subject: Financial Debt Settlement- How Law Makers Have Created Financial Debt Deal Much Better [print this page] Financial Debt Settlement- How Law Makers Have Created Financial Debt Deal Much Better
The Federal Trade Commission (FTC) has come up with amendments to the Telemarketing Sales Rule, 16 CFR Part 310 to put an end to the practices of fraudulent debt settlement companies. It was due to the prevalence of fraudulent companies and their malpractices that the FTC was compelled to take this step. There have been a number of complaints from consumers about debt settlement companies that made lofty promises of getting them out of debt quickly and failed to deliver on those promises. In addition, after listening to their advice and defaulting on the payments that were meant to be made to the creditors, the consumers found themselves in a bigger financial mess. This had forced numerous consumers to abandon the debt settlement process midway and file for a Chapter 7 bankruptcy.
With the new rules in place, the FTC hopes to put an end to the functioning of companies that entice consumers with false promises of having their credit card debt reduced by half or more in exchange for large, upfront fees. Companies have made offers of cutting debt by even 80% which is nearly impossible to achieve. What finally happens is that these companies squeeze out the last bit of finances that the consumers have and leave them on the doorstep of bankruptcy. The new rules state that no company is allowed to charge fees in advance and the clients need to make the payment only after the service is completed. There is an upper limit fixed on the fees that can be charged by the debt settlement companies which protect the interests of the consumers. In case only a portion of the debt has been reduced, the debt settlement company is eligible for only a proportionate amount of fees. The FTC has also mandated enhanced disclosure requirements including informing the clients of the negative consequences of using debt settlement for eliminating their debt. These measures have made debt settlement a much safer and affordable alternative of debt reduction for the consumers struggling with financial debt.
