On October 27th, 2010 the second wave of new rules implemented by the Federal Trade Commission will go into effect in effort to curb abusive acts and practices of Debt Consolidation Companies. The new rules are designed to prevent misleading claims and charging up-front and excessive fees.
Under the new rules Debt Consolidation Companies will be forbidden from maing false claims regarding their success rates and non-profit status. Companies will also be required to make several disclosures including:
– How long will it take for consumers to see results.
– How much the service will cost.
– Key information about dedicated accounts and fees charged.
– Other options such as bankruptcy relief.
The advance fee ban stipulates that fees for Debt Consolidation Companies cannot be collected until:
– The debt relief company renegotiates, settles, reduces or 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 to which the consumer has agreed to.
– The consumer has made at least one payment to the creditor.
The aforementioned new rules will help, however, not enough. The Debt Consolidation Companies have a very powerful advertising campaign where they claim to reduce debts by outrageous percentages. However, the trouble is, that overall, most consumers see an increase in their total debt, albeit with a few small successes to keep them paying into the system. Generally, unless the consumer has a high income, low expenses and is paying in great excess of the minimum payments, the debt will continue to grow despite the new rules. The consumer should consider all options, including Chapter 7 Bankruptcy and Chapter 13 Bankruptcy with an open mind.
If there are any general questions or topics you would like to read about relating to bankruptcy law in the Philadelphia, Pennsylvania region, you may contact the Philadelphia Bankruptcy Lawyers at Sadek Law Offices, LLC at 215-545-0008 or email [email protected]. Thank you.