“FTC Testifies about Credit Counseling Abuses”
Federal Trade Commission
March 24, 2004

Some firms may be misleading consumers about who they are, what they do, or how much they charge. In Commission testimony submitted before the Senate Committee on Governmental Affairs, the Permanent Subcommittee on Investigations, FTC Commissioner Thomas Leary cautioned that some companies use their non-profit status as a badge of trustworthiness to attract customers, who are then duped into paying large fees. Those fees are sometimes funneled to for-profit companies.

Consumer Counseling Agencies indiscriminately enroll their clients in “debt management plans” (DMPs) without regard to their particular financial situation. In this kind of debt management consumers pay debt managers who then pay their creditors. “Along with these changes in the industry have come complaints about troubling practices, including possible deception about the services offered, poor administration of DMPs, and undisclosed fees associated with DMPs,” Leary says.

Leary stated that the FTC’s greatest concern is deception by Credit Counseling Agencies about the nature and costs of their services, including the following practices:

• Failure to pay creditors in a timely manner or at all.
• Promises of results that cannot be delivered.
• Failure to abide by telemarketing laws.

The FTC remains committed to working with its law enforcement partners to protect consumers against financial fraud and deception.

This is only a summarization. You can read the entire article on the Federal Trade Commission’s website at http://www.ftc.gov/opa/2004/03/credittestimony.shtm

Return to Industry Articles