Mannequin holding red word Debt
Mannequin holding red word Debt - 
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Steve Chiotakis: As unemployment goes up, so do the number of people having trouble paying off their debts. Now the Federal Trade Commission's proposing new rules to crack down on unscrupulous companies promising to negotiate a better deal for the debt-strapped -- for a fee. That's the subject of a public forum at an agency today, as Marketplace's John Dimsdale reports from Washington.

John Dimsdale: About two thousand firms sell debt relief services, and the FTC's Eileen Harrington says they rarely deliver on their promises.

EILEEN HARRINGTON: If they charge you money up front with the promise that they're going to reduce your debt and reduce your payments, it's a scam. Don't fall for it.

The FTC is considering prohibiting companies from charging a fee until they actually deliver on their promise to reduce a customer's debts.

David Leuthold is with the Association of Settlement Companies. He says it usually takes two to three years to reach a deal with creditors.

DAVID LEUTHOLD: To suggest that a company can sustain itself financially before settlements are made clearly would not be possible for a lot of companies.

But consumer advocates say prohibiting payment of up-front fees to debt settlement companies is no different than a congressional ban on advance payments to credit doctors promising to clean up bad credit reports. The proposed rules become final sometime next spring.

In Washington I'm John Dimsdale for Marketplace.