August 04, 2010
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News: FTC Reins In Debt Relief Companies
New rules aimed at helping credit cardholders with debt relief have been approved by the Federal Trade Commission. Vice President Joe Biden and the Chairman of the Trade Commission, Jon Leibowitz finalized the rules which are aimed to end predatory activities of certain debt relief companies that have been taking advantage of credit cardholders buried in debt. Over the past few years a number of less than ethical individuals have established debt relief companies as a scam to take advantage of those individuals already at a lost. These companies took advantage of credit cardholders looking to find relief from debt by taking large fees and not following through with any debt negotiations. These deceitful companies would tell consumers to stop paying any debt payments and pay them instead. The cardholders were told that the money would be placed in a holding account for a one lump sum payment to the lender. However, most of the time the debt relief company would charge a large monthly fee that would virtually eat up the entire payment.
Credit cardholders can begin to see the rules in place by October 27, 2010. According to the rules, debt relief companies are banned from charging customer's an upfront fee to negotiate any unsecured or card debt. Leibowitz said the rule is aimed at stopping companies who take advantage of consumers by promising consumers to significantly reduce credit card debt for an up-front fee. He added that most of these deceptive companies take the very last dollar the cardholder has leaving them completely broke. The actions of these deceptive companies have left cardholders no alternative but to file bankruptcy.
Allowances are made in the rules for debt relief companies to collect a fee only if and after the company is able to successfully negotiate lower credit card balances or settle or reduce debt. There also must be a written signed agreement between the consumer, the credit and the debt relief company with the terms of the settlement. The debt relief company will not receive any fee until the first payment has been made by the consumer to the creditor as a result of the debt relief company's negotiations.