Protect Yourself From Debt Relief Management False Promises
Revised Rules Cushion Consumers From Opportunistic Debt Relief Management Agencies
This may not be very fresh news anymore, but for consumers out there who are in the process of looking for debt relief management companies to guide them in handling their credit card and other personal debts, knowing the changes to rules protecting them is essential. Not long ago, the Federal Trade Commission had modified rules that can help insulate hard-pressed consumers from bad practices. This covers for-profit debt help firms only and other companies using the nonprofit status as a smokescreen. The following discusses some of the changes included in The Final Rule:
Must-Know Debt Relief Management Rules
Bye-bye Set Up Fees. When signing up over the phone with a debt relief management agency, you must be aware that these agencies are no longer allowed to exact advance fees from you. These often exorbitant up front fees give false hopes to consumers while eating away at their limited resources regardless of the success of the relief program. Under the revised rules, your agency can only collect fees from you after effectively renegotiating, reducing, paying off, or changing the terms with at least one creditor. They can also start charging you once they are able to produce a written debt management plan, settlement agreement or other contract between you and your creditor and you have agreed to this. If you are able to pay at least one creditor because of the negotiation conducted by your debt solution provider, then they can also collect this fee from you. This amount paid to a single creditor should be in proportion to the total fee that they would collect once all the debts has been payed off. This is to make sure that you do not incur the larger bulk of the fees at the early phase of the program. Your debt solution provider may, otherwise, collect fees based on the percentage of how much you have saved resulting from your use of their services. This percentage must be uniform among your creditors.
No More Hole-and-Corner Fees, Policies and Expectations. The Final Rule requires debt management companies to be transparent to clients regarding proposed fees and refund policies. They should come up with estimates that use actual outcomes with particular creditors as basis.
No More False Hopes. When your debt relief management provider gives you their ballpark figure, you can ask them for a time frame of how long it will take for you to pay off your debts considering your particular case and your capacity to save money to pay off.
They should also be able to give you an estimate of how much this savings must be. Again, this estimate must be founded on their actual experiences with other clients. Under the revised rule, they can ask you to open a dedicated account where you must deposit your savings and the amount to cover for fees. They can make this a requirement provided that the said account is maintained at an insured financial establishment; you own the savings as well as the interest accrued; you can make withdrawals anytime without paying penalty fees; the agency has no ownership, control or association with the establishment handling the account; and the agency must not pay or be paid by the establishment handling the account.