Debt settlement companies technically aren’t allowed to charge fees until after lowering a consumer’s debt. But a loophole in the Telemarketing Sales Rule — and a mish-mash of federal and state laws — allows predatory firms the opportunity for exploitation.
A growing corner of the $23 billion debt relief industry has used a workaround regulators have dubbed the “attorney model” — taking money to the tune of tens of millions of dollars from consumers, according to Consumer Financial Protection Bureau actions since 2010. In this scheme, settlement companies masquerade as law firms, sometimes “renting out” a law license — since lawyers are allowed to collect advance fees, this provides a nifty if questionable way…