Chairman Rockefeller Says FTC Rule to Protect Consumers from Deceptive Debt Settlement Practices is Enormously Important

Rockefeller's Landmark Debt Settlement Investigation is Helping to Protect American Families from Unscrupulous Companies

July 29, 2010

WASHINGTON, D.C. — Today, the Federal Trade Commission (FTC) announced a new rule to protect consumers from deceptive debt settlement practices. The new rule will require debt settlement companies to disclose more information about the services they provide, and ban them from charging upfront fees. The debt settlement industry was the subject of a Commerce Committee investigation initiated by Chairman John D. (Jay) Rockefeller IV.

Chairman Rockefeller’s statement follows:

“As Chairman of the Commerce Committee, cracking down on bad actors who try to cheat, swindle and defraud consumers has been one of my top priorities. Last October, I asked the GAO to conduct a covert investigation into the debt settlement industry.

“The investigation revealed what many had suspected – these debt settlement companies were kicking Americans when they were down, destroying their credit, and leaving them financially worse off than they were before.

“I applaud the FTC for adopting this new rule to protect consumers from the scourge of unscrupulous debt settlement companies. From now on, debt settlement companies that take huge upfront fees or misrepresent the amount of money they can save consumers will be subject to substantial civil penalties.”


  • The FTC’s rule will make it illegal for companies that use telemarketing to offer debt settlement or other debt relief services to charge consumers a fee before settling or otherwise resolving consumers’ debt.
  • This fee, also known as an “upfront fee”, was paid directly to debt settlement companies before they even began work on a customer's behalf, and could cost thousands of dollars. During a Committee hearing in April, Chairman Rockefeller questioned why debt settlement companies were allowed to charge financially distressed consumers thousands of dollars for services they had not yet provided, and urged the FTC to put an end to such practices.
  • The FTC’s new rule will also require debt settlement or other debt relief services to disclose key information to consumers, including how much the services cost, how long it will take to get results, and the negative consequences that could result from using their services.


  • Chairman Rockefeller has championed efforts to expose debt settlement companies that engage in fraudulent, deceptive and abusive practices that hurt consumers. These companies sell their services by claiming that they can significantly reduce the amount of credit card debt a consumer owes. Their business practices include requiring large upfront payments from consumers and strongly encouraging consumers to stop paying their creditors.
  • In 2009, Chairman Rockefeller asked the U.S. Government Accountability Office (GAO) to launch an undercover investigation into whether debt settlement companies were engaging in deceptive, unfair, or otherwise abusive marketing practices.
  • The results of that undercover investigation were released at a Commerce Committee hearing on April 22, 2010. During that hearing, Chairman Rockefeller strongly encouraged the FTC to protect consumers from deceptive debt settlement services. For more information, click here.