The Federal Trade Commission (FTC) has come up with amendments to the Telemarketing Sales Rule, 16 CFR Part 310 to help out the consumers who rely on debt companies to work on their behalf during the settlement process.
The amendments on disclosure requirements (including a ban on misrepresentations) came into effect on September 27, 2010 and the amendments banning collection of advance fees from consumers for promised services came into place from October 27, 2010.
The disclosure amendments require settlement companies to make specific disclosures to consumers and prohibit them from making misrepresentations.
The companies must inform the consumers about the negative implications of settlement along with their benefits so that they can make an informed choice.
The Telemarketing Sales Rule has now been extended to cover calls consumers make to these firms in response to advertisements made by the debt settlement companies.
The ban on upfront fees charged by the companies over services that they promise to render has come in as a big help for consumers.
There are a large number of companies that charge very high fees in advance for their services and leave the consumers hanging in the hope of getting the debt settled.
The new amendment specifies that the companies are not entitled to charge fees for services rendered until the firm successfully renegotiates, settles, reduces, or otherwise changes the terms of at least one of their client's debts or the client has successfully made at least one payment to the creditor as a result of the agreement negotiated by the company.
There should be a written contract of agreement between the settlement company and its client regarding the fees to be charged.
The FTC has also mentioned an upper ceiling on the fees (taken as a percentage of the total debt amount) that can be charged by the companies in order to protect the interest of consumers.