Newspaper article The Florida Times Union

New FTC Rule Offers Help for Some Beleaguered Consumers

Newspaper article The Florida Times Union

New FTC Rule Offers Help for Some Beleaguered Consumers

Article excerpt

Byline: David Bauerlein

Consumers who hire debt relief companies have some new protections against businesses that promise to help but fail to deliver.

A new Federal Trade Commission regulation bars for-profit debt relief businesses that sell services over the telephone from charging up-front fees to customers.

Instead, the business cannot collect fees until the business is actually successful at settling or reducing the consumer's unsecured debt, a category that mainly applies to credit card debt. The fees cannot be charged until the consumer agrees to a payment plan with the creditor, and the consumer makes at least one payment to the creditor under the terms of agreement negotiated by the debt relief business.

Martha Cox of Family Foundations, a Jacksonville nonprofit that provides credit counseling, said the federal ban on advance fees will help curb the horror stories of consumers who are contacted by telephone, pay advance fees in hopes of relief from credit card bills, and get little or nothing in return.

"When people are in these situations, they are desperate and they hear what they want to hear," Cox said. "There are numerous cases where people shelled out thousands of dollars and the companies just disappeared."

The FTC regulation took effect on Wednesday. It isn't retroactive to consumers who previously enrolled in debt management plans with for-profit businesses that use telemarketing to sign up customers. The FTC is not applying the ban on advance fees to businesses that market tax-debt relief services. The FTC says it is considering questions from those tax-debt relief businesses about whether the ban should apply to them.

In addition to the FTC regulation, Florida residents have another consumer safeguard when they sign up for debt management services. According to state law, Florida residents cannot be charged more than $50 for the initial consultation and account set-up. …

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