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FTC Debt Relief Rules Start Today for Massachusetts Consumers

The Federal Trade Commission’s new rules aimed at protecting consumers with credit card debt starts today. This is following a federal investigation that found fraud and deception of vulnerable consumers. Massachusetts consumers seeking relief from credit card bills will benefit from the new regulations aimed at debt relief companies but may still want to consider consulting with a Massachusetts Bankruptcy lawyer before signing up. The so called “debt relief agencies” are now required to disclose all fees and their refund policies based on actual expected results. Debtors must be given a “good faith estimate” of the time it will take to complete their debt relief program. In addition, the companies are required to inform debtors of the negative impact on their credit score. Most importantly perhaps is that the companies advertisements must be accurate with respect to how much savings their clients received.

Just so it is clear, these “agencies” are really companies that offer services to debtors. Historically, over 60% of the consumers who signed up for these programs dropped out. The new rules are aimed at protecting the debtors who are often overwhelmed with debt and other personal issues. Many of these companies sell their services over the telephone; their print, radio and television ads have been found to be misleading. The new law prevents them from charging a fee before they settle or reduce a debt.
This part of the law actually does not go into effect until October 27, 2010. The rest of the law, as mentioned above, requires disclosures that are more accurate than they have been historically.
The law also requires the companies to put any advance payments into a “dedicated” account in a federally insured financial institution. Further, the consumer will own the monies in that account, will receive interest, if any, and may withdraw the funds at any time. The debt relief company may not have an association with the bank. We will see how this new law helps, and will continue to aid our clients who need a fresh start through bankruptcy.