Consumer Protection and the Debt Settlement Industry
As the amount of unsecured consumer debt has increased and economic growth has slowed, the
for-profit debt relief industry appears to have undergone significant expansion. The FTC staff is
hosting the upcoming workshop to examine in depth the for-profit debt settlement industry and
the effectiveness of existing consumer protections relating to the industry.
The workshop will explore the history and development of the for-profit debt settlement
industry, compare and contrast the status of the debt settlement industry with that of the non-
profit credit counseling industry, review current business practices and consumer protection
issues, and consider the outlook for the future of the industry. In these contexts, we seek to
further understand the impact that the growth of the for-profit debt settlement industry has had
on businesses and consumers.
The for-profit debt settlement industry has drawn the attention of state and federal law
enforcement agencies and regulators in recent years. State Attorneys General have engaged in
several enforcement actions addressing a variety of practices within the for-profit debt settlement
industry. Over the past few years, the FTC also has brought enforcement actions, which alleged
violations of Section 5 of the FTC Act for various deceptive marketing practices.
In addition to these enforcement actions, several state legislatures are considering enacting the
Uniform Debt Management Services Act or other legislation that addresses the for-profit debt
relief industry. In addition, many states have already passed legislation regulating the industry.
Despite these efforts, some consumers complain that they did not get what they bargained for
from for-profit debt settlement companies, that they were surprised by program fees, that their
enrollment in a debt settlement program may have hurt their credit score, or that their
involvement with the for-profit debt relief industry ultimately led them to bankruptcy.
Given the inc