FTC Debt Settlement Companies RegulationThe Federal Trade Commission (FTC) is making sure that the financially stressed debtors in America are not subject to any kind of debt settlement scams. The FTC has passed a new set of rules that will come into effect from October 27 to protect the consumers from being a victim of huge upfront fees charged by debt settlement companies. This step has been taken by the FTC to ensure that most middle-class Americans are not taken undue advantage by the debt settlement companies.

 

The Federal Trade Commission (FTC) is making sure that the financially stressed debtors in America are not subject to any kind of debt settlement scams. The FTC has passed a new set of rules that will come into effect from October 27 to protect the consumers from being a victim of huge upfront fees charged by debt settlement companies. This step has been taken by the FTC to ensure that most middle-class Americans are not taken undue advantage by the debt settlement companies.

The new rules will stop such debt relief companies, especially debt settlement companies from making false promises to consumers of reducing their credit card debt to its half or more in lieu of huge upfront fees. With the increase in the level of national debt and unemployment rate, most debtors are finding it impossible to pay off their outstanding debt amounts. This is forcing most debtors to run to debt settlement companies because it is the only debt relief option that reduces the overall debt burden to its half.

The new rules by the FTC specifies that the debt settlement companies cannot charge you with huge upfront fees until the company successfully negotiates with your creditor and settles the amount or at least changes one of the terms of the consumers credit card accounts. The settlement agreement must be written so that both the debt consultant and the creditor can’t back out from the agreement.

Another new provision of the FTC is to create a “trusted account” for the consumers to set aside their fees for payments to the respective creditors. But the consumers may only require this kind of account if some conditions are met. The dedicated account has to be maintained at a financial institution that is insured. The consumer has to own the funds and should also have the power to withdraw the funds any time.

After the FTC has passed these new rules governing the debt relief companies, the debt relief providers have to make several disclosures about their services to the customers. This rule is also applicable for telemarketers who speak about their settlement services over phone. The rules specify that all representatives of such companies should inform the consumers about the pros and cons of settling their debts with a debt settlement company. Most consumers complain that they’re not aware of the negative consequences that debt settlement has on a consumer’s credit score. They must also inform consumers about the time it will take to settle your debts through such a company.

The new rules by FTC are being considered as a good move to prevent deceitful, deceptive and unfair business practices and protect the consumers who are already debt stressed. If you’re looking for debt settlement company, educate yourself on the new rules in order to prevent being a prey to scam companies.

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