The Federal Trade Commission on Thursday told the U.S. Senate Committee on Commerce, Science, and Transportation that protecting financially distressed consumers from deceptive debt relief schemes is a top agency priority.

The FTC reports it has stepped up efforts to stop fraudulent financial schemes that exploit consumers, according to the testimony, which was presented by Alice Saker Hrdy, assistant director in the FTC’s Division of Financial Practices.

Hrdy described the FTC’s law enforcement actions, including a new rule to combat deceptive and abusive telemarketing of debt relief services, and ongoing work to educate consumers about debt relief options and how to avoid scams.

The FTC in the past seven years has brought 23 lawsuits against credit counseling firms that are sham nonprofits, debt settlement services and debt negotiators. The cases have helped more than 500,000 consumers who have been harmed, and more investigations are ongoing. Last month, the marketers of a “Rapid Debt Reduction” plan who promised to lower interest rates on credit cards – for an upfront fee of up to $899 - agreed to pay $1.5 million to settle Federal Trade Commission charges that they misled consumers (see story).

The FTC's testimony also described how the agency recently amended its Telemarketing Sales Rule (see story) to help stop deceptive and abusive debt relief practices. The rule now prohibits for-profit companies that sell debt relief services over the telephone from collecting fees before delivering the services they promise. 

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