Attorney General Bill McCollum today announced that he has co-sponsored a letter to the Federal Trade Commission (FTC), asking it to amend a federal rule that would require debt relief service companies to provide services before collecting any fees.

The letter was also sponsored by the Attorneys General of Illinois, Maryland, and Washington.

Debt relief is an umbrella term that applies to any service offering to negotiate, settle or in any way adjust a consumer’s debt, including interest rate reduction services, debt management and debt settlement services.

The FTC's proposed amendments would regulate debt relief agencies under the Telemarketing Sales Rule by, among other things, prohibiting deceptive trade practices and misleading statements concerning fees and success rates, and requiring clear and conspicuous disclosures regarding how they perform their services and the length of time it will take to provide debt relief and the cost.

Attorney General McCollum and his colleagues have also urged the FTC to prohibit the charging of advance fees, as proposed, a prohibition the states believe will prevent substantial monetary losses suffered by consumers, discourage unscrupulous operators from flocking to this industry, and facilitate efficient and timely enforcement. The States view the eradication of unfair and deceptive practices in the debt relief industry, and the harm caused to consumers and the marketplace by these practices, as a consumer protection priority.

Last week, the Attorney General’s Office filed two lawsuits on behalf of Florida consumers against five debt settlement-related companies.
According to the lawsuits, the businesses promised consumers they could pay off their debts for a fraction of the amount owed, but instead collected large up-front fees and left customers with little or no money to pay creditors. The lawsuits and the letter to the federal authorities continues the Attorney General’s consumer protection initiative targeting abuses within the debt services industry.

A copy of the letter is available online at:
http://myfloridalegal.com/webfiles.nsf/WF/MRAY-7X8FSV/$file/FTCDebtRelief.pdf.