October 27th, the 'debt setttlement' scam ends (and so do the relentless commercials)

[DainBramaged]

Consumers Face Huge Losses With Debt Settlement Firms

Consumers are being warned to exercise extreme caution in dealing with companies that offer to reduce credit card debts. The warning follows a little-noticed rule announced by the Federal Trade Commission which is likely to put many put of these firms out of business in the next few months, but only after they have collected millions of dollars in fees without providing any service.

"There's 9 million customers in these plans who are going to be hung out to dry basically," says consumer advocate Jordan E. Goodman, author of Master Your Debt: Slash Your Monthly Payments and Become Debt Free. "These firms have collected millions of dollars from people and they are going to lose the money; it's just going to be a complete disaster."

Heavy on Ads, Light on Results

Everyone has seen the ads that predominate on the Internet and on late night cable television: We can help you settle your credit card debt for 50 cents on the dollar and you can be debt free in 12 months. Some even invoke President Obama's name and say the administration included the reduction of credit card debt in the 2009 stimulus. But there wasn't any credit card bailout.

By the industry's own accounting, which it made public during hearings on the FTC rule, as few as 30% of consumers ever achieve a settlement of any kind. But they still have to pay thousands of dollars in upfront fees to the debt settlement companies.

In an effort to halt this abuse, the FTC adopted a rule on July 28 that prohibits firms from collecting upfront fees from consumers in debt settlement cases. Instead, they will have to wait until at least a partial settlement is made before collecting their fee. They will also be forced to disclose how long the process will take and the possible negative consequences of using a debt relief service.


But the new rule does not take effect until Oct. 27, and the debt settlement companies are still feverishly advertising their services and may legally continue to collect these fees until the cutoff date.

Goodman says that there is real concern that many firms will simply go bankrupt or close down because their business models depend on getting upfront fees, not waiting three or four years for a settlement.

http://www.dailyfinance.com/story/consumers-face-huge-losses-with-debt-settlement-firms/19613606/?icid=main%7Cmain%7Cdl4%7Csec1_lnk1%7C167577

[Stuart G]

1. Consumer screwed again....very sad..........nt

[zipplewrath]

2. There will still be nonprofits

It was a tad sad when this industry first cranked up. We had a nonprofit that did debt reconcilliation for basically no fee. They were effective, if a bit "brutal" at times. It wasn't easy to hear their suggestions. Their only "short coming" is that they didn't ever advise bankruptcy and really there were times that it was the reasonable solution. But then the commercial outfits showed up and they were giving the nonprofits a bad reputation.

[wellstone dem]

4. We have a nonprofit in our area too

(and it will advise bankruptcy when needed) and for years they have effectively negotiated lower interest rates, or pay offs. I will be so glad to see these scam agencies gone.

[FBaggins]

5. The reason they didn't ever advise banklruptcy...

...was that many of these firms were started by the credit card companies themselves (which is why they could almost automatically reduce some interest rates to zero - depending on the card). They had every incentive to help you work your way out of debt, but no incentive to help you declare bankruptcy.

[DainBramaged]

8. And they would get ZERO using the bankruptcy option

you bet. They would NEVER recommend that to someone who is buried in debt, they want to suck your blood until you are dust.

[MrScorpio]

3. That's my birthday

Thank goodness that I never took them up on any of their offers

[david13]

6. Finally they put the scam out of buisness. Now there are only about

200,000 other miscellaneous scams out there they should shut down.
dc

[DainBramaged]

7. I had wondered why there was such a furious wave of commercials on XM

Now I understand, They are sucking the teat of the poor consumers one last time before they go to slaughter.

[SeattleGirl]

9. Those places are disgusting. I'm glad they are cracking down

on them, and I hope they all go out of business.