Digital News Report – The Federal Trade Commission (FTC) has new rules that will go into effect for debt relief companies starting on September 27th, 2010. The new rules say that the debt relief companies need to be up front with their costs of their fees and costs for the services that they provide. By October 27th, 2010 debt relief companies will not be allowed to collect money in advance for the services that they provide. They can only get compensation for their services only after they settle or reduce a clients credit card or unsecured debt.
The reason for these new rules are to stop debt relief companies from promising more than they can deliver and charge large up front fees. These new rules hope to keep the debt relief companies operating with more reasonable claims and actually deliver a valuable service to their clients.
The September 27th, 2010 rule will make debt relief companies disclose specific information to the potential customer and will ban them from making misrepresentations on what their service provides. This new rule will also apply to credit counseling services, debt settlement companies, and debt negotiation organizations. This final rule does not include nonprofit organizations that offer debt relief services, however the FTC warn it does cover those agencies whom falsely claiming nonprofit status.
Another new rule will make the debt relief companies to set aside the consumers fees and savings for payment to be made to creditors in a special “dedicated account.” This dedicated account has to be at an insured financial institution, the consumer owns the fund and any interest accrued, the consumer can withdraw funds without any penalties at any time, and the debt relief company has no ownership or control of the financial institution. The debt relief company also can’t get any referral fees from the company that holds the account.
By: Victoria Brown