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The FTC's stringent monitoring of debt settlement firms

People who are trying to settle their debts often approach debt settlement agencies that claim they can help customers eliminate debt. Such agencies will negotiate with creditors and reduce the amount of money that a customer owes them by as much as 30 to 70 percent of the debt.

Although there are legitimate companies that offer such services, the Federal Trade Commission has issued warnings against several companies that indulge in fraudulent activities related to debt settlement.

Contrary to popular belief, there is no solid evidence to prove that debt settlement companies are effective at convincing credit card companies to accept partial payment of a debt. Even if they succeed in doing so, their client must adhere to paying their creditors every month. However, it can take several months or even years before such firms are able to negotiate with a client's credit card company.

Additionally, if the client stops making payments to the credit card company in the meantime, the credit card company will often add interest and late fees to the debt each month. The customer may eventually realize that the debt has now doubled or even tripled!

In recent years, debt settlement and debt settlement regulations have come to the public's attention. Since October 2010, companies that offer debt relief services are required to first settle or reduce a customer's credit card or other debts before charging them with any kind of fees.

These companies are also required to disclose information, such as the amount of time that it will take before a customer sees results, the cost of doing so and any negative consequences that might occur before the customer registers for any such service. Recently, the FTC charged two debt settlement companies with fraudulent and deceptive practices.

Source: TNCourts.gov, "Debt Consolidation and Settlement Firms: Governing Laws and Issues," J. Bennett Fox, Jr., accessed May 22, 2015

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Kenneth C. Rannick, P.C.
4416 Brainerd Road
Chattanooga, TN 37411

Phone: 423-954-7180
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