As the US economy struggles to recover from the after effects of the global economic recession, every consumer in the US are striving to get back a grip on their personal finances and let go of their credit card debt burden. How would you like to lower your monthly credit card and loan payments? Certainly, it’s an offer that would sound awesome during such moment of financial crisis, but how would you do so? There are a growing number of debt settlement firms that claim to reduce your debt burden by 50-60% but how many of them actually help you in doing so? Though the debt settlement companies are trying their best to assist the debtors in reducing their debt burden, the BBB is still getting complaints about the increasingly common deceptive practices that the debt settlement companies are adopting to stay afloat in the extremely competitive market.
The FTC has passed a new set of rules on the 27th of October, 2010 for the for-profit companies that sell their debt relief services to the consumers of the US. The FTC is always striving to make sure that the middle class families in the US get straight deals that will not involve too much of money. This new law passed by the FTC will stop all companies that make grandiose promises to the struggling debtors. Have a look at the different ways in which the FTC has protected the consumers against the unscrupulous practices.
- Upfront fees banned: In the year 2010, the BBB had received almost 3500 complaints against the debt settlement companies and most complaints said that the debt settlement companies charged advance fees from the debtors. Therefore the FTC has said that the for-profit companies cannot charge advance fees from their consumers until they successfully negotiate or reduce a portion of the debt. If there is a written settlement agreement with the debtor where he agrees to pay advance fees, the company is allowed to charge such fees.
- Dedicated account for savings and fees: As you enroll yourself with a debt settlement company, the debt consultant will negotiate with your creditors and lower the principal rates. If the amount is reduced, you have to start making single monthly payments to the company. Most debtors were concerned about the trustworthiness of the company to handle their money. After the new laws enforced by the FTC, there will be a dedicated account that will be accessible to both the debtor and the creditor. This account will be maintained at an insured financial institution and the debtor will withdraw the money without any penalty fee.
- Misrepresentations will be prohibited: Under the Final Rule, the companies have to make several disclosures while telemarketing their services to the struggling debtors. Before the consumer signs up with the particular company, the representative must disclose the negative effects that it may have on the debtor’s credit score. They cannot charge hidden fees from the consumers and later push them deeper into the debt hole.
In the last few years, the FTC has sued more than a dozen debt settlement companies for duping the customers. After the laws have been enforced, the debtors feel that they are safer in the debt industry and can think of settling their debts without worrying about being hoodwinked by the companies.