May 12, 2009

Credit Counseling and Debt Settlement Alert - State Investigations and Enforcement Actions

2 min

This article is part of the May 2009 Credit Counseling and Debt Settlement Alert, which provides a broad survey of some recent notable legislative initiatives, federal and state regulatory actions, and other developments affecting providers of debt relief services—including financial counseling and education, debt management plans, and debt settlement.

State Investigations and Enforcement Actions [1]

On May 7, 2009, New York Attorney General Andrew Cuomo announced a nationwide investigation into the debt settlement industry, issuing subpoenas to 14 debt settlement companies. A press conference held by Cuomo indicated that these investigations are focused generally on the accuracy and veracity of the claims made by settlement companies, whether the benefits of the program are overstated, whether the risks of the program are understated, whether claims can be supported by sufficient substantiation, whether consumers are misled about the program, and, whether certain debt settlement business models are inherently (per se) deceptive.

On the state debt adjusting law front, the Attorneys General of West Virginia and Illinois have each recently announced lawsuits against debt settlement companies. In addition, the Attorneys General of both Colorado and Vermont have publicized recent settlements reached with debt relief companies. Overall, we have seen an increase in enforcement actions in nearly every state—under foreclosure consultant protection acts, state debt adjusting statutes, and general consumer protection laws prohibiting unfair trade practices.

[1] See “A Legal Issues Primer for Credit Counseling Agencies, Debt Management Plan Providers, and Debt Settlement Companies,” available at:


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For more information, please contact Jonathan L. Pompan at 202.344.4383 or


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For more information about this and related industry topics, see

For more information about Venable’s credit counseling and debt settlement practice, see

This article is not intended to provide legal advice or opinion and should not be relied on as such. Legal advice can only be provided in response to specific fact situations.