A couple of developments in Illinois last week might keep debt-burdened consumers a tiny bit safer from financial sharks.

The state's new mandatory database for title loans took effect, which should help prevent some abusive loans to consumers secured by titles to their cars. Meanwhile, Illinois Attorney General Lisa Madigan launched a fight against the debt settlement industry, suing one company and proposing a new law to tame abuse.

Debt settlement is a growth business these days as desperate people seek to escape a pile of debt. For a fat fee, debt settlement companies say they'll negotiate with your creditors to reduce the amount you owe.

"DEBT FREE in as little as 12-36 months," promises Credit Solutions of America, one of the biggest debt settlers.

For certain people, in certain circumstances, it works. The rap on debt settlers is that they sell their services deceptively.

Madigan says debt settlers "lure consumers with elaborate, deceptive promises to dramatically reduce consumers' debt." In fact, she said, "consumers seldom, if ever, see their debts settled and often end up owing more that the credit card debt they originally incurred."

Debt settlers say that's hogwash, and that they help consumers. They blame credit card companies, who they say don't want debtors to wiggle off the hook.

Clearly, debt settlement is in need of regulation. In Missouri, Gov. Jay Nixon vetoed a debt settlement bill this year, claiming it wasn't tough enough. The Legislature last month let the bill die.

In Illinois, Madigan is proposing to ban upfront fees — a sore point among many consumers — and a requirement for bonds and licensing. She would give consumers a right to cancel the contract, and companies would have to disclose the risks involved.

A ban on upfront fees would kill the industry, says Wesley Young of the Association of Settlement Companies, a trade group. If they don't collect up front, debt settlers will never be able to collect after the consumer has spent his money paying creditors, he says. His group favors licensing, bonding and other reforms.

Debt settlement relies on rising frustration in the banking industry. When an unsecured loan — such as a credit card balance — goes many months overdue, lenders despair of ever seeing their money. So, they become willing to reduce the debt in trade for a quick cash payment.

Debt settlers often advise customers to stop paying their unsecured debts and to put the money aside in savings. But it takes a long time to build up enough savings to make a settlement offer, and a long time for lenders to get frustrated enough to accept one.

In the meantime, consumers' credit is wrecked and collection agents are calling.

Creditors sometimes file suit and garnishee wages. Lenders are also hiking interest rates and imposing late fees on the overdue debt.

Meanwhile, settlement companies charge fees often amounting to about 15 to 20 percent of the debt owed. The fee is collected month by month, often before the company makes a settlement offer to creditors.

Madigan and other critics say consumers don't understand the consequences when they sign up, and debt settlers don't go out of the way to explain it.

If a customer drops out of the plan, or if the settlers can't bargain down the debt, the consumer can owe more than when the plan began. Only 40 to 55 percent of people who embark on a settlement program stick with it to the end, according to the Association of Settlement Companies.

Debt settlers say most of their clients were behind in their bills before they signed up, so wrecked credit and collection efforts would happen anyway.

Madigan sued Credit Solutions of America, of Dallas, alleging a laundry list of abuses. For instance, she said the company didn't tell clients that months might pass before the company tried to negotiate their debt, and all the while the settlement company would be collecting fees from the customer. Missouri Attorney General Chris Koster sued the same company in May, claiming it misled consumers and illegally collected advance fees.

A spokeswoman for Credit Solutions said she would send a statement reacting to the Illinois suit, but it had not arrived by late Friday.

Meanwhile, new title loans in Illinois will have to be entered into a state database for approval. They'll be approved if they meet new standards issued in April.

Some of the new rules limit loans to $4,000, and forbid multiple loans to the same customer. A loan can be renewed only if the principal is paid down by 20 percent.

So far, so good. Those rules make it less likely that consumers will sink over their heads in debt by repeatedly renewing big loans at high interest rates.

But the new rules allow loan payments of up to 50 percent of the borrower's gross monthly income. That's a fast train to the poor house for any consumer.

Sue Hofer, spokeswoman for the Department of Financial and Professional Regulation, said the high payments were permitted to accommodate small-business borrowers. A gardener, for instance, might pledge his truck title for a loan to buy shrubbery for a customer, expecting to be paid in a week or two.

But couldn't the state have issued different standards for a business loan than for a loan to a mother needing rent money?