Debt settlement industry could face huge losses
Debt settlement firms have typically used fast-talking radio and television advertisements that promise to cut credit card debt to attract consumers. However, they are now under fire from U.S. and New York lawmakers.
State attorneys and Andrew Cuomo, who was recently elected governor of the Empire State, have been investigating the practices of debt settlement firms and are moving toward prosecution.
Earlier this year, Cuomo sent subpoenas to 14 debt settlement firms. The prosecutors cite upfront fees and the companies’ overall ineffectiveness as a reason for the decision, The New York Post reports.
Over the past two months, the Federal Trade Commission has been amping up regulations on the industry, banning advance fees and setting new rules for how the companies can raise revenue. The industry is facing legal problems not only in New York, but also in California.
While some are complying with the new rules, others could face increased scrutiny. Industry surveys suggest up to 80 percent of debt settlement firms could close down because of lawsuits resulting from the new regulations.