New FTC Rules Support Consumers Seeking Debt Relief

In the last quarter of 2010, new FTC rules went into effect to protect consumers seeking debt relief through debt settlement type companies. This change spells good news to those struggling with mounting credit card debt or other unsecured debt for two important reasons:

1. it cleans up the deceptive and abusive practices that have been associated with some debt relief services and
2. it reinforces the legitimacy of negotiating-down and settling debts with creditors as a way to get out of debt.

You can now feel comfortable in pursuing this option to eliminate your debt with the protection of the FTC.

How Did the Debt Relief Changes Come About?

Since 2005, when Congress passed The Bankruptcy Abuse Prevention and Consumer Protection Act - which actually limited consumers ability to file Chapter 7 bankruptcy to discharge unsecured debts - consumers have been desperate for ways to unburden themselves of mounting debt, especially credit card debt. With the reduction of home values due to the mortgage crisis, debt-consolidation loans were no longer a viable option. Programs such as Consumer Credit Counseling were also ineffective for many people. Their debt was just too big and the time to pay it back just too many years!

As consumer debt grew, so did the debt settlement industry as a way for people to settle and discharge their debts with their creditors for less than what they owed. While many people have found true relief using a debt settlement company, unfortunately, as is the case in many industries, the rise in demand also lead to the rise in unscrupulous companies making unrealistic promises of how much they could save you and how quickly they could get you out of debt. In addition, many so-called experts in the financial reporting world were skeptical of the industry and critical of options that enabled people to settle debts for less than what was owed. Their philosophy was: “It’s your debt problem; buckle down and pay back what you owe!” The unethical practices of some, along with the negative press, cast a shadow on the industry.

Yet, during all of this, banks and credit card companies themselves were under scrutiny by Congress for their own ruthless practices that kept people in debt by raising interest rates without warning and mounting up over-draft charges and late fees. In 2009, in response to consumer complaints and the rampant rise in debt, Congress passed a new law to protect consumers from these kinds of practices. While this helped to stem the blood flow, it did little to cure the epidemic.

With the FTC’s enactment of the new provisions governing debt relief services under the TSR (Telemarketing Sales Rule), there is now a glimmer of hope for debt-strapped consumers. A better product has emerged from the industry cleanup that provides consumers with a doable solution to debt problems, allowing them to discharge their debts honorably and, in most cases, for less than what they owe.

The new Debt Relief Rules and What They Mean for You

1. It’s illegal to charge upfront fees. Debt Relief service providers cannot collect any fees from you until they have settled at least one of your debts. They can, with certain restrictions, require you to set aside money in a dedicated account for your fees and for payments to creditors. The benefit to you is that the service provider has a real incentive to settle your debts as quickly as possible; meaning, you will start to reduce your debt burden in a much shorter period of time.
2. Certain information must be disclosed before signing. Before you sign up for debt settlement services, the provider must disclose specific information about the service, including: how long it will take to get results, how much will it cost, the negative consequences that could result from using debt relief services, and key information on how your account is set up and managed. The benefit to you is that you should have a clearer understanding of how their debt relief program works and what you can reasonably expect before you engage their services.
3. No misrepresentation of services. Debt relief service providers are prohibited from making false or unsubstantiated claims about their services. Again, the benefit to you is a clearer understanding of what you can expect based on the amount of debt you have and the amount of money you can afford to pay towards discharging those debts. Gone are the deceptive, to-good-to-be-true practices of leading you to believe you can be debt-free for just pennies on the dollar.

I hope this blog post will help those of you struggling with mounting debt and uncertain about whether to look at debt settlement as a way to get out of credit card debt. If you are wondering whether debt settlement is a good option for your debt situation, you can call Credit Card Relief Toll-Free at 866-960-5454 for a free, no-obligation consultation. This is one company that for the past decade has provided a consistently reputable product and has helped thousands of people get out of debt. You can also click here and visit their website to learn more.