FTC Challenging Debt Elimination Programs - Total Bankruptcy
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FTC Alleges Debt Elimination Programs Making False Claims


The Federal Trade Commission and the Washington State Attorney General have filed a complaint alleging that four telemarketing companies have made false representations.

These companies sell debt elimination programs for hundreds of dollars and ultimately save customers little, if any, money.

The complaint alleges that Debt Solutions, Inc.; DSI Financial, Inc.; DSI Direct, Inc.; and Pacific Consolidation Services, Inc. falsely claimed that:

  • consumers would save thousands of dollars in a short period of time
  • credit card and loan interest rates would be reduced substantially
  • debts would be paid off much more quickly, without higher monthly payments
  • monthly credit card and loan payments would be reduced
  • the program was endorsed by the Financial Standards Council in Canada and the Registered Financial Planners of North America

Consumers are also promised a full refund if they do not save at least $2,500, but the complaint alleges that few consumers have been able to collect refunds, since they are not told in advance that the $2,500 in savings may take decades to achieve.

Where consumers do see savings, it is most often because they are making higher monthly payments, not because of any reduction in interest rate.

According to the complaint, most consumers do not see their interest rates reduced at all, and that most reductions that are negotiated are 1% or smaller.

Lydia Parnes, Director of the FTC's Bureau of Consumer Protection, says that there are legitimate options to reduce debt: more realistic budgeting, credit counseling from reputable organizations, debt consolidation programs, and even bankruptcy.

The FTC offers additional suggestions for anyone considering a debt management plan:

  • Make sure that the organization complies with the licensing requirements in your state
  • Avoid organizations that charge for information about their services
  • Look for an organization that offers a range of services such as:
    • Budget counseling
    • Savings and debt management classes
    • Trained and certified counselors
  • Get price quotes in writing and ask for details-and make sure that all fees are covered in the quote
  • Find out whether the employees or organization gets paid more depending on which services you sign up for
  • Check with the consumer protection division of your state's Attorney General's office and the Better Business Bureau to see whether other consumers have filed complaints against the organization.

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