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CONSUMER ALERT – Debt Settlement Rule Changes
You may not be aware that the Federal Trade Commission recently passed new telemarketing sales rules that govern what debt relief services may do and how they can charge fees.
These new telemarketing sale rules covering debt relief services were put in place to protect consumers and were much needed.
Debt settlement companies that were primarily interested in selling consumers into debt settlement services are not likely to continue operations since the new rules prohibit the collection of fees or charges for debt settlement services before the debt is actually settled. The new rules require debt settlement companies to settle a debt first before charging the consumer.
In the past couple of weeks about twenty debt settlement companies have closed up or disappeared. The irony is that these companies are most likely going to file bankruptcy, rather than settle their debt, and leave consumers who have paid advance fees, high and dry.
If you are currently working with a debt settlement company I suggest you call them and make sure they are still in business and ask them what their plan is for continuing operations after the new fee rules go into effect on October 27, 2010. The latest debt settlement company to fall appears to be FBL Associates. While I was not able to confirm they are now officially out of business, they appear to have stopped answering their phones for consumers. I’ve received some panicked questions from consumers this week that I answered about FBL Associates.
The ban against charging upfront fees goes into effect on October 27, 2010 and covers consumers enrolled after that date. I have noticed that many debt settlement companies are continuing to sell consumers front loaded or advance fee debt settlement programs and services that will be illegal to sell as of October 27, 2010. If you or someone you know is considering enrolling in a debt settlement program before October 27, 2010, tell them to either wait or ask the company to abide by the new rules.
As of September 27, 2010 all debt settlement companies must provide consumers with good faith documentation and may no longer make untrue statements regarding settlement percentages or their success rates, unless they can provide proof those statements are true. For more information on the good faith estimates you can read this guide I wrote.