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Debt relief services regulation and consumer stress focus of action by Ohio AG, OSU survey
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While American consumers still have record levels of
debt, their worries about that debt are slightly better
than before, OSU's DSI surey shows
(Photo/John Michael Spinelli)
COLUMBUS, Ohio -- In timely related news about mounting indebtedness and stress from that debt, Ohio Attorney General Richard Cordray joined other attorneys general asking the Federal Trade Commission to apply stronger regulation of "debt relief services," while a report by The Ohio State University on a nationwide survey about how Americans are coping with record-setting levels of consumer debt show that even though they are still very worried about it, their level of stress decreased in September.
Ohio AG calls for tough regulations by FTC on debt relief services industry
Cordray, a Democrat elected last year as Ohio's top cop, who is expected to face his Republican challenger Mike DeWine in next year's race for attorney general, joined 40 other state attorneys general in calling for the FTC to strengthen regulations on debt relief services sold to consumers to reduce or settle their debt, according to a Monday media release, which said the FTC is reviewing a new rule proposal to amend the current Telemarketing Sales Rule.
The letter Cordray signed, that was sent to the FTC, said the industry, particularly debt settlement and debt negotiation companies, "routinely overpromise and under-deliver services to consumers and usually leave consumers in a far worse financial situation."
"In an ever-building wave of ploys and scams on consumers, debt settlement and debt negotiation companies promise to help consumers eliminate or reduce their debts, but often fail to deliver on these promises," Cordray said in prepared remarks. "Tougher regulations will help to rein in some of the most deceptive and unfair practices in this industry."
Ohio State University's DSI survey shows slight ebbing of stress over debt levels
In separate but related news, Lucia Dunn, professor of economics at The Ohio State University and one of the leaders of a nationwide survey called The Consumer Debt Stress Index (DSI), said in a media release that consumers are feeling less anxious than they did, "but the high levels of debt stress on consumers are still troubling.”
The DSI, conducted by Ohio State’s Center for Human Resource Research and based on telephone interviews of randomly selected Americans, fell 10 percent in September, indicating that Americans are feeling slightly better about what they owe on their credit cards, mortgages, home equity loans, car and student loans and other sources of debt.
Dunn's DSI indicates stress has been on the rise since the fall of 2007 when the the index rose above the 100 mark. It hit 155.3 in July of this year – 55 percent higher than the debt stress levels on consumers in January 2006 and the highest it has been since the inception of the current index. The stress score declined to 147.6 in August and again to 132.8 in September.
“Reports on the economy have become more encouraging, with the retail and housing sectors showing renewed signs of life,” Dunn said, adding that “The good news clearly brought some psychological relief to consumers.”
But she cautioned that the debt stress levels are still relatively high, and warned that could "bode ill for the holiday shopping season." With unemployment still high -- Ohio's rate is 10.1 percent -- Dunn said consumer spending won't be robust for retailers this shopping season.
Stress from debt affects health, more so with women than men
High stress levels even affected how consumers view their health. The DSI showed that about 26 percent of the September respondents said that their debt has affected their health to some extent – an increase of 3 percent since a year ago.
About 10 percent of those asked said debt has been an “extreme problem” for their family life, and six percent said it has been an extreme problem for their job performance – both substantial increases over the same period last year.
Moreover, women are more affected by debt stress than men, Dunn's survey found. Women’s debt stress is about 34 percent higher than men for the same level of debt to income. “In these difficult economic times, women appear to face a greater psychological struggle over their debt than do men, and it can’t be explained by differences in their debt relative to their income,” Dunn said.
For Cordray, his goals for the FTC's new rule are the following:
--Prohibiting debt relief companies from charging fees until they have performed services.
--Requiring improved disclosures to consumers, including informing the consumer of the length of time it will take to settle debts and what the costs will be.
--Prohibiting misrepresentations, including misleading statements concerning fees, success rates, and the impact the services will have on a consumer's credit history.
--Extending the Telemarketing Sales Rule so that it covers incoming calls made to debt relief companies in response to advertisements.AG spokesperson Kim Kowalksi said the office has received more than 600 complaints involving debt relief services since January 2007 and through its complaint resolution process has recovered more than $320,000 on behalf of consumers.
Each month's DSI is based on the past three months of interviews, with the average sample size being 658.
The DSI has been conducted monthly since November 2005, and its base value is set at 100 in January 2006.
Follow me on Twitter @ohionewsbureau. Read more of my stories on people, politics and government in Ohio here.
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