The entire debt settlement industry should not suffer for the lack of performance by only a hand full of companies in question. The FTC has recently proposed new regulations regarding the debt settlement industry that will prove to be pivotal in the demise of the industry if put into effect.

A vote will take place in November 2009 with the intension of implementing provisions that will benefit consumers seeking debt relief. But will it really help consumers to eliminate the option of retaining a company to negotiate debts on their behalf?

The leading trade associations representing debt negotiation/settlement companies have endorsed research studies to determine the effectiveness and overall results of the debt settlement industry. Both TASC (The Association of settlement companies) and USOBA (United States Organization for Bankruptcy Alternatives) hope to prove the true benefits of debt settlement to the FTC and to prevent the passing of some of these groundbreaking regulations.

Debt settlement companies work on consumers’ behalf to negotiate the amount of unsecured debt owed, such as credit card debt, personal loans, lines of credit, and medical bills. They serve a segment of consumers with serious hardships, such as medical illnesses, job loss, divorce, or death of a spouse.

Most of the amendments that the FTC seeks to implement—including a ban of advance fees— would effectively eliminate this viable option for consumers who are having difficulty with unsecured debt. TASC outlined in a brief historical performance data study the economic value its member companies deliver to consumers enrolled in debt settlement programs, and it is clearly illustrated in many others. For example, based on that recent data analysis of its members, TASC estimates its members settled more than 94,000 accounts representing more than $553 million in debt in the first 6 months of 2009. This is an annual projected rate of more than $1.1 billion in debt settled by TASC members for just 2009. Majority of other studies also clearly indicate the advantage of the debt settlement industry as a whole, showing the positive impact on the economy in general.

USOBA has endorsed examinations of the debt settlement industry by Dr. Richard A. Briesch, an Assistant Professor of Marketing at Southern Methodist University’s renowned Cox School of Business, releasing the study entitled “Economic Factors and the Debt Management Industry” earlier this month. He conducted an independent objective assessment of the consumer benefit, if any, provided by debt settlement and negotiation companies. Through studying specific sources of concern in the debt settlement industry, such as consumer completion of debt settlement programs, paid-in-advance fees, the quality of settlement officers, and overall consumer benefit, Dr. Briesch concluded that debt settlement can provide significant value and benefit to consumers even beyond what credit counseling can provide. Most issues of concern did not outweigh the advantages and positive impact of debt settlement on consumers.

Dave Leuthold, Executive Director of TASC said “Debt settlement has been and should remain an option for the tens of thousands of consumers who are facing financial difficulties. Especially in this tough economic climate, consumers should have more financial tools at their disposal, not fewer.”

Commissioner J. Thomas Rosch of the FTC also agrees that the Debt Settlement industry has an important role to play as he said “For example, a debt settlement firm can advocate on the consumer’s behalf, especially in cases where consumers are reluctant, embarrassed, or even afraid to contact their creditors directly. A debt settlement firm also may be able to provide individualized attention to consumers, taking a holistic approach to all of the consumer’s unsecured debt owed to several creditors, rather than just the amount owed to a particular creditor. Managing the complete debt picture and focusing on restoring the consumer’s financial health has always been a critical value proposition of debt management professionals.” Rosch goes on to mention several recommendations to the industry that can help to reduce the complaints by consumers, since it is the complaints that drive the FTC and other authorities such as Attorney Generals’ offices, State Bar Associations, and the BBB to scrutinize, report, and crack down on the companies involved in the industry.

“More than ever consumers are finding themselves squeezed by multiple sources of debt that in a better economy they were able to service. Unfortunately, turns of fate–many out of their control–have thrust good consumers into an unlikely spot. Who is to be the trust advocate of the consumer in these confusing and desperate times” (Wilson n.pag.)?

The FTC does not need to set regulations in place to protect consumers because there are many sources to reference when selecting a reputable company to team up with. Also, understand that a company that is a member of either TASC or USOBA would be a safe choice because these associations were created to protect consumers and to ensure that their member companies are adhering to a higher standard.

Obviously, different debt settlement companies have differing programs and fee structures that will suit different consumers based on their specific needs, but when the proper research is done, the possibility of going with an unscrupulous company is greatly diminished, if not completely eliminated. Debt settlement has proven to be an option that benefits consumers; it would be a disservice to consumers to possibly eliminate the industry by implementing unnecessary restrictions.

-Wilson, Troy. “FTC on the Real Benefits of Debt Settlement Industry.” Online Posting. 5 May 2009. Aged Lead Strategies. 3 Nov. 2009 <http://blog.nextwavemarketingstrategies.com/2009/05/05/ftc-on-real-benefits-of-debt-settlement-industry/>