This is a guest post by Steven Robert. If you want to guest post on this blog, check out the guidelines here.
With the brewing debt storm terrorizing the financial lives of all Americans, debt settlement is like a financial respite for such debt-stressed individuals who are worried about their ever-increasing credit card debt burden. The debt settlement companies are wonderful financial tools when you want to rein your out-of-control credit card debt level that is spiraling out of control. Unfortunately, there are some criminal, inefficient and inept people who have set up companies that exist to take undue advantage of the financially distressed debtors. They make the consumer’s personal finances worse than what it was before they took help from such debt settlement companies. To bring a control over these unscrupulous practices, the FTC has passed a new set of rules that will safeguard the consumers from being a victim of the scam debt settlement companies and help them differentiate between the good ones and the bad ones.
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How do the debt settlement companies work?
If you’ve decided to settle your debts through a debt settlement company, you need to understand how the process of debt settlement works. Read on to know how a debt settlement company may benefit you in reducing your debt burden and becoming debt free as soon as possible.
1. You require finding a reputable debt settlement company: In order to avoid the debt settlement scams, you require finding a company that is registered with the Better Business Bureau and provides you with authentic service. Finding an authentic company is not an easy task as there is an abundance of the scam companies that pose to be reputable ones. Select a company only after you’ve done your research lest you may become a victim of debt settlement scam companies.
2. The debt counselor will assess your finances: All reputable debt settlement companies will offer you free counseling where a professional debt counselor will examine your finances and advice you on effective money management skills. This pre-settlement counseling is very important as you’ll be subject to a professional expert who will guide you throughout the debt settlement process.
3. The debt consultant will negotiate with your creditors: As your personal finances are assessed by the debt counselor, your debt negotiator will negotiate with your creditors and attempt to reduce the principal amount by a considerable amount. This is the biggest benefit of a debt settlement company that you need not pay back the entire amount that you owed to your creditors. You can easily pay off the amount as it is drastically reduced.
4. Make a plan and execute it: As your creditors agree to reduce your principal amount, you will have to make a plan along with your debt consultant where you will decide on your monthly payments based on your income. Once you’ve decided your monthly payments that you have to make to the debt settlement company, you can start paying them and slowly dig your way out of credit card debt.
Once you’re done with making your timely and regular monthly payments, check whether the company is dispatching the money to your creditors. You can order your credit report and also check the current status to stay updated about your financial history.
How has the FTC protected the debtors from being duped by the settlement scammers?
Since there was a sudden rise of the number of complaints against the debt settlement companies with the BBB, the FTC immediately took a stringent step to stop the unscrupulous practices and make the debt settlement option a secured and a safe one. Have a look at the sweeping changes implemented by the FTC to protect consumers from the raw deals of the settlement companies.
1. No more upfront fees: The for profit companies that sell debt relief services to consumers will not be able to charge hefty upfront fees from the debtors before even settling their debts. They are now allowed to charge fees only after they settle or reduce a part or portion of the debtor’s principal amount.
2. Telling the truth about the services: The telemarketers and the debt representatives are now required telling the truth about their services upfront to the debtors. They cannot keep anything as secret and cannot misrepresent their services to lure the consumers into becoming customers.
3. A trusted account: As the debtor starts making the monthly payments towards the repayment of the loan, this amount of money must be accumulated in a “trusted account” with a reputable bank. The bank account will be availed by both the debt consultant and the debtor and he can withdraw money for any emergency purpose without any fee.
Thus, how well will these rules work to protect consumers? There have been positive results from debtors in America when it comes to settling your debts through a debt settlement company. Throughout the past few months, the debt settlement industry has flourished and is still continuing to make handsome profits from their services. The new set of rules by the FTC is working as a huge success by protecting consumers from being hoodwinked by the creditors.
Steven Robert is a contributory writer associated with the DebtConsolidationCare.com and has written several articles for various financial websites. His expertise is in the Debt industry and he has made significant contributions through his various articles.