Federal Credit Card Debt Settlement Laws - How New Debt Settlement Rules Work

Federal Credit Card Debt Settlement Laws - How New Debt Settlement Rules Work

Federal credit card debt settlement laws were established to control the activities of the credit card companies as well as the fraud settlement companies. It was found that the creditors increased the interest rates of the consumers without informing the consumers and even the interests were increased for those consumers who did not use the credit cards for one year. The new laws made it mandatory for the creditors to inform the consumers well in advance that the rates of interests will increase so that the consumers can prepare themselves for this interest adjustment and modify their budgets accordingly to avoid debt problems.

On the other hand the creditors were not allowed to increase the interest rates for those consumers who did not use the credit card for one year. This way the consumers received some relief. Again the creditors were asked to settle the existing debts for those who are struggling with their payments. The creditors in turn were allowed to use the stimulus cash and were required to pay less taxes. This increased the demand for settlement.

Meanwhile in the settlement industry, the increase in demand helped many fraud firms to flourish. These firms were cheating the consumers by asking for advance payment of the fees and when the consumers paid in advance, these firms did not negotiate with the creditors and informed the consumers that the negotiation failed. This way the consumers lost their money and the reputation of the whole settlement industry was hit. The FTC introduced a new law according to which the settlement companies are no longer allowed to collect up front fees. The companies are ordered to first settle the debts of the consumers and then ask for their service fee. This is how the new laws work.

Debt settlement is a viable option to filing bankruptcy and is becoming increasingly popular amongst Americans with over $10k in unsecured debt. Creditors are ready to negotiate. You can literally eliminate 50% of your unsecured debt with a settlement.

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