New York Officials Fight Debt Settlement Companies

Andrew Cuomo, the newly elected governor of New York, and state attorneys have been investigating debt settlement and relief firms, according to a new report.

In May of 2009, Cuomo then the state's attorney general, sent subpoenas to 14 debt settlement companies including Freedom Debt Relief and New Era Debt Solutions. The ensuing investigations are still pending, but could be given a boost by recent legislation.

The Federal Trade Commission is cracking down on advanced fees and putting increased restrictions on company services. Including ones that limit payments until after settlements and cutting heavily into company profit margins. Government officials say the new rules could close between 50 to 80 percent of the industry, the New York Post reports.

"We recognize that the Federal Trade Commission attempted to strike an appropriate balance between improving consumer protection and ensuring continued viability for the majority of ethical, well-managed debt-settlement companies," Robby Birnbaum, president of the Association of Settlement Companies, told the Post.

Despite the effort by legislators, many similar lawsuits have gone unresolved in the past. In January, an 18-month long civil lawsuit against Freedom Debt Relief in California was settled without conclusive findings.