New rules on debt settlement are hoped to erase fees which many consumers have been charged for services before they have even been offered any form of debt relief. Many debt settlement companies offer debt relief services for consumers who may have, for instance, a high level of credit card debt but may be unable to meet the costs of repaying these obligations.
In the past, debt relief companies have charged up-front fees, which many have deemed excessive, and as a result these fees have resulted in consumers being unable to save money when it comes to finding debt relief. There are some companies, which are fraudulent, that have simply scammed consumers out of money by promising to erase debt quickly if certain fees are met before the process begins.
Obviously, this new rule is hoped to stop such practices, but is also set in place to help consumers avoid excessive fees throughout the debt relief process. Consumers have been hurt in some cases when these counseling services mishandled funds or misrepresented themselves, but not only will these settlement companies no longer be able to charge upfront fees, they are also required to tell the consumer how much debt will be reduced through agreements made with creditors.
However, these rules are only for debt relief services which are being negotiated by phone, as this rule was created under the Telemarketing Sales Rule. Debt relief companies are, reportedly, considering sending representatives to deal with consumers face-to-face, as this can also allow for fees to be paid up-front.
These new rules may help some consumers when it comes to debt relief services, but financial advisers also suggest that consumers talk directly with their creditors first, as they can work out a repayment or credit settlement with out a third party. Also, there are opportunities for credit debt counseling through nonprofit organizations, which can obviously eliminate up-front fee costs and the possibility of a scam.
However, any debt relief company which is being consulted by consumer can be researched online or through sources like the Better Business Bureau before a debt relief relationship is formed.