FTC has passed new debt settlement laws in 2010
New laws concerning the debt settlement industry were passed by the Federal Trade Commission (FTC) on 28th July 2010. The Debt Settlement Consumer Protection Act is introduced by the government after the Better Business Bureau (BBB) has obtained more than 3,500 complaints from the consumers. The consumers have complained about being cheated by the settlement companies. The purpose of these new laws is to make the debt settlement industry more legitimate and undoubtedly a better option to bankruptcy.
Debt settlement laws
The new laws forbid the debt settlement companies from charging upfront fees. Previously, several settlement companies have reportedly charged extremely high upfront fees. This new law intends to bring an end to that practice. This is a great triumph for consumer advocacy groups that have been trying for a rigid control on the debt settlement industry.
Individuals who enroll in the debt settlement program will not have to fret about paying a hefty amount of money with no assurance of truly settling their debts. As per the new laws, debt settlement companies will not be permitted to charge fees till one the debts are settled, customer and the creditor consents to the fees and the creditors have received at least one payment.
According to the new laws, the debt settlement companies can charge maximum $50 as an enrollment fee. It will also limit the maintenance fee to 15% of the total amount the company is able to save the client. Consumer advocacy groups welcomed the new laws as a decisive step at a time when millions of consumers have incurred huge amount of debt.
Financial experts are of the opinion that the new laws would change the business model of the debt settlement industry. The companies would get paid as per their performance.
But many leaders of the debt relief industry are of the opinion that the new rules are so strict that several settlement companies are most likely to go out of business. Nearly all the companies depend on upfront fees to meet the expense of enrolling new customers and handling their accounts before the outstanding balances are settled.
The new laws forbid the debt settlement companies from charging upfront fees. Previously, several settlement companies have reportedly charged extremely high upfront fees. This new law intends to bring an end to that practice. This is a great triumph for consumer advocacy groups that have been trying for a rigid control on the debt settlement industry.
Individuals who enroll in the debt settlement program will not have to fret about paying a hefty amount of money with no assurance of truly settling their debts. As per the new laws, debt settlement companies will not be permitted to charge fees till one the debts are settled, customer and the creditor consents to the fees and the creditors have received at least one payment.
According to the new laws, the debt settlement companies can charge maximum $50 as an enrollment fee. It will also limit the maintenance fee to 15% of the total amount the company is able to save the client. Consumer advocacy groups welcomed the new laws as a decisive step at a time when millions of consumers have incurred huge amount of debt.
Financial experts are of the opinion that the new laws would change the business model of the debt settlement industry. The companies would get paid as per their performance.
But many leaders of the debt relief industry are of the opinion that the new rules are so strict that several settlement companies are most likely to go out of business. Nearly all the companies depend on upfront fees to meet the expense of enrolling new customers and handling their accounts before the outstanding balances are settled.
