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Debt settlement programs can no longer charge up front fees

[Oct 3, 2010.]


It's been a long time coming, but the watchdog for consumer protection has now acted to stop abuses by debt settlement programs. The Federal Trade Commission (FTC) has issued a Final Rule, which will ban advance fees. That new rule doesn't take effect until Oct. 27, 2010, but there are other new rules pertaining to telemarketing by debt settlement programs that went into effect Sept. 27, 2010. Combined, these rules will significantly improve consumer protections for people seeking debt relief.

When the Final Rule takes effect in October, debt settlement providers will not be able to charge fees before all of the following has occurred:

  • The provider must make some type of material change to at least one of the consumer's debts, either renegotiating, settling, reducing or otherwise changing a debt.
  • The provider must negotiate with the consumer's creditors. Any agreement or plan has to be in writing, and agreed to by both the consumer and the creditor.
  • After the agreement or plan is in place, the consumer has to make at least one payment.

Looking for reputable help with debt solutions? Find debt solutions now.

As of Sept. 27, 2010, other new rules pertaining to telemarketing by debt settlement providers went into effect. As part of the Final Rule, the Telemarketing Sales Rule now includes provisions requiring new disclosures, prohibiting misrepresentations, and regulating calls between consumers and debt settlement providers.

The new disclosures must include telling the consumer how long it takes to get results and how much the provider's services cost. Consumers are to be made aware that settling debts usually has a negative effect on credit reports. If a dedicated account is required, consumers must be made to understand what that means.

Debt settlement providers cannot misrepresent themselves. For example, they cannot claim to be a not for profit entity unless they actually are. They cannot misrepresent any of their services or make up false success rates.

Finding a reputable debt relief specialist is just a click away. If debt settlement is what you need, work with a specialist who is up on the FTC's changes and willing to provide consumers with the services they are entitled to.


About Author:

Renee Morgan has been a loan officer for over eighteen years. She is also a freelance writer and guest expert for radio and TV.

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