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Debt Consolidation Company - FTC Rule and Regulations

FTC Debt Consolidation Company Rules and Regulations

Last Updated: July 14, 2016

While many Americans struggle to pay their credit card bills, a lot of them turn to businesses offering debt relief services. These are for-profit companies that say they can renegotiate what consumers owe or get their interest rates reduced. In response to this growing business model, the FTC put together the Debt Relief Rules which took effect October of 2010. The regulations are very comprehensive and are aimed to curb deceptive and abusive practices associated with debt relief services offered by debt consolidation companies.

For-Profit Companies are Required to Give the Following Upfront Disclosures

Accurate Estimate of How Much Money a Consumer Will Save

Savings Accounts Must be Held in an Insured Financial Institution

In times past, payments consumers make to the debt settlement firm went into an escrow account, though many firms labeled it as a savings account, a misleading term since there was no savings account opened at a real bank. Under the new rules:

No Upfront Fees

The debt settlement firm must wait until one of the following occurs before they collect any fees.

If you do find yourself signing up with a firm and they are not following these regulations, do not hesitate to report them to your state attorney general's office or file complaint with the FTC.

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