In an effort to protect consumers the Federal Trade Commission imposed stricter regulations on debt settlement companies. However, now some are claiming that companies are still finding ways to bend those rules.
The regulations were implemented in the fall throughout the country. These new regulations specifically put a ban on debt-relief and settlement companies from charging upfront fees before offering any services, and using telemarketing to misrepresent the services being offered.
However, according to sources, some debt settlement companies are finding ways to still get around those rules. For example, since an upfront fee can’t be charged by a settlement company, a representative from that same company is now just claiming to be an attorney who is representing those in debt, and then saying that a retainer fee is required.
In addition, companies are also reportedly using the popularity of text messaging to find potential clients. However, now instead of calling a person at home and breaking the telemarketing regulations, some companies are going as far as to text a potential client to see if he or she would be interested in filling out a survey on how to get out of debt. Then, when these companies are questioned on the behavior, the claim is that it’s just a survey, not a telemarketing ploy.
So far, while the FTC admits that the agency has received a letter from a nonprofit organization that works with people in debt about these shady business practices, at this point the FTC has taken no taken action against those accused of bending the rules.
When the FTC started to implement these new regulations, the point was to protect consumers from questionable business practices that in some cases could result in a person actually acquiring more debt than actually getting rid of it. However, when it comes to debt relief there are many different roads a person could take that honestly could help his or her situation, which makes it important to weigh all options before jumping to a decision.
Source: Daily Finance, “How Debt-Settlement Companies Skirt the New FTC Rules,” Charles Wallace, 26 Dec 2010