The Federal Trade Commission issued its final rule on debt relief firms Thursday, banning those that engage in telemarketing from collecting advance fees from customers. The rule will come into effect in October of this year, and it should help protect consumers who are trying to get out of debt from some of the industry’s less savory practices.
Debt relief firms may now only charge fees in one of three circumstances: If the company manages to renegotiate, settle, reduce or change the terms of at least one debt; if the consumer and the creditor are able to reach a settlement; or if the consumer makes at least one payment under an agreement negotiated by the firm.
Debt relief firms are now also prohibited from "making misrepresentations," and they will have to disclose certain facts, such as how long it will take to see results from the settlement and the potential consequences of enrolling with a debt relief firm.
While debt relief firms remain a competitive option for consumers working to get out of debt, some of the abusive practices at the less savory fringes of the industry will now be banned. "At the FTC we strive every day to make sure America’s middle class families get straight deals for their dollars," said Jon Leibowitz, the commission’s chairman.