Many states as well as the National Conference of Commissions on Uniform State Laws (NCCUSL) have attempted to regulate debt settlement through laws that mainly target debt management practices. In fact, debt management and debt settlement are very different businesses. By including debt settlement in laws that focus on debt management, policymakers are helping to legitimize debt settlement—a business model that is inherently harmful to consumers.
This report is a first step at shedding some light on the debt settlement industry and explaining the differences between debt settlement and debt management. The information in this report is based on a survey of thirteen debt settlement companies conducted from January through March 2005, including phone interviews and information collected from company web sites. We also used information from a previous survey, including numerous debt settlement company enrollment agreements, collected in 2003 and 2004. In addition, we compiled information from Better Business Bureau complaints, government enforcement actions and receiver reports, media reports, and information from private lawyers.