Debt Settlement Association Pushing for Regulation, Standardization

The commentary period following the Federal Trade Commission’s recent debt settlement workshop ended Monday, with many of industry leaders hoping for some federal regulation to set some standards for the growing industry.

The Association of Settlement Companies (TASC), a non-profit organization created in 2005 to promote fair legislation, strict business standards and consumer protection for the debt settlement industry, told insideARM that it “looks forward to continuing our work toward strong legislation at both the federal and state levels to help regulate this young and growing industry.”

Chris Kesterson, president of the 170-plus member organization and CEO of Debt Settlement America, and Wesley Young, TASC executive board member and legislative committee chair, recently discussed the organization, the industry and the related businesses with insideARM.

“TASC respectfully disagrees strongly with the ABA [American Bankers Association] that a settlement intermediary is unnecessary to help consumers,” Kesterson said. “TASC member companies employ ethical, upstanding business professionals that help consumers manage financial burdens and help creditors collect debts.”

While financial services firms will say that they don’t work with debt settlement companies, that’s more the party line than the reality, according to Kesterson. “They see us as a necessary evil. While some creditors may not choose to talk about it publicly, in our experience, most creditors appreciate the good actors in our industry for helping financially distressed consumers establish and maintain a plan to pay off at least a portion of their debts, rather than declaring bankruptcy.  In fact, TASC members have successfully negotiated debt-settlement claims for customers with all of the major creditors.”

Kesterson added: “Companies in the debt buying industry are big fans of us. They know that if they work with us, they will have better collections and returns.”



Though some collection firms have said that consumers would be better working directly with them than going through a debt settlement firm and paying the associated fees, the reality is that most consumers going the debt settlement route don’t have the funds to pay what collection firms would accept as a settlement, according to Kesterson.

“Consumers appreciate having a third party handle the difficult, time consuming and emotionally taxing process of negotiating a fair resolution with their creditors,” Kesterson explained. “Clients graduate from a debt-settlement program free of the burdens of unsecured debt, with a healthy financial outlook, all while avoiding bankruptcy and complete financial ruin.”

Young added that while Fortune 500 companies and other firms (including the Big Three auto companies that made their emergency loan pitch Tuesday) are going to the government for bailouts, consumers have no similar recourse. So they turn to the debt settlement companies.

Current economic woes, including the consumer credit crunch and increasing unemployment, mean that more consumers are turning to debt settlement firms than ever before, said Young, who added that TASC membership has doubled in the last year.

The organization wants members to abide by certain standards, including providing consumers with certain disclosures and adhering to a set of business practices and ethics. TASC “mystery-shops” its members, Kesterson added, and will remove companies that don’t abide by the organization’s rules.

“Our companies’ main goal is to have good relationships with consumers,” Kesterson said. “We want member companies disclosing to consumers the pros and cons of debt settlement.”

Kesterson acknowledged that consumers who go to debt settlement companies will likely see their credit ratings deteriorate further until payments are made to creditors, which can be some time after signing up for a program. But for many consumers, the credit ratings have already hit rock bottom before they seek a debt settlement solution.

Kesterson added that consumers are seeking the best solution, and are shopping around among different debt settlement companies, not settling for the ones with the most aggressive marketing.

The number of debt settlement firms is likely to continue to grow as the economy tries to turn around, which could take a year or more, Kesterson and Young said.

The preceding article is one in a series on the debt settlement industry. Read the rest of the articles:

“Unrealistic Collection Expectations Drive Consumers to Debt Settlement,” Nov. 20
“Collection Agencies Wary of Debt Settlement Firms, But See their Purpose,” Nov. 13
“Debt Settlement Companies Largely Ignored by Banks,” Nov. 3