FTC Testifies About Ongoing Efforts to Protect Consumers from Deceptive Debt Relief Scams

The Federal Trade Commission today told the U.S. Senate Committee on Commerce, Science, and Transportation that the FTC has made it a top priority to protect financially distressed American consumers from deceptive debt relief schemes.

With Americans continuing to feel the effects of the economic downturn, the FTC has stepped up efforts to stop fraudulent financial schemes that exploit consumers, according to the testimony, which was presented by Alice Saker Hrdy, Assistant Director in the FTC’s Division of Financial Practices. Hrdy described the FTC’s law enforcement actions in this area, a new FTC rule to combat deceptive and abusive telemarketing of debt relief services, and the FTC’s ongoing work to educate consumers about debt relief options and how to avoid scams.

In the past seven years, the FTC has brought 23 lawsuits against credit counseling firms that are sham nonprofits, debt settlement services, and debt negotiators. These cases have helped more than 500,000 consumers who have been harmed, and additional investigations are under way. The FTC works closely with state attorneys general and state banking departments to leverage its resources to protect consumers in this and other areas.

The testimony also described how the FTC recently amended its Telemarketing Sales Rule to further combat deceptive and abusive debt relief practices. The Rule now prohibits for-profit companies that sell debt relief services over the telephone from collecting fees before delivering the services they promise. In addition, the Rule requires telemarketers to make certain disclosures and prohibits them from making false claims.

In addition, the testimony described the FTC’s many educational campaigns to help consumers manage their finances, avoid deceptive and unfair practices, and be aware of emerging scams, including a major initiative regarding mortgage loan modification and foreclosure rescue scams. The FTC has focused outreach efforts on issues affecting people in financial distress, such as federal stimulus money scams.

The Commission vote authorizing the testimony was 5-0. The testimony was presented during a Senate Committee field hearing in Kansas City, Missouri.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,800 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.