Debt Settlement And FTC Complaints - Handling Such Issues

Most of the people, when in debt problem, opt to get the help of the debt settlement companies, in order to be able to pay down the debts more easily. The debt settlement agencies or companies are supposed to help you with paying down the debts, as they can negotiate with the creditors, in order to lower the outstanding debt amount. That is the main help that they offer to you, other than helping you with making the monthly payments through them. Now, if the settlement company gets away with your money, instead of helping you in your problem, then you may end up even deeper into debt.

As such scams and frauds became rampant, as most of the debt settlement companies started to work as for profit companies, FTC or the Federal Trade Commission brought on a new rule, with regards to what the debt settlement companies are prohibited from. It also defines what the consumers can do, if a debt settlement company or agency breaks the law.

FTC Rule on Debt Settlement Help

FTC prohibits the debt settlement companies from:

1. Charging any upfront fees - The debt settlement companies or agencies or firms are prohibited from charging any form of upfront fees. That is, the firm cannot charge any fees from the consumer, before actually settling at least one of the debt accounts.
2. Making any false representations - The debt settlement firms are supposed to provide all sorts of details to the consumer, before actually asking the consumer to enroll into a program. The settlement firms are prohibited form making any form of false representation, coming under the influence of which the consumer may enroll into the debt settlement program.
3. Asking consumer to maintain dedicated account if the conditions are not met - If the consumer does not meet the below discussed criteria, the firm cannot ask the person to go on maintaining a dedicated account.
  • The dedicated account will have to be maintained at a financial institution (insured)
  • The consumer will own the funds
  • The consumer will have the option to withdraw funds (sans penalty)
  • The institution cannot have affiliation with settlement company and
  • The institution cannot barter the referral fees with the settlement company and vice versa
Now, if the debt settlement agencies fail to follow the above prohibitions, and if you are a victim of the same, you can file complaint with the FTC. In such cases, the debt settlement companies will be required to pay fees in the form of fine.

The investigations made by FTC can pertain to only a single company or may be even the whole of the debt settlement sector. If the investigation done on the debt settlement company shows that the firm is at fault, the Federal Trade Commission may try to find out if they can get voluntary consent from the guilty through the usage of the consent order. After this, the FTC is going to file a complaint; mainly an administrative one. On the other hand, the FTC can also start a federal litigation against the debt settlement firm. This litigation or lawsuit is in general known as or referred to as the debt arbitration process.
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