10/27/10 – (AP) According to the Associated Press via the likes of CNNMoney.com and others, Debt.tv is pleased to announce that debt settlement companies are no longer allowed to charge upfront fees for their services.
How it works
“Consumers who are very deeply in debt and don’t know how to pay it down are trying to do the right thing by signing up with these companies, and they end up paying thousands and thousands of dollars in fees and filing for bankruptcy anyway.,”
-Lauren Bowne, a staff attorney at the Consumers Union-
Debt settlement companies used to charge a fee of $400-$600 per month for their services. Most of the time, these companies fail to keep you informed and up-to-date on the status of the current negotiations.
This lack of communication often leads to distrust and eventually failed negotiations and almost certanly bankruptcy. Since the practice of debt settlement is relatively new, there is very little federal oversite and regulations against these companies, therefore, it makes it very easy for you to get scammed.
What is debt settlement?
Debt Settlement, as discussed in an earlier post, is essentially negotiating your bills away so you will owe between 20% to 75% of your original debt. Once the negotiation is complete you will have to pay a one-time lump sum payment to the creditor for the negotiated amount. That’s if you contact your creditors and negotiate your debt away all by yourself!
How it used to be
If you decided NOT to go after you creditors alone, therefore, deciding to hire an experienced company, you would be charged the $400 to $600 a month, depending on your debt load. This money would be withdrawn directly from your bank account by the debt settlement company.
Whats new
THEY ARE NO LONGER ALLOWED TO CHARGE AN UPFRONT OR A MONTHLY FEE! If you ask me, this gives them incentive to do the job you hired them to do. However, the main problem with this law is that it was filed under the Telecommunications Sales Rule, which means if they do business with you face to face or over the internet….you may still be charged.
Final thoughts
Do your own bidding. You got yourself into this hole, get yourself out. Call your creditors yourself and negotiate your debt directly with them. Don’t get scammed into thinking these companies can help you because they’ve been doing it for years and they “know how to get the job done”. Just do it yourself, take some ownership and get out of debt.
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