Relief on the way due to new regulation of misleading "debt-relief" companies Skip to main content

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Relief on the way due to new regulation of misleading "debt-relief" companies


A number of good things have emerged from the economic situation of the last several years. Recently enacted credit card reform will hopefully change the way we are treated by the industry responsible for so much of our country’s collective personal debt. Mortgage modification, even with all its warts and scars, should eventually become an industry with real benefits to struggling homeowners. The quick roll out of federal plans and the pressure on banks to quickly create similar programs obviously led to a lot of frustrations. Still, when things iron themselves out, consumers stand to benefit. Another recent instance of positive regulation has stemmed from the offices of the Federal Trade Commission (FTC). The News & Observer reported that last week, the organization ruled that as of October 27 of this year, companies operating in the rather unregulated “debt-relief” industry must now be a great deal more clear about to what extent they can actually provide assistance. Specifically, the new law states that any company offering to alleviate your standing debt is not allowed to request payment until the “benefits” of their efforts reach fruition. In other words, they don’t get paid until they do what they said they would. Quite a notion, huh? The last couple of years has seen a tremendous rise in the number of organizations offering “debt-relief.” From shaky, hand-written signs on the side of the road promising to rebuild your credit to more formal companies with Web sites and 1-800 numbers, the number of ways you can “start over” has exponentially multiplied. Unfortunately, hundreds of thousands of Americans have found that that is not really the case. Typically, the industry model has been to request fees from customers upon engagement of service, a strategy that hardly seems reconcilable with common sense. To sell this goofy model, companies peddle panic. They target not the completely destitute but the people somewhat close to the edge of a serious financial dilemma, those considering a bankruptcy but still looking for alternatives. This anti-sell tactic works wonders. The practice has sky-rocketed. More over, many industry players instill confidence by telling customers to cease paying their credit cards. “We’ll handle it,” the operator says with a smile and headset. The longer you go without paying any obligated debt without formal legal protection (bankruptcy), the worse off you are going to be. The new guidelines will require companies to tell you how long it is expected to take to realize the results they present to you and a good faith estimate of your total costs. Previously, companies often asked you to create a separate account with them to hold money that you should be using to pay your credit cards as way to ensure they get paid everything they are “owed” after they decide your account is done be serviced. Come this fall, any money you are asked to set aside must be held in a separate financial institution under your name. So let’s recap this for a second: Debt-relief companies tell you to stop paying your credit cards so that you will have the money needed to pay us. Moreover, they can make absolutely no promise that your debt will be alleviated or what it is you will need to pay them. And, since they know what it is you owe every month, might their total fee just happen to be close to whatever it was you were supposed to be paying to your credit card debt? See how that works? The most certain way to ensure long-term relief from your debts is through filing bankruptcy. It’s not always the answer for everyone but it is certainly far better than what what private "debt-relief" companies are offering.  Call the Law Offices of John T. Orcutt today for your FREE initial consultation: +1-919-646-2654

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