FTC – Rule for defending consumers in credit card debt

After the recent financial uproar of 2008, lots of people have been crushed under the heavy weight of credit card debt. If you’re one of them and struggling to make your credit card payments, you might consider using a debt relief company to aid you in regaining control over your finances. In the year 2009, an average American family carried an anticipated credit card debt of almost $10,000. Under such economic circumstances, a lot of people have fallen prey to debt relief scams. In October 2010, the FTC or Federal Trade Commission issued a new consumer credit card debt-relief law specially designed for debt relief and settlement organizations.

Amendments to Telemarketing Sales Rule Prohibiting Debt Relief Companies from Collecting Advance Fees

In October, 2010, the FTC issued rules according to which for-profit organizations that trade debt relief services over the phone cannot ask for a fee ahead of reducing or settling a consumer’s credit card or additional unsecured debt. Chairman Jon Leibowitz said that the FTC strives each day to make certain that America’s middle-class households obtain straight deals for their dollars. He added that this rule will stop organizations who lure customers with false promises of lowering credit card debts in swap for huge, up-front fees. A majority of these organizations take out the last dollar from the clients’ pockets, and instead of helping them out, drag them down into deeper debt problems. Three Telemarketing Sales Rule provisions that took effect on September 27, 2010, are:
- Debt relief organizations need to make explicit disclosures to customers
- stop debt relief companies from making misrepresentation
- expand the Telemarketing Sales Rule in order to cover calls customers make to these organizations in response to debt relief promotion

The final rule is aimed at for-profit debt relief services, comprising debt settlement, credit counseling, and debt negotiation services. Though it doesn’t cover non-profit organizations, it does cover organizations that misleadingly claim nonprofit status. Over the last ten years, the FTC and state organizers have brought together 259 cases so as to stop misleading and foul practices by debt relief companies that have targeted individuals in monetary distress.
Advance Fee Prohibition
The final rule consists of particular requirements for debt relief organizations who charge an advance fee ahead of giving any service. It states that fees for debt relief services cannot be collected until:

The debt relief company successfully negotiates, reduces, settles, or modifies the terms of the client’s debts.

There is written settlement conformity, debt management plan, or further agreement between the debtor and the creditor, and the debtor has consented to it.

The client has made a minimum of one payment to the creditor due to the deal negotiated by the debt relief company.

In order to make sure that debt relief companies do not charge too much fees if a client has enrolled several debts in a single debt relief program, the final law states how debt relief organizations can collect their payment for every settled debt. First, the debt relief provider’s payment for a particular debt needs to be proportionate to the overall payment that would be charged if the entire debts had been settled. On the other hand, if the provider decides its fee on the basis of the percentage of what the client saves for using its services, the amount charged should be equal to each of the client’s debts.

Shah Peerally is an attorney licensed in California practicing immigration law and debt settlement. He has featured as an expert legal analyst for many TV networks such as NDTV, Times Now and Sitarree TV. Articles about Shah Peerally and his work have appeared on newspapers such as San Jose Mercury News, Oakland Tribune, US Fiji Times, Mauritius Le Quotidien, Movers & Shakers and other prominent international newspapers. His work has been commended by Congress women Nancy Pelosi and Barbara Lee.  He has a weekly radio show on KLOK 1170AM and frequently participates in legal clinics in churches, temples and mosques.

 

For updates follow us onYoutube, Radio, Facebook, Twitter and LinkedIn.  Shah Peerally Law Group PC deals in immigration law  - www.peerallylaw.com and www.immigrationlegalblog.com

Attorney Shah Peerally also deals in debt settlement. For more information call us on 510.742.5887 and visit us on www.YourDebtSettlementAttorney.com.

Information provided above is for educational purposes only.  One should not act or refrain to act solely based on the information provided.  You should consult an attorney to assess your case before proceeding.

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