RICHMOND, VA (WWBT) – The Federal Trade Commission is cracking down on debt relief companies that don't follow through with their promises. Starting Monday, for-profit companies offering these services will face tougher guidelines.
Millions of Americans are in financial debt but new rules start next week that could help prevent crooks from taking advantage of you. Bruce McClary with Clear Point Counseling Solutions says, "It all boils down to truth in advertising and fair representation of the product that they are offering."
The goal is to better protect consumers from phony debt relief companies. Workers at Clear Point say criminals are well aware this could be an end to their easy cash flow. McClary says, "They know the door is closing and they are not going to be able to get away with some of the things they have been getting away with in the past, so they are ramping it up to try and catch as many people as they can before that door shuts."
McClary says they've gotten dozens of complaints from consumers, like fake debt relief letters, designed to look like they are backed by the government. The pitch -- pay a large up front fee your debt will be reduced. The problem -- many of these companies pocket the cash, never do any work, and you are still in debt.
McClary says, "These offers continue to get more outrageous everyday, people are getting tons of letters like these with fake government symbols on them, names that allude to some kind of affiliation government bailout plan which we know doesn't really exist."
The new guidelines take place September 27. Among the changes, debt relief companies must inform customers how long it will take for them to see results, list negative consequences and are prohibited from misrepresenting services.
McClary says, "After the 27th, if they continue to make those representations and say they are affiliated with the government and they lie about their products or results you can call the FTC Consumer Hotline and turn them in."
There is even more protection on the way for consumers. Beginning October 27, debt relief companies can no longer charge up front fees. The new law requires that these companies prove they are doing the work or complete the work before they get paid.
If you are looking to get out of debt, Clear Point Financial advises consumers to look for non-profit credit counseling agencies to help determine a plan of action.