The New FTC Rules for Debt Settlement Companies
Over the past couple of years, due to the economic downturn people are going through a financial crisis, and thus are falling into overwhelming debts. As a result, they are approaching the debt settlement companies in order to settle their debts. In this situation, the debt settlement companies are booming high. The advertisements of the debt settlement companies that claim to settle the debts at a minimum fee or no fee are extending across the country. These companies also promise to settle the debts without damaging the credit score. But these promises are hardly meant to be true. So the FTC has drafted the new rules and regulations that prohibit the debt settlement companies from making false promises to the customers and misrepresenting them.
New Rules from the FTC:
1. One of the biggest changes after the implementation of the new FTC rules is that the debt settlement companies cannot charge an upfront fee. The companies can only charge a fee once they negotiate, reduce and settle the debt. Before the fee being charged there should be some written agreement that both the customer and the company must agree upon. This is also being included in the FTC rules that the fee for one debt must be in a proportion to the fee for all other debts.
2. The settlement companies have to disclose all the information before the customers sign up the agreement. The companies have to disclose their fee structure, how much time will they take to settle the debts and if there is any negative effect for using the service.
3. The settlement companies are forbidden from giving false advertisement or disclosing any wrong information. The companies can no longer lie to the consumers about their fee structure or cannot make false promises and mislead them.
4. Since the new FTC rules have been implemented the settlement firms must have their dedicated accounts at an FDIC or NCUA insured banks. The accounts have to be in the name and control of the customers so that they can access the accounts, and can draw money at any point of time. Even the debt settlement agencies cannot have any affiliation with the company administering the account.
5. The FTC rules are extending on the calls that the consumers make to the debt settlement agencies to settle their debts in response to advertisings.
Among all the rules from the FTC, the advance fee ban had been effective from October 27, 2010, and the other rules had been effective from September 27, 2010.
Questions and Answers
Undoubtedly, debt management can ameliorate your credit rating. However, at times your debts become so difficult and irreparable that you can't afford to meet all your repayments, in such cases your credit rating is affected.
There were similar concerns raised over the use of email marketing by some debt management companies.
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