Debt settlement companies are not supposed to engage in deceptive practices. Detailed government rules are designed to stop them from doing things like charging up-front fees that often leave debtors worse off, not better, or pushing their services aggressively through telemarketing. But despite new rules from the Federal Trade Commission, many unscrupulous debt consolidation companies continue to prey on vulnerable people.
The Difference That an Attorney Can Make
Consumers tempted by debt settlement offers therefore need to have a better understanding of just what these companies can and cannot do. By becoming better informed, consumers can better protect themselves against the dubious promises of debt settlement companies and make more informed decisions. In many cases, that decision should be to seek debt relief advice from an experienced lawyer.
The contrast between the legitimate debt relief assistance an attorney can provide and that of an unethical debt settlement company is very clear. An attorney is bound by rules of ethical advertising, but a debt settlement company is not. An attorney who practices bankruptcy law can also help clients stop creditor harassment and weigh all of the legal options for debt relief. Debt relief companies, by contrast, often do nothing to end creditor harassment. In fact, they often compound it by collecting thousands of dollars in fees that they do not necessarily apply to paying down the debt.
Federal Trade Commission Rules
In the tough economy that has followed the Great Recession, many people in Florida and across the country are struggling with unprecedented debt. This has left many people vulnerable to the fancily and often false claims of debt consolidation. Such companies frequently insist on upfront payment of fees, but then often fail to actually pay down the consumer's debt.
The Federal Trade Commission was supposed to stop this practice with new rules that went into effect last September. These rules banned debt settlement companies from using telemarketers to promise a reduction of a certain percentage of someone's debt, such as cutting it in half. The new rules were also supposed to stop companies from charging fees before any services were delivered.
Consumer advocates say that the new rules have not had yet succeeded in stopping the improper practices. Many debt settlement companies continue to charge advance fees, and they continue to mislead people who are stressed and anxious about their debt problems.
To get around the telemarketing restrictions, debt settlement companies have turned to text messages, Internet chats, and other types of media. Some have moved their operations offshore to places like Panama or the Dominican Republic. The FTC needs to crack down on these self-styled debt fixers, who continue to engage in a bait and switch - promising debt relief in exchange for upfront fees, but then not delivering it.
Some debt settlement companies are so enmeshed in fraudulent practices that they even pose as law firms to get people to sign up. If you are a consumer in need of debt relief, make sure you are dealing with a real attorney, not an imposter.