A change in federal regulations regarding debt relief and settlement services intends to stave off ineffective, predatory companies from collecting money from customers.
Effective this week, new Federal Trade Commission guidelines forbid companies that solicit debt relief services over the phone from charging up-front fees until the following are completed: successfully renegotiating, settling or reducing the debt; a written agreement between the consumer and creditor being presented and agreed upon by the consumer; and the consumer making at least one payment to the creditor as part of the debt relief agreement.
While those rules are an important step, they still allow debt relief businesses that operate on the Internet to continue charging customers from the start.
?This new set of rules doesn?t do a whole lot to prevent that,? Aaron Reese, an investigator for the Better Business Bureau of Greater Kansas City, said.
More effective and urgent is a blanketing rule that forbids any debt collection business from placing a consumer?s money in a private, dedicated account while the company collects interest and fees from it.
?People would pay money before any money was actually going towards their creditors,? Mr. Reese said. ?I?ve had people who have lost their homes over it while their money is in the pockets of these companies.?
Mike Hanneman, a certified financial counselor for Apprisen Financial Advocates in St. Joseph, said he has seen many people fooled by fly-by-night debt relief companies.
?The person thinks everything is being handled correctly ... Then they find their accounts have been turned over to law firms and collection agencies,? he said.
In order for consumers not to be fooled again, it?s important to remember the new rules only apply to phone transactions.
?If they do something and it violates the rules, it makes it easier to hold them accountable. Deal with them by phone,? Mr. Reese said.
Further research always helps, including making sure a debt relief company is approved by the Better Business Bureau, such as Apprisen, which received an A-plus.
?It?s really important to look for a financial expert,? Mr. Hanneman said. ?People can call me and set up an appointment for free.?
Mr. Hanneman can be contacted at (816) 364-3337.
Andrew Gaug can be reached at andrew.gaug@newspressnow.com.
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