The Federal Trade Commission (FTC) has reported that for a period of 12 months starting from June 2008 to June 2009, concerns about the credit card debt relief industry has risen by 18 percent.
The Association of Settlement Companies recently released data on Americans enlisting help from credit card debt relief companies. The data indicates a 25 percent rise in the number of Americans looking for relief from the credit card debt relief industry for the past year. The industry saw a jump to 154,000 debt relief applications this year, up by 25 percent from last year's 123,000.
The increase is attributed to the global economic recession which took away jobs of hundreds of thousands of Americans. With debts incurred due to unemployment, Americans also sought help from the credit card debt relief industry.
The concerns against the industry, however, are also growing in the face of investigations by the Federal Trade Commission. The credit card debt relief companies have had a bad image for false advertising to lure the already financially vulnerable market to avail of their services.
Different State Attorney General Offices described that the credit card debt relief companies use emotional appeals via misleading and deceptive claims of benefits which are never delivered along with implicit blackmailing in the language of their contracts. These issues led the Federal Trade Commission to make amendments to the Telemarketing Sales Rules.
The FTC said that they cannot tolerate the practices in the credit card debt relief industry since they're putting the already financially unstable market in jeopardy. FTC adds that action has to be taken against the companies committing such practices in order to mitigate harms.
FTC says that the harms include those associated with other companies in the credit card relief industry which are justly and validly serving distressed Americans. FTC adds that the bad image of the industry subjects a lot of other "good" companies to people's generalization of dishonest and illegal practices in the whole industry.
FTC's new Telemarketing Rules now include the proper education for Americans in relation to the realistic pace of reduction the companies can deliver in a given span of time-this includes the needed presentation of facts and evidences attesting to a company's capacity for debt reduction, disallowing claims of debt reduction above 50 percent, prohibition of fees being charged until results of debt reduction are seen by the clients, free counseling, negotiation, and settlement to arrive at effective plans of action, and a transparent fee matrix along with time-bound proposals for results.
Lastly, the new rules make it clear that profit-seeking debt relief companies advertising as non-profit organizations shall face sanctions.