Attorney General Gansler Applauds FTC's Debt Relief Rule

BALTIMORE, MD ( July 29, 2010) -Attorney General Douglas Gansler today praised the Federal Trade Commission (FTC) for deciding to ban companies that sell debt relief services from charging a fee before they settle or reduce a consumer’s credit card or other unsecured debt. Debt settlement companies often charge consumers up-front fees, which can total hundreds or thousands of dollars, but they often fail to settle consumers’ debts and refuse to refund their fees. The FTC’s new rule prohibits debt relief agencies from charging consumers fees until after they have settled consumers’ debts and provides other protections for consumers. The new rule governing debt relief agencies amends the Telemarketing Sales Rule and will go into effect October 27, 2010.

“Requiring debt settlement companies to actually perform the service they promise to provide will protect consumers and ensure that these companies only enroll consumers for whom the services are appropriate,” said Attorney General Gansler. “The FTC’s advance fee ban is a great victory for consumers.”

Attorney General Gansler has been a leading advocate for protecting consumers against abuses by debt settlement companies. In October 2009, Attorney General Gansler led more than 40 State Attorneys General in submitting comments supporting the FTC’s proposed advance fee ban. His Consumer Protection Division obtained a judgment in excess of $2.7 million against a Frederick, Maryland-based debt settlement provider – The Law Offices of Richard A. Brennan, LLC – when it charged consumers significant fees and did not settle their debts.

The Attorney General’s Consumer Protection Division has received hundreds of complaints from consumers who paid substantial advance fees to debt settlement companies but never had their debts settled. The debt settlement industry has been widely labeled as a “suspect” industry by consumer advocates because of the large up-front fees it charges and its failure, in most cases, to settle consumers’ debts as promised.