GAO Issues Report on Debt Settlement Industry
This past weekend I saw an advertisement on television for a debt settlement company touting special relief for consumers with credit card debt, thanks to the recent credit card legislation. The ad went on to say that you have the right to settle your credit card bills.
The problem is that it’s just not true. There’s been no special bailout for credit card holders (just help for the banks that issued the cards), the Credit CARD Act says nothing about negotiating settlements on credit cards, and while you certainly have the right to try to settle your credit card bills, your credit card issuers have the right to say no.
Yesterday, a Senate committee held a hearing on the debt settlement industry. At the center of the hearing was a report issued by the Government Accounting Office (GAO) describing its experience “mystery shopping” debt settlement firms. The GAO report on the debt settlement industry focused on issues that have been raised by state and federal regulators, including high upfront fees, misleading sales tactics, and even outright lies on the part of these firms.
It can’t be cheap to run television advertisements like the one I saw this weekend. Unfortunately, someone is paying for that advertising, and it appears that the folks who are paying for that marketing may also be the ones who can least afford it.
If you are considering negotiating your debts, proceed with caution. Make sure you also talk with a bankruptcy attorney and read our tips for evaluating a debt settlement firm.
Gerri Detweiler – Personal Finance Advisor for Credit.com, Gerri contributes budgeting, debt recovery and savings information online. She is also the co-author of Reduce Debt, Reduce Stress: Real Life Solutions for Solving Your Credit Crisis.
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