Debt Settlement Scams Have New FTC Regulations

Any advertisement that claims they can settle your debt for a fraction of what you owe sounds too good to be true. And in reality, it usually is. Debt settlement agencies have taken off since the beginning of the recession and continue to target unsuspecting people.

Therefore, in the past week, the FTC drafted regulations for the debt settlement industryto crack down on false advertising, expensive up-front fees, and misleading payment plans. The FTC handed down these regulations:

1. No more upfront fees. These companies tend to make their money by charging a large initial fee. There was nothing, before these rules, to prevent debt settlement agencies from collecting a fee and not doing much else. As soon as the regulations take effect, debt settlement agencies will be required to get you at least some form of reduction on at least one of your debts. Furthermore, debt settlement agencies are required to have their fee structure in writing.

2. Transparency. These companies are now required to reveal information to potential clients before they decide to sign up. Debt settlement agencies are now required to tell clients a time-frame of the settlement strategy and the fact that there could be negative consequences such as damage to your credit history.)

3. No more false advertising. Debt settlement agencies are not able to falsely state that they are not-for-profit anymore. Debt settlement firms can no longer lie about how much they can help you, or misrepresent their success rate.

4. Your own bank account. Instead of paying your settlement payments into a veiled bank account created and managed by the debt settlement agency, now debt settlement accounts must be made at an FDIC insured bank and the account must be in the name of and controlled by the client.

Where does that leave the debt settlement industry?

I'd bet that it won't be around much longer. According to experts, debt settlement companies fail in theory and in practice to accomplish the needs of their customer. The new regulations are going to help put the scams out of business and expose the agencies left to the general public, showing them how much damage debt settlement can actually do to your financial future.

Many folks going through hard times are taken advantage of because they are fed lies and false advertising by debt settlement firms which claim they give you a way to avoid bankruptcy. Contrary to what they claim, debt settlement can still hurt your credit score. What is worst of all in this scheme is that debt settlement firms aren't really able to offer you total protection from your creditors.

A lot of people think that the huge claims of the debt settlement firms are true when they are over their heads in debthowever, for most hard working people who have found themselves in too much debt, bankruptcy provides better options. A bankruptcy attorney is probably your best bet if you are thinking that a bankruptcy is the best option for protection from foreclosure or help with credit card debt. And always keep yourself educated by seeking out free information from experienced and qualified attorneys to avoid scams and get the help you need to secure your financial future.

About The Author Jim Brown is the founder and owner of Castle Law Office of St. Louis, P.C. He has been filing bankruptcy cases in Missouri since 1994 and has released several publications based on his experience. You can find these publications and more information by visiting his website at http://www.CastleLaw.net .