Consumers overwhelmed with debt see Debt Settlement Companies as a savior and an alternative to Bankruptcy. These companies claim to be able to reduce your debt by 10%-50% or more by renegotiating the terms of your agreement with the creditor. I have never used one so, I do not have first hand knowledge if they are legitimate. The research I have completed shows mixed results; some consumers have reported positive results and some say they have paid these companies for months but have not seen any decrease in interest rate or amount owed. Why pay for something you can do yourself?
Why Hire a Debt Settlement Company
Consumers can contact creditors on their own behalf and renegotiate the terms of their agreement; without the expense of a Debt Settlement Company. A consumers success depends largely on how much time, effort, and research is put into the negotiation both before contacting the creditor and after. Negotiation is a useful tool when working to rid yourself of debt and can be used during credit repair to get negative items off your credit report by paying less than is owed and by entering into a agreement which states the creditor will delete the information about receiving the payment. This is commonly referred to as: “Paid for Deletion” or “PFD”. Under new amendments to the “Telemarketing Sales Rule” companies who sell debt relief services over the telephone may no longer charge a fee BEFORE they settle or reduce a customer’s credit card or other unsecured debt. This amendment takes effect October 2010.
Advanced Fee Ban
The Final Rule contains specific requirements for debt relief providers related to charging an advance fee before providing any services. It specifies that fees for debt relief services may not be collected until:
- the debt relief service successfully renegotiates, settles, reduces, or otherwise changes the terms of at least one of the consumer’s debts;
- there is a written settlement agreement, debt management plan, or other agreement between the consumer and the creditor, and the consumer has agreed to it; and
- the consumer has made at least one payment to the creditor as a result of the agreement negotiated by the debt relief provider.
To ensure that debt relief providers do not front-load their fees if a consumer has enrolled multiple debts in one debt relief program, the Final Rule specifies how debt relief providers can collect their fee for each settled debt. First, the provider’s fee for a single debt must be in proportion to the total fee that would be charged if all of the debts had been settled. Alternatively, if the provider bases its fee on the percentage of what the consumer saves as result of using its services, the percentage charged must be the same for each of the consumer’s debts.
In addition to the Ban on upfront fees, the FTC is making three other significant changes to the Telemarketing Sales Rules program. These changes take effect September 27, 2010 and include:
- require debt relief companies to make specific disclosures to consumers;
- prohibit them from making misrepresentations; an
- extend the Telemarketing Sales Rule to cover calls consumers make to these firms in response to debt relief advertising.
Full details of these changes can be found on the FTC website and are included in a Press Release released on July 29, 2010.
About Finance Diva
[...] This post was Twitted by nickelnm [...]