Bankruptcy

What New Debt Settlement Rules Mean for You

By guest-writer

The Federal Trade Commission issued new rules governing how debt settlement firms can charge consumers for their services. The new rules prohibit debt settlement firms from charging upfront fees for their services, which in theory will prevent some of the predatory practices that cost consumers so much money in the past.

Here?s a summary of some of the potential side effects these new rules might have on the debt settlement process.

Fewer Ads, More Honest Claims

• A drop-off in ads claiming to settle debts for little money: A ban on hefty upfront fees will mean that simply bringing customers through the door will no longer guarantee income for debt settlement firms, which in turn will mean that dropping money on TV and radio commercials may no longer be worthwhile financially.
• More selective consumer selection: Now that debt settlement firms cannot charge every customer large fees, they?ll have to more carefully choose which customers they agree to help. This will likely be good news, regardless of your goals. If you?re a good candidate for debt settlement, visiting a debt settlement firm may have a greater chance of helping you than in the past. And if you?re not a good candidate, the debt settlers may be less likely to waste your time and money with their services.
• Claims made based on all customers: Before the FTC?s rules took effect, debt settlement firms commonly made claims based only on the settlement experiences of their most successful customers. Now, though, companies must advertise using figures that represent all their customers? experiences, meaning that the figures should more honestly represent what the company may be able to do for you.
• Some closures of debt settlement firms: Some debt settlement firms may no longer have a workable business model without upfront fees from customers, which could mean closures in debt settlement firms.
• ?Innovative? trickery: And, finally, as with any implementation of new rules, some debt settlers may try to find ways around the new requirements. As always, you are still responsible for making sure your money and financial health is in good hands.

Debt Settlement without a Firm

If you?re struggling with debt and are trying to figure out which debt-relief option might work best for you (bankruptcy, debt settlement, credit counseling, etc.), remember that you can contact your creditors without any help from a third party. By exploring all of these options, you may find the debt-relief option that works best for you.

Full post as published by The Bankruptcy Blog on November 01, 2010 (boomark / email).