As outlined by nationally syndicated columnist Michelle Singletary, debt settlement companies are already facing new rules from federal regulators concerning their practices.
New rules require debt-relief companies to make specific disclosures, such as how long it will take to get results, how much the service will cost, and the potential negative consequences.
The firms are prohibited from misrepresenting what they can do for debtors, in particular the percentage of debt that is typically erased.
The new rules specifically cover telemarketers of for-profit debt-relief services.
Also coming up, beginning Oct. 27, it will be illegal for a debt-relief service to charge upfront fees. Companies that sell their services over the phone can’t get paid until they successfully settle or reduce a customer’s debt.
At their best these debt settlement plans usually only cover 50% of a client’s debt, and that is at their best. A simple bankruptcy case can usually eliminate anywhere from 95 to 100% of debt, and is often cheaper in the long run, to boot.
By Doug Beaton