Legislation aimed at regulating unfair billing practices within the credit card industry have dominated the news for the past few weeks. While this is good news for consumers who are currently struggling to keep their accounts in good standing, there is another industry that is preying on consumers who have already fallen behind on credit card payments. Various debt "relief" companies are sprouting up everywhere, making promises that few cash-strapped consumers can resist. This largely unregulated industry is now in the cross hairs of lawmakers seeking to provide consumers will some level of protection.
On Tuesday the House voted in favor of Bill 2191 which requires debt management agencies to register with the Oregon State Department of Consumer and Business Services. Additional areas covered by House Bill 2191 include regulating advertising, limiting or imposing caps on fees and other protections. The Association of Settlement Companies and United States Organizations for Bankruptcy Alternatives which represent the debt negotiation industry have opposed this bill. In contrast companies within the debt consolidation industry support the bill.
Illinois Attorney General has announced lawsuits have been filed against two debt settlement companies. The lawsuits allege that California based SDS West Corporation and Debt Relief USA, Inc located in Texas charge excessive fees, do little or nothing to improve the financial situation of clients and engage in deceptive marketing practices. The complaints allege that both companies charge substantial upfront fees as well as monthly maintenance fees for debt settlement services. Many consumers claim they did not understand that the majority of their monthly payments would not be applied to their escrow account but instead used for company fees. Other clients allege they were not aware of the fact that it would take several months to save enough money to begin negotiations. Both complaints ask the court to bar the defendants from engaging in debt settlement within the state as well as paying restitution to clients.
Imposing restrictions and regulations designed to protect constituients addresses only part of the problem. Consumers are not absolved of their responsibility and must understand that many of the issues they currently face could have been avoided. Financial experts agree that people must pay more attention to the terms and conditions prior to entering an agreement with lenders or debt relief services. Consumers are encouraged to research companies and the services they claim to provide before becoming bound by a legal contract. These simple steps can greatly reduce the number of people who would otherwise be victimized by unfair or predatory business practices.