New Debt Settlement Rules - The Brand New FTC Guidelines on Consumer Debt Agreement Applications
The people who seem to have benefited the most from the economic crisis would have been the settlement agencies.
Even when people are deep in financial debt, they hesitate to file for bankruptcy due to the new rules that are now in place.
The next best option is to look for settlement.
However, nowadays there are a lot of settlement companies flooding debtors with offer of getting debt settled at the earliest and making tall claims.
Unfortunately, numerous consumers have fallen prey to the false promises made by these firms and lost the little money that they had by paying fees to these firms.
The Federal Trade Commission has come up with a set of rules to help the consumer in such situations.
The most significant change brought about through the new rules is that settlement companies will be forbidden from collecting upfront fees without negotiating a single debt agreement on behalf of the client.
Earlier, the companies would lure customers through telemarketing and as soon as they registered for the services, would charge huge fees to even start with the proceedings.
Under the new set of laws, the settlement company will only be able to charge a fee after the company has successfully renegotiated, settled or reduced at least one of the consumer's debts.
In addition, it is also stipulated that the amount of fees must be clearly informed to the customers through a formal written agreement.
If only a portion of the client's debts are successfully settled, the settlement company would only be eligible for the proportionate amount of fees.
Earlier, settlement companies often advised their clients to stop making payments on their debts and to deposit the money into an escrow account every month from which payments would be made after negotiations were completed.
Now the FTC has ruled that if the consumer pays into a dedicated account as part of the settlement agreement, that account must be created at a financial institution that offers federal deposit insurance.
It is also specifically stated that the account must be in the consumer's name and control, rather than in the control of the settlement company.
With effect from September 27, 2010, settlement companies will also be required to spell out the negative potential consequences of a settlement to the customers so that they can take an informed decision on which method of debt elimination they should choose.
Even when people are deep in financial debt, they hesitate to file for bankruptcy due to the new rules that are now in place.
The next best option is to look for settlement.
However, nowadays there are a lot of settlement companies flooding debtors with offer of getting debt settled at the earliest and making tall claims.
Unfortunately, numerous consumers have fallen prey to the false promises made by these firms and lost the little money that they had by paying fees to these firms.
The Federal Trade Commission has come up with a set of rules to help the consumer in such situations.
The most significant change brought about through the new rules is that settlement companies will be forbidden from collecting upfront fees without negotiating a single debt agreement on behalf of the client.
Earlier, the companies would lure customers through telemarketing and as soon as they registered for the services, would charge huge fees to even start with the proceedings.
Under the new set of laws, the settlement company will only be able to charge a fee after the company has successfully renegotiated, settled or reduced at least one of the consumer's debts.
In addition, it is also stipulated that the amount of fees must be clearly informed to the customers through a formal written agreement.
If only a portion of the client's debts are successfully settled, the settlement company would only be eligible for the proportionate amount of fees.
Earlier, settlement companies often advised their clients to stop making payments on their debts and to deposit the money into an escrow account every month from which payments would be made after negotiations were completed.
Now the FTC has ruled that if the consumer pays into a dedicated account as part of the settlement agreement, that account must be created at a financial institution that offers federal deposit insurance.
It is also specifically stated that the account must be in the consumer's name and control, rather than in the control of the settlement company.
With effect from September 27, 2010, settlement companies will also be required to spell out the negative potential consequences of a settlement to the customers so that they can take an informed decision on which method of debt elimination they should choose.
