In May of 2010, the Federal Trade Commission passed the Debt Settlement Consumer Protection Act. This act may well be a lifesaver for many American citizens who are struggling to get by in the current economic slump. Various debt settlement companies have been operating for years, claiming to help consumers get out from under mountains of debt. Unfortunately, some of the companies end up doing more harm than good, and financially desperate people tend to be the perfect prey for such agencies.
Services Provided by Debt Settlement Agencies
Debt settlement agencies advertise debt management services to people who can no longer manage their debt. According to MSNBC, these so-called fast debt solutions are often scams. Most companies ask for a detailed list of all debts owed along with account numbers and other information from people who sign up for the services. A monthly rate is paid to the agency, and the amount of the payment typically depends on the amount of debt a person has. In addition to the monthly rate, there is also usually a $10 or $15 “monthly maintenance fee” tacked onto the total amount. Debt settlement agencies generally ask for upfront payments, usually within the range of $200 to $300, before debt payment distribution can begin. These agencies also claim to be able to work with creditors, getting them to agree to reduced interest rates, monthly minimums, and occasionally balances on behalf of borrowers.
What the Debt Settlement Consumer Protection Act Will Do
This new act will puts several debt settlement regulations in place to greatly reduce and occasionally prevent fees being charged by debt agencies. Debt settlement agencies now have to provide full disclosure to interested parties, which means they have to give detailed information regarding where every single dollar given to them by a person will go. As a result of this act, companies like these no longer have the means to take advantage of the financially destitute. Because so many debt agencies rely heavily on the astronomically high fees charged both upfront and month to month, it is expected that many agencies will go out of business because of the Debt Settlement Consumer Protection Act.
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