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Debt Settlement Companies Made (Slightly) Better by the FTC

By Sam Glover

Many consumers who end up drowning in debt turn to debt settlement companies for help. The problem is, many debt settlement companies don’t really help; they just take the money and run. I guess they figure poor consumers are unlikely to complaint. But they do, and the FTC has heard. It recently issued new rules designed to reign in debt settlement abuses.

The new rules are designed to ensure consumers get what they pay for. For starters, debt settlement companies may no longer charge a fee before doing the work promised. The fee must also be proportional to the work done (a/k/a the amount of money saved). No benefit, no payday.

Debt settlement companies will also be required to make certain disclosures, and may not make misrepresentations in marketing materials—or anywhere else.

But keep in mind that debt settlement companies are completely unnecessary. You can (and should) settle your debts yourself, and get in touch with a consumer rights lawyer—not a debt settlement company—if collectors get out of hand.

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Full post as published by Caveat Emptor on September 20, 2010 (boomark / email).