Financial Debt Agreement Laws - FTC Puts an End to Deceitful Practices

Debt settlement companies most often promote their services through
telemarketing by assuring debtors that they can substantially reduce
debt and urging them to sign up for their services. Once the debtor
signs up for the program, the settlement companies typically demand
their fees at the earliest - irrespective of whether the promised
services have been rendered or not.This can lead to great loss of
money for the debtor who is probably already reeling under great
financial debt. It can also lead to loss of credit worthiness (or what
was left of it after accumulating so much debt) because debt
settlement companies often advise their clients to stop making
payments to their creditors and to instead set up an escrow special
account to build on the lump sum amount that will be used in the
future to negotiate a settlement which is more often than not first
withdrawn by the settlement firm to cover its fees even though it
hasn't reached a settlement with creditors.Keeping these issues in
mind, the FTC has come up with the new set of rules that the debt
settlement companies will need to abide with. With effect from
September 27th, all debt settlement companies are mandated to disclose
to their clients the time that will be taken to reduce the debt and
when the company is planning to negotiate a settlement with creditors.
The settlement companies must also specify how much money the debtors
would be required to set aside before a settlement offer will be
made.All negative consequences of not making payments to outstanding
creditors, such as being subject to collections or lawsuits, decreased
creditworthiness, and increased debt must be clearly communicated to
the clients while giving them advice on how to manage their debt.In
addition to this, from October 27th, debt settlement firms would be
forbidden from collecting fees for their services until they have
settled some or all of the client's debt. Fees can also not be
collected until the debtor has made at least one payment to the
creditor as a result of the negotiated agreement. If the company asks
the client to place funds in an escrow account, the fund should be
owned and controlled by the client and that the funds can be withdrawn
at any time without penalty. �