Nonprofit Associations Urged to Abide by FTC Rules & Protect Consumers from Conflicts-of-Interest

COLUMBIA, Md., Sept. 1 /PRNewswire/ -- CareOne Services Inc. has formally called on the three largest nonprofit debt relief industry associations to require their members to comply with stringent new Federal Trade Commission rules. These rules, which begin to take effect September 27, do not apply to any of the nonprofit agencies that constitute 85 percent of all debt relief providers.

The three associations -- the National Foundation for Credit Counseling, the Association of Independent Consumer Credit Counseling Agencies and the Association of Credit Counseling Professionals – have each publicly supported the new FTC rules. However, because the FTC does not have regulatory authority over nonprofit, tax-exempt organizations, consumers may not be adequately protected from unscrupulous providers.

CareOne, one of the nation's largest debt relief providers and a strong supporter of the new FTC rules, is urging the nonprofit debt relief associations to proactively and forcefully address this issue.

"Over the past several weeks, the leadership of the largest associations in the debt relief industry has all voiced their support of the new FTC rules," said Mike Croxson, president of CareOne. "But it is easy to give lip service to rules that do not apply to you. Each of these associations is actively working to develop debt settlement programs with creditors, so it is appropriate to ensure that their members comply with these new rules to protect consumers."

The rules, issued by the FTC in July, require increased disclosures to customers about the cost of any services provided and the amount of time it will take for customers to complete any debt management or debt settlement plan. The rules also forbid the charging of any upfront fees for debt relief services.

CareOne has also called on the three associations to ensure that conflicts-of-interest are not created when working with both consumers and creditors. Many nonprofits that currently offer debt management plans are compensated by both consumers and their creditors. Payments from creditors to nonprofits are made in exchange for collecting and remitting debt obligations from the consumer in an industry practice known as "Fair Share." These payments create an inherent conflict between the interests of the consumer and the creditor.

"Fair Share" payments raise an even greater concern in the debt settlement arena where nonprofits may be in the position of negotiating settlements with the creditors that pay for their collection services. CareOne is urging the trade associations to prohibit members who provide debt settlement products from accepting payments, grants or other forms of compensation from creditors.

"If debt relief agencies are truly negotiating on behalf of a consumer to settle their outstanding debt for less than what they owe, accepting a payment from the consumer's creditor creates a serious conflict-of-interest," said Croxson. "If debt settlement providers are accepting money from creditors, they have no real incentive to act in the best interest of consumers."

About CareOne Services

CareOne Services Inc. is a debt relief company formed in 2002 to provide consumers with multiple solutions to complex money issues. CareOne takes a holistic approach to assisting customers in debt and reviews each situation to create achievable financial solutions. CareOne's services include credit counseling, debt management, debt settlement, as well as free referrals to bankruptcy attorneys if that is in the best interest of the consumer.

CareOne also provides the My CareOne community (MyCareOne.CareOneCredit.com), a free online resource for consumers that includes educational tools, blogs and forums where more than a million people share their experiences and receive support from others in similar situations.

Headquartered in Columbia, Md., CareOne has helped more than 2 million people. In 2009, it provided consumers with the tools and assistance to pay down more than $294 million in debt. CareOne provides services in 41 states. For more information, call 1-800-364-6981 or visit CareOneCredit.com.

To receive a copy of the letter sent to the trade associations or to speak with CareOne President Mike Croxson regarding the FTC rules and the exemption of nonprofits, contact Michelle Rash at [email protected] or (336) 553-1733.

SOURCE CareOne Services Inc.