview of individual state governments, the federal government can and should create a more comprehensive federal legislative scheme to regulate the industry and increase penalties for noncompliance.
Keywords: debt, debt settlement, debt relief, consumer protection, CFPB, FTC Telemarketing Sales Rule
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