New Rules to Protect Consumers
Written on October 25th 2010
Have you considered consulting with a debt relief agency to help you manage your debt? Beginning October 27, 2010, debt release agencies will have to follow new rules to protect the consumers they are claiming to help. The new rules will change the fee structure of the past several years.
Previously, these companies were requiring a monthly payment from the consumer as a way to become debt free in a matter of years. The common practice of these companies was to collect fees for itself first and then start using the monthly payment to pay off creditors. The problem that this type of fee structure created for consumers resulted in big debts becoming even bigger as the debt relief agency collected its share first. In one instance, a consumer actually paid approximately $7000.00 without the first creditor receiving any money. All the money went to the company that was claiming to have the solution to her debt problem. Ultimately, the consumer filed a chapter 7 bankruptcy to get a fresh start.
The new rules ban advance fees. The fees cannot be collected until:
- The debt relief agency successfully settles or changes the terms of at least one of the consumer’s debts.
- There is a settlement agreement, debt management plan, or other agreement between the consumer and the creditor.
- The consumer has made at least one payment to the creditor as a result of the agreement negotiated by the debt relief provider.
The new rules also provide that the debt relief provider cannot make misleading claims of help and will be required to disclose all fees upfront.
If you are already in a debt management plan, the new rules are not retroactive. So if you have paid in a lot of money only to find that it went to the company claiming to help you and not to your creditors, at this point you may want to consider other options to addressing your debts.
Make sure you do your research before signing up with any company you read about on the internet or see on TV. If it seems to go to be true it probably is. You can always review your situation with an experienced bankruptcy lawyer
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