FTC Testifies About Continuing Efforts to Protect Consumersfrom Deceptive Debt Relief Scams

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For Release

The Federal Trade Commission today told the U.S. Senate Committee on Commerce, Science, and Transportation that the FTC will continue its stepped-up efforts to protect financially strapped consumers from deceptive and abusive debt relief scams.

The testimony, presented by FTC Commissioner Julie Brill, described the FTC’s law enforcement actions, a rule change the agency has proposed 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. With Americans continuing to feel the effects of the recent economic downturn, the Commission has stepped up its efforts to stop fraudulent financial schemes that exploit consumers who are particularly vulnerable as a result of financial distress, the testimony stated.

In recent years the FTC has brought 20 lawsuits against for-profit credit counseling firms, debt settlement services, and debt negotiators, and more investigations are under way. The testimony also noted FTC efforts against other scams that target cash-strapped consumers: credit-related and government grant scams, mortgage loan modification scams, deceptive marketing of health care products, deceptive negative-option marketing, and business opportunity and work-at-home schemes. The FTC works closely with state attorneys general and state banking departments to leverage its resources to protect consumers.

The testimony described the FTC’s proposal to amend its Telemarketing Sales Rule so that it will apply when consumers call telemarketers in response to debt relief advertising. The proposed rule change would require these telemarketers to make certain disclosures and prohibit them from making false claims. It also would prevent any debt relief company from seeking or receiving payment before delivering the services it promises. FTC staff is currently reviewing public comments on the proposal.

The testimony also described the FTC’s many education 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. In addition, the FTC has focused outreach efforts on issues affecting people in financial distress, such as federal stimulus money scams, rental scams, church “opportunity” scams, offers for bogus auto warranties, and phony charities claiming to help military troops and public safety personnel.

The Commission vote authorizing the testimony was 5-0.

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.

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