Finance Globe

U.S. financial and economic topics from several finance writers.
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Debt Relief Law Offers New Protections

The Federal Trade Commission announced on Wednesday that they will be mailing 360 consumer redress checks to customers of Briggs & Baker, a company that advertised it could “drastically” reduce consumers’ credit card debt.

The FTC alleged that the company’s ads were false and misleading, and says that customers who signed up for their debt negotiation services ended up with worse credit ratings and a higher debt load. Some of Brigg’s & Bakers customers even became the target for legal action.

The refund checks being sent by the FTC are in the amount of $104.09, and consumers who receive them can cash them right away.

Consumers who have questions or believe they were victims of Briggs & Baker, but who did not receive a refund check from the FTC may contact the fund administrator at 1-866-535-1622 .

On a related note, new consumer-protection laws went into effect on Tuesday to help prevent many of the sneaky or downright dishonest tactics employed by some debt relief organizations.

Consumers in financial distress - especially those who are drowning in debt - make an easy target for unscrupulous businesses out to make an easy buck by making false promises and collecting cash before the consumer is helped even one bit.

Amendments to the Telemarketing Sales Rule now require debt relief companies to make specific disclosures to consumers such as the expected costs involved, how long the consumer can expect it will take to see results, and negative consequences the consumer can expect due to using debt relief services.

The law applies to for-profit debt relief companies that sell their services over the phone, and also applies if consumers contact the business over the phone as a result of the company’s marketing and advertising, but doesn’t cover nonprofit firms.

Credit counseling, debt settlement, and debt negotiation operations are also banned from making misrepresentations about the success rate of the program and whether the company is a non-profit agency or a for-profit business.

“At the FTC we strive every day to make sure America’s middle class families get straight deals for their dollars,” Chairman Jon Leibowitz said. “This rule will stop companies who offer consumers false promises of reducing credit card debts by half or more in exchange for large, up-front fees. Too many of these companies pick the last dollar out of consumers’ pockets – and far from leaving them better off, push them deeper into debt, even bankruptcy.”

And starting next month on October 27, 2010, other provisions in the amended law will forbid debt relief companies from charging customers before they actually do something to help the consumer’s debt situation.

Currently, many debt relief companies start charging fees before the consumer sees any progress in their debt situation. If you’re considering using a debt relief service, it may make sense to wait until the new law goes into effect to protect yourself from up-front fees.

Debt negotiation or debt settlement is not a painless way to get rid of debt. Consumers who settle may have their credit damaged, and there are tax implications of getting a creditor to take less than the amount owed - the IRS considers forgiven debts exceeding $600 to be taxable income and it must be reported on the tax return.

But for those in a truly desperate situation, debt settlement can be a better alternative to bankruptcy - it will do less damage to the consumer’s credit rating and for a shorter amount of time. (Bad credit issues fall off the credit report in seven years, bankruptcy falls off in ten years.)

And finally, remember that you are ultimately control of your own debt. Live within your means and avoid racking up new charges if debts are becoming difficult to manage. Pay off debts as quickly as possible, even it if means giving up a few unnecessary things here and there.

If you can take charge of your own debt, all the better. Why pay someone to tell you how to get ahead of your debts when you can do it on your own. Education and discipline are key.

For more reading on do-it-yourself debt management, check out the Related Articles below.

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Friday, 23 February 2024

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