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Debt Relief Companies Bending the New FTC Rules - Part One

Debt settlement companies do not have the best reputations. Horror stories of consumers paying thousands of dollars while receiving no benefit from these companies run rampant. Still, progress was made in September, with the Federal Trade Commission (FTC) imposing new regulations on debt relief and consolidation companies. These rules sought to protect vulnerable consumers looking to avoid bankruptcy and relieve their mounting credit card debt.

Essentially, the rules prohibited debt settlement companies from misleading consumers through advertisements that made outlandish claims through telemarketing, such as touting the ability to drastically cut or eliminate debts. Another important rule bans these companies from charging any upfront fees. Therefore, they are unable to collect any money before they have negotiated debts on behalf of the consumers.

However, it has become apparent that some of these debt relief companies are finding ways around the new rules. Many companies still continue to charge large upfront fees before performing any services or making any progress in the consumer's debt situation.

The problem is not a few isolated incidents, according to Chris Vale, CEO of Cambridge Credit Counseling, a consumer advocacy organization. Rather, a growing number of companies are finding ways to evade the new FTC rules and take advantage of unsuspecting consumers. Cambridge Credit Counseling, along with many other consumer advocacy groups, has contacted the FTC with its concerns about the situation.

In our next blog post, we will look at the tactics these companies are using to skirt the FTC rules and what the FTC has to say about the situation.

Source: ConsumerAffairs.com "Debt Settlement Companies Are Still Skirting New FTC Rules," 23 December 2010

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