The new Federal Trade Commission regulations to help protect financially-desperate families from deceptive offers for debt relief will go into effect on October 27. While the new rule will have a significant impact on reducing predatory debt relief, the Better Business Bureau advises consumers that they still need to use caution when enlisting the help of a third party to get out of debt.
Since the start of the recession in December of 2007, the Better Business Bureau has received more than 6,000 complaints from consumers about debt relief or debt settlement companies. Typically, complainants say they were charged large up-front fees in exchange for the empty promise that the company would significantly reduce or eliminate their debt.
Under the new rule, any company that solicits debt relief services over the phone—including taking incoming calls from new customers—will not be able to charge upfront fees until:
Additionally, debt relief providers cannot require that consumers set aside payments in a “dedicated account” unless:
Finally, before the consumer signs up for any debt relief service, providers must disclose fundamental aspects of their services, including how long it will take for consumers to see results, how much it will cost, the negative consequences that could result from using debt relief services, and key information about dedicated accounts if they choose to require them.
Businesses can learn more about how to follow this new rule on the FTC’s web site: Debt Relief Services & The Telemarketing Sales Rule: A Guide for Business.
For more information on managing credit and getting out of debt, check out BBB’s free advice at Managing Credit-Made Simpler.