Debt relief is a helpful tool when you’re overwhelmed by debt, can’t afford to pay your bills and have no other way to meet your financial obligations. It’s often a better choice than bankruptcy, and there are a variety of reputable debt relief programs available to consumers. But the industry has been under tight scrutiny the last few years. Until recently, many people fell victim to scam artists who charged way too much for debt relief — or failed to deliver anything at all. Luckily, in 2010 the Federal Trade Commission (FTC) introduced regulations that are designed to help eliminate scams and over-priced debt settlement services.
Last year, the FTC introduced new regulations affecting how debt relief companies can operate. The following regulations went into effect on October 27, 2010.
New FTC Regulations
- Restrictions on upfront fees: Debt relief companies are now prohibited from charging any fees until they successfully negotiate a settlement. No fees can be collected until the company lowers the balance on at least one of the consumer’s accounts, the company gets a written settlement or consolidation agreement, and the company has made at least one payment to the creditor under the terms of the agreement.
- Disclosure of required savings: Debt relief companies must clearly show the consumer how much money they need to save before the company is able to consolidate or make debt settlement offers to creditors.
- Fundamental information required: Debt relief companies must now provide the consumer with basic (or “fundamental”) information about how their programs work, including how much time they can expect the process to take before they actually see results and the total cost of the service. They must also discuss the likely consequences of consolidation or debt settlement with respect to the consumer’s credit. Debt relief companies are also prohibited from making misrepresentations about the results they can provide.
- Dedicated savings account: Debt relief companies are no longer allowed to create “dedicated savings accounts” for consumers, unless the accounts meet certain criteria: the consumer must have unrestricted access to the account, must be able to withdraw funds without incurring a penalty, and the account must be with an FDIC-insured financial institution, which has no affiliation with the debt relief company.
Thanks to these new regulations, it should be easier for you to avoid scams and greedy debt relief companies. And by forcing you to become more informed and helping you to avoid rediculous fees, the new rules will also help you to pay off your debts much faster and easier than before.
Need debt help? Be sure to visit DebtOMG.com…