The Future of Debt Settlement Trade Associations TASC & USOBA

The United States Organizations for Bankruptcy Alternatives (USOBA) has spent the past year fighting and lobbying against the Federal Trade Commission’s regulation of the debt settlement industry. They have stated in the past that 85% of their members would be forced out of business if the improvement fee ban were to pass.

The Association of Settlement Companies (TASC) has had much the same approach as USOBA since the FTC opened hypothesizedv regulations for review in July 2009. It was very clear, very early in the review course of action that TASC was not out to work with regulators, they were out to push their own agenda and protect improvement fees at all costs.

Guess what, the FTC regulations passed and will go into effect on October 27, 2010. Debt settlement companies will no longer be allowed to collect improvement fees as of this date and if the predictions USOBA made earlier in the year are accurate, we’ll be losing about 85% of all settlement companies in existence today. Many continue that this is not a bad thing.

With both of these trade associations fully funded by their members. How will they fare losing 85% of their revenue? And the bigger question. Why would the surviving 15% of companies continue to fund them?

My guess is that if either TASC or USOBA were to reverse course at this point and embrace the improvement fee ban, it would appear as nothing more than a shallow last ditch effort to survive and nevertheless save a shred of dignity. I would also venture to guess that most settlement companies with an eye towards the future, would see right by this gesture, after the without of leadership and direction that has been displayed by both TASC and USOBA to date.

If you go to the websites for both TASC and USOBA, you will find NOTHING in regards to the FTC announcing the improvement fee ban. This was announced on July 29, almost two weeks ago. One would think that any organization that claims to promote good practice and sustain the members that fund them, would have launched a major awareness campaign to announce that a new law has been passed, not just a threat or proposal, a new law. Their members have no choice but to follow this law, in addition the trade associations have done nothing to prepare or educate them on how. Where did they go?

Rumor has it that there may be lawsuits brewing to challenge the FTC on the improvement fee ban. This would would be a colossal waste of time and would likely cause more trouble for the industry.

In April, Senator Charles Schumer (D-NY) and Senator McCaskill (D-MO) introduced the Debt Settlement Consumer Protection Act. This would be an aggressive law that aims to cap fees that debt settlement companies can charge. The hypothesizedv cap right now is at 5% of the savings, this would make it impossible for debt settlement companies to stay in business, and would effectively shut down the complete industry.

The chances of this law passing would increase exponentially, if the debt settlement industry doesn’t accept the FTC’s improvement fee ban and clean itself up. The only way for the industry to prove to lawmakers that debt settlement is a viable option, would be to embrace the improvement fee laws already on the books, and provide a quality performance based service to consumers. This would open the door to working with lawmakers to help draft laws that protect both consumers and the debt settlement industry in addition. Any continued resistance by the industry will only consequence in lawmakers going ahead with their own ideas of how debt settlement will be regulated, and it won’t be pretty.

My prediction is that both TASC and USOBA will be heard from again and may try to adapt and survive. They may join hands and work as one. They also may close shop, and form a new organization with a new name, now as proponents of performance based debt settlement. at all event way they go, it would be very hard for me to ever take either of these organizations seriously, in any form they recreate themselves into. The current leadership has helped to steer the debt settlement industry way too far off-course and the industry desperately needs new leadership.

Who will rule debt settlement in the future? Where will debt settlement companies look for guidance? It think it’s clear that the answer is not TASC or USOBA.

Leave a Reply