New rules for debt settlement companies

By Gray Hall - bio | email
Posted by Terry Alexander - email

RICHMOND, VA (WWBT) –There's more help for those who may have been victimized by the very companies they turned to for help. Many people use debt settlement companies to help relieve financial hardships like mounting credit card bills, but some of those companies just added to the problem.

The recession is making it harder for families with debt to keep paying their credit card bills. More are turning to companies that promise to settle their debt. As they do, the number of complaints to the Federal Trade Commission are going up.

New FTC rules aim to reduce the negative experience for consumers. They target those over the phone solicitations, and people who respond by phone to ads they've seen on TV or the web.

Beginning today, before you pay a debt settlement service any money the company must settle or change the terms of at least one of your debts. Also, the creditor must be paid before the debt service gets any payments.

There is also more disclosure to protect you. Before signing on with one of these companies, they must provide you details of the plan in writing, or an oral agreement, and the company must make sure you are aware of any pitfalls.

These new rules apply to for-profit debt settlement companies. Most consumer groups warn against any debt-settlement company that looks for upfront fees. Another piece of advice - before you seek help for an outside company financial experts say try settling things on your own first.

Other changes to the rule took effect on September 27th. They include preventing debt-settlement companies from making misrepresentations.

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