The results of a nine-year study of consumers enrolled in debt settlement programs, commissioned by the American Fair Credit Council (AFCC), show consumers realize financial benefits and have a higher probability of success since regulatory reforms took effect in 2010.  

The study, the second of its kind and a follow up to the original study commissioned by the AFCC in 2012, addressed the outcomes of more than 1.9 million consumer accounts enrolled in debt settlement programs by approximately 297,000 consumers from January 1, 2006 through March 31, 2015. The study was performed by the Certified Public Accounting firm of Hemming Morse LPP.

The study revealed several positive findings for consumers seeking relief from the burden of credit card debt. Most notable among the findings are that consumers are receiving financial benefits in the form of debt reduction resulting from regulations imposed on the debt settlement industry through the Revised Telemarketing Sales Rule in October of 2010 by the Federal Trade Commission and the Consumer Financial Protection Bureau.  

Several highlights from the report include the fact that:

  • The average settlement of an account enrolled in a debt settlement program is 48% of the balance owed at the time of the settlement.
  • More than 50% of consumers settle accounts within the first 4 months of the program (vs. 12% prior to regulatory reform).
  • More than 90% of consumers had settled at least one account in the first 8 months of the program (vs. 65% prior to regulatory reform).
  • 45% of consumers had settled 5 or more accounts after 30 months in a debt settlement program.
  • 82% of consumers had settled 3 or more accounts after 30 months in a debt settlement program.
  • Debt reduction consistently ranged between $2.75 and $3.13 per $1.00 of fees paid for all client types (active, completed or terminated) over the life of a debt settlement program.
  • More than 95% of consumers enrolled in a debt settlement program after the implementation of regulatory reforms realized savings through these programs.
  • Consumers studied as a part of this report recognized $2.1 billion in debt reduction for a net savings after fees of approximately $1.4 billion or approximately $4,600 per consumer.

Robby Birnbaum, president of the AFCC said, “We are pleased that this report validates what our association and its members have known for years; that debt settlement programs provide a valuable and much needed option for consumers struggling with high amounts of debt and who cannot otherwise qualify for other options such as credit counseling or traditional financing such as debt consolidations loans or mortgage refinancing. Overall, the introduction of regulatory reforms for the industry has been positive and resulted in a higher likelihood of success for consumers.” 
AFCC is an association of professional consumer credit advocates. The AFCC, and its member companies, represent the rights of consumers struggling with debt. The AFCC has a strict Code of Conduct centered on best practices designed to protect consumers and require member companies to follow strict regulatory guidelines for operation. All AFCC members operate on a “No Advanced Fee Model” and never charge a fee for services until a consumer’s debt has been successfully negotiated. 

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