The “Final Rule” imposed by the Federal Trade Commission contains some strange quirks. One of them applies to the disclosures now required by debt settlement companies.
For whatever reason, the new regulations affecting debt settlement companies apply only to those transactions in which the initial contact was made over the phone.
It doesn’t matter if they called you or you called them, as long as that first contact was by phone.
If you visit a debt settlement office in person, or if you fill out an online form, all bets are off. So, if you decide to follow up with an email solicitation, don’t go to the website. If you want to know more about services offered, pick up the telephone.
Before you take even this step, remember that whatever they can do, you can do.
Your first step should be to review your credit report. The second step should be to call each of your credit card companies and other creditors to see if you can personally work out a debt settlement arrangement. Then, don’t sign anything until you see a concrete proposal, in writing.
If you feel unsure about what you’re signing, consult with an attorney.
Why should you contact creditors yourself rather than use a debt settlement service?
Because debt settlement companies can get you deeper in debt.
Just because they must disclose things such as the total cost to you and the amount of time they’ll need to reach an agreement with your debtors doesn’t mean using them will be in your best interests.
Think about this: If you pay $1,000 to a debt settlement service, you could have instead applied that $1,000 to outstanding debt and be closer to becoming debt-free.
And, if they collect and hold funds from you for dispersal to your creditors, months could go by with no payments credited to your accounts. In the ensuing months, your debt will be growing, and the creditor could sue you for non-payment.
Meanwhile, your credit scores will be falling quickly as your credit report shows you farther and farther in arrears.
Another clause in the new regulations prohibits these companies from collecting fees from you until after they’ve gotten the promised results. So if a debt settlement service asks you for an up-front fee, run the other way.
Think about this as well: Debt experts fully expect that some of these debt settlement companies will be finding ways around the regulations for telephone solicitations.
Why would you trust such a company with your money, or with your credit future?
