AFSA Urges Legislation for Debt Settlement Industry
Last week, AFSA wrote a letter urging the Senate Commerce and the House Energy and Commerce committees to introduce legislation to modernize national standards for debt settlement companies (DSCs), aiming to improve transparency for consumers and financial institutions.
DSCs target consumers with large balances of debt and claim to provide a quick way ro negotiate down the debt with financial institutions at a fraction of the cost. To do this, DSCs instruct consumers to stop making payments to their creditors and terminate all contact, while paying into a special “dedicated account.” This strategic default has a significant negative impact on consumers’credit score and their financial stability for years to come.
The Federal Trade Commission and many state regulators have warned the public that DSCs often mislead consumers and leave them worse off by damaging their credit scores, charging enormous fees, and sticking them with unexpected income tax bills.
Unfortunately, for far too long, the DSC industry has been operating in a “Wild West” environment without adequate federal oversight, which has allowed it to grow significantly. This growth is partly because DSCs have started marketing to attract consumers in good financial standing, rather than only vulnerable consumers.
AFSA encourages Congress to shed light on DSCs and their questionable practices and enact basic regulations for the industry, which is currently taking advantage of consumers and financial institutions at an alarming rate.
October 15th, 2025
