Debt Collection, Relief: Abusive Tactics Eyed by FTC

The Federal Trade Commission told a Senate panel that it is intensifying efforts to combat deceptive and abusive practices by debt collection agencies and outright debt relief scams – as more consumers seek help in these recessionary times.

The FTC said it is reviewing public comments on a proposal to amend telemarketing sales rules tied to debt relief advertising.. The amendment would require telemarketers to make certain disclosures and prohibit them from making false claims.

It would also prevent a debt relief company from “seeking or receiving payment before delivering the services it promises.”

FTC Commissioner Julie Brill testified before the U.S. Senate Committee on Commerce, Science and Transportation yesterday to give an update on the agency’s enforcement and education efforts to reduce abusive debt reduction practices.

“To be sure, some debt relief services do help consumers reduce their debt loads,” Brill testified. “In too many instances, however, consumers pay hundreds or thousands of dollars for these services but get nothing in return.”

The FTC has brought 20 lawsuits against “for-profit credit counseling firms, debt settlement services, and debt negotiators,” and other investigations are under way, she said.

“Stopping the purveyors of empty promises who prey on consumers facing financial hardship is among the FTC’s highest priorities,” Brill said.

Brill also said the FTC has initiated education campaigns to help consumers manage their finances, avoid deceptive and unfair practices, and warn them about emerging scams, including surging scams tied to bogus offers of mortgage modifications and foreclosure rescue scams.

The FTC has set up a resource page on debt collection and debt relief services.