NATIONAL
CONSUMER LAW
CENTER INC
S
AN INVESTIGATION OF DEBT SETTLEMENT COMPANIES:
AN UNSETTLING BUSINESS FOR CONSUMERS
A Report by the National Consumer Law Center
March 2005
Written by: Deanne Loonin
Research Assistant: Lauren Mandel
77 Summer St., 10th Floor Boston, MA 02110 Phone: (617) 542-8010 Fax: (617) 542-8028
Website: www.consumerlaw.org
Table of Contents
Introduction and Methodology ..................................................................................1
Differences between Debt Management and Debt Settlement ..................................1
Key Problems with Debt Settlement..........................................................................3
Overview....................................................................................................................3
The Industry’s “Ideal” Customers Are the Least Likely to Benefit...........................4
Few Consumers Complete Debt Settlement Programs..............................................4
Advising Consumers Not to Pay Debts .....................................................................5
Consequences of Not Paying .....................................................................................6
Exorbitant Fees ..........................................................................................................7
Questionable Value of Services (if any) Performed .................................................9
Loss of Consumer Control and Decision Making......................................................11
False Claims and Representations .............................................................................12
Many Debt Settlement Companies are Breaking Existing Laws...............................13
Federal and State Credit Repair Laws .......................................................................13
Unauthorized Practice of Law ....................................