Credit Card Debt Settlement

 

 

How Can The Debt Settlement FTC Rulings Effect You?

 

Debt settlement as an industry has been growing very rapidly over the past decade; particularly since the advent of the recession that we are currently still in. This industries’ growth has come from a few major factors; the first being how large the market is, American consumers owe trillions of dollars on unsecured credit cards and the second is the large upfront fees that could be charged by these debt settlement companies. These two factors, the large market and high upfront fees, attracted business owners and entrepreneurs by the droves.

Unfortunately not all of these entrepreneurs who started many of these debt settlement companies had their prospective client’s best interest at heart. Over the years the debt settlement industry has developed a very bad reputation of being full of “scam” companies. The problem was that many unscrupulous debt settlement companies would charge their clients upfront fees and then never actually settle their accounts. In addition these companies would also never offer what is known as “full disclosure” to their prospective clients; meaning they never told clients about the potential pitfalls associated with debt settlement, they would only cover the positive aspects.


Well now this has all changed! The FTC (Federal Trade Commission) has finally stepped in and helped to protect American consumers with strict rulings and regulations.


The first and most notable debt settlement ruling made by the FTC is the advance fee ban. No longer are debt settlement companies allowed to charge their settlement fees in advance of actually settling the account. Many companies would charge a flat percentage of the total debt owed to the creditors upon enrolling into the program as their fee, and this fee would be collected before settling. A much better fee model is where a debt settlement company charges a percentage of the actual amount of money saved once the account is settled! This creates a win-win situation for all and ensures that the debt settlement company will do all within their power to negotiate the best possible debt settlement for their client.

The benefit of this ruling:  This is great news for American consumers who are trapped in credit card debt and are seeking relief through debt settlement. Essentially what this does is remove the risk of losing money through advance fees to a debt settlement company. Consumers will have the peace of mind that they will not be scammed. This ruling will virtually eliminate all the scam companies in the debt settlement industry. The advance fee ban also ensures companies will try their hardest to negotiate the best deal for their client; because their profit is a direct result of how good of a settlement they can reach.

The other major debt settlement FTC ruling is dealing with misrepresentation of services and what is known as “full disclosure”.

For those that may not be familiar with debt settlement the benefits are saving money and time on the path to achieving debt freedom. However, there are certain aspects to debt settlement that are not so positive and must be made aware to a prospective client before they enroll. In order for any debt settlement to be achieved the account must fall into a past due status. Falling past due will have a negative effect on ones credit rating, will also bring on collections calls, and can also leave the debtor open to the possibility of a lawsuit.


The problem was that many debt settlement companies would not inform prospective clients of these drawbacks to debt settlement and would deceive them into believing that debt settlement is a completely smooth ride. While the benefits of debt settlement are great the reality is, it’s not easy and is considered a “hardship” program meant to help people who are way too overextended to ever truly be able to pay the debts back.

 
The FTC ruling now mandates that debt settlement companies must inform a client about the entire process of debt settlement, both the good and bad! In addition they must also review other debt relief options outside of debt settlement ensuring the potential client understands all the options available.


The benefit of this ruling:  This will help to prevent people from enrolling into a debt settlement program that they do not truly understand. Many complaints to the FTC were a result of clients being misled by the company they signed up with. These complaints should drop dramatically with debt settlement companies offering “full disclosure” to their clients.

 

So What Does This Mean To The Debt Settlement Industry? And To You The Consumer…


For starters there will now be far less companies getting into the debt settlement industry and many of those currently in the industry will shut their doors. Some companies are simply too small and cannot manage to still conduct business without advance fees. Other companies will no longer have interest in the business deeming it unprofitable, seeing that they cannot charge their fees upfront any longer. Then the scam companies will all shut down, because now they must earn their money through their performance and work, not through their deception. The only companies that will be left in the debt settlement industry will be the strong reputable ones; companies that are large enough to continue conducting business without charging upfront fees.

This is all great news for consumers. Now debt settlement will suddenly become a much more attractive and much less risky option for those stuck in debt. With no risk of losing money through upfront fees consumers will be much more welcome to the idea of debt settlement as their means for debt relief.

If you are in need of help with your debt situation and are considering debt settlement with a fully FTC compliant company then either fill out an application form below or give us a call. We will fully review your debt situation and see if this is the correct option for you to take.

 

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