McCaskill: Consumers are Desperate for Help with Mounting Debt

As thousands of hard-working Missourians face ongoing financial struggles and mounting debt resulting from the economic crisis, U.S. Senator Claire McCaskill yesterday took to task representatives from debt settlement organizations that prey on consumers and often leave them with more debt despite promising to resolve their financial issues. In a Commerce, Science and Transportation Committee hearing, McCaskill criticized debt settlement companies for taking advantage of worried consumers with misleading advertising and undocumented promises of 100% success rates.

“You are preying upon the fears of people. You’re making a lot of money and you’re delivering a substandard product. Many times you’re engaging in fraud to get the customers by promising them something that you know is not true,” McCaskill said. She continued “If you can prove what you say then you should just get to proving it.”

Watch McCaskill question the representative from a debt settlement trade association

Numerous complaints and lawsuits have been filed against debt settlement companies for misrepresenting the services they offer and charging large fees for customers who are already deep in debt. Companies often charge substantial fees up-front, before they even begin seeking to reduce a customer’s debt, a practice which McCaskill said should be banned. Further, the companies frequently fail to actually reduce customers' debt at all. Additionally, the settlement companies are notoriously secret about their practices and documentation. Trade associations won’t even reveal which companies are members.

Currently, the Missouri Attorney General’s Consumer Bureau is embroiled in a lawsuit against Credit Solutions of America in St. Louis for misrepresenting the services that the company could provide. The Missouri Attorney General, along with numerous other Attorneys General and consumer protection groups nationwide, has repeatedly found that debt settlement companies are not forthcoming with documentation to substantiate claims that they have successfully helped customers.

“When people are in debt and worried [they] are more easily persuaded that someone can help them because they’re desperate for help…What’s hard for me to understand is how your association thinks you can stop the inevitable march of regulation, lawsuits, and enforcement actions, because I don’t think you can produce statistics that show you’re helping anyone,” McCaskill said.