You’ve likely heard the stories of fly-by-night companies that offer to get people out of debt, only to make matters worse by setting up an agreement that only causes the customer to fall further into debt. The Better Business Bureau confirms the stories you might have heard: 2,600 complaints were logged against debt relief companies in 2010 alone.
In response to these types of reports, the Federal Trade Commission issued new guidelines for debt relief companies that took effect in September 2010. In order to protect consumers from predatory practices, the new FTC rules on debt relief offer the following protections:
- A debt relief company cannot collect up-front fees from a customer until a written agreement is in place. It is also the debt relief service’s responsibility to have repayment agreements in place with a client’s lenders before it collects any money from that client.
- Debt relief companies must provide detailed information to customers about the total cost of their services, as well as a timeline for when they can expect to see results. Debt companies must also provide information on any negative consequences, such as a blemished credit score, that could result from enrollment in these types of programs.
- If the company requires deposits into a debt settlement account that will be used to pay off creditors, the account must be operated by a financial institution that is not affiliated with the debt relief company. Any money deposited into this fund must either be used to pay down the debt or returned to the customer with any interest earned by the fund.
However, “Instead of complying with the new rules, the majority of debt settlement companies are evolving to evade them,” said Chris Viale, CEO of Cambridge Credit Counseling, a nonprofit consumer advocacy group. “They are doing everything they can to continue charging these advance fees to consumers and mislead consumers.”
“We see this all the time with potential clients that call our firm and have paid these companies thousands,” said Scott Nelson of The Sader Law Firm. Coming to grips with the thought of filing for bankruptcy is the initial hurdle that most debtors face. Many view bankruptcy as something that will only hurt them, and not help them. And that’s just not the case. After all, it’s easy to keep a bankruptcy filing to yourself. It’s not easy to hide a home foreclosure from your neighbors.
The Sader Law Firm has more than 30 years of combined experience in Chapter 7 bankruptcy, Chapter 11 bankruptcy and Chapter 13 bankruptcy cases and can help provide you with financial freedom. Contact an attorney at The Sader Law Firm today for a free consultation at (816) 281-6349 to find out whether you qualify for bankruptcy and to learn more about the options available to you.