The High Costs Associated with Debt Protection is studied by the Government

Receiving help with repaying a debt without giving up their home or ruining their credit score is something consumers do have in common. This is equally true regardless if the debt is from credit cards, taxes or loans. A good number of people often turn to the lender for help when it comes to relieving the debt they have with them. While they do offer help, the fees and cost may not be worth the assistance. The cost for debt help and the service the person is actually getting is something the Government Accountability Office (GOA) is scrutinizing.

The passing of the Dodd-Frank Wall Street Reform and Consumer Protection Act created the Consumer Financial Protection Bureau. This group will be responsible to study the many products offered to protect debt. This group may recommend educational programs designed to help consumers better understand debt protection services. The information would help people to make educated decisions on whether or not debt protection is best for them. They will also be the ones to consider legislation aimed toward creating a balance between the cost of these services and the actual protection consumers receive.

The imbalance is clear. In 2009, the American public spent $2.4 billion to protect their debt and only $518 million was put out as payments to protect these consumers. This is a huge driving force that is causing the government to examine the issue. They started by examining 80% of credit card providers. They looked at companies marketing the debt protection directly to the consumer through U.S. mail, e-mail, and online sites from the branch offices of these companies.

The studies show that people are receiving very little return for the money they put out for debt protection. These studies were on credit card programs that offered to postpone or eliminate some of the debt in the event of an emergency. A ton of money is being poured into the programs from consumers, with small amounts of people that actually qualify for the benefits. Understanding these types of programs have been shown to be difficult for people. It is suggested that not enough resources are being provided to the consumer for them to make an educated decision on what, if any program is appropriate for their situation.

Based on a GOA study, the average annual payment for credit card protection is roughly $200. The breakdown for this is between $0.85 and $1.35 for every $100 of balance on a credit card. Unfortunately, receiving benefits on the protection plan becomes very difficult when you take into account the fine print details. Some of the details include complex applications, loopholes like not covering hospital stays for pre-existing conditions and other restrictions that deter claims from being filed. This is exactly why the government is looking into this.