FTC: Debt Settlement Companies Can No Longer Claim “Non Profit” Status
The Federal Trade Commission (FTC) has recently issued new regulations covering the debt settlement industry which are expected to have wide ranging impacts. One of these new rules specifically prohibits debt settlement companies from promoting themselves as non-profit entities.
Part of the confusion that consumers face occurs when they search for a debt relief company is that oftentimes they mistakenly believe that a company may be operating as a nonprofit. More commonly known as Consumer Credit Counseling, these organizations do not charge consumers hefty fees to help them reduce their debt.
However, the FTC has received numerous complaints that for-profit debt consolidation companies are masquerading as nonprofit entities. Therefore, to eliminate confusion amongst consumers, the agency now explicitly prohibits for-profit debt settlement companies from claiming to be a not-for-profit enterprise. The hope is that by implementing this rule, consumers seeking debt relief will be able to make more informed decisions before deciding to work with a particular company.
Other changes in the new FTC rules regulating debt settlement companies include:
- Prohibiting exaggerated claims such as being able to cut debts in half
- Providing a clear timeline for results that are promised
- Explicitly divulging all costs associated with these services
- Full explanation of the impact of debt settlement on credit scores
- Forbidding the charging of upfront fees for any debt relief services
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