If you have ever seen or heard ads promising to rid all your debts without damaging your credit and thought these offers sounded too good to be true, that's because they are.
No legitimate debt relief company can promise to get rid of your debt without damaging your credit since debt relief options like settlement will always cause some damage to your credit.
This is due to the fact that you must stop paying your creditors for around six months before you can settle your debts, resulting in credit damage from late payments. FTC compliant companies will not claim to get rid of your debt while maintaining your credit score.
How Do I Find A Legitimate Debt Relief Company?
If you are struggling to pay off your credit cards and other unsecured debts, it's important to work with a legitimate debt relief service. With so many companies out there, it can be hard to tell the difference between con artists and a real debt settlement service.
In October 2010, the FTC released the Debt Relief Rules -- a series of regulations put in place to stop deceptive practices in the debt relief industry.
If you are looking for an FTC compliant debt relief company, there are some key factors to check:
- The difference between an FTC compliant debt relief company and regular debt relief companies is the level of honesty they offer and how upfront they are with pricing and terms.
- You should be able to have a free consultation and no obligation debt analysis.
- FTC compliant companies are upfront about personal bankruptcy laws, such as why it is harder to get rid of your debts through bankruptcy.
- FTC compliant companies will be upfront that you will need to have a strong commitment to successfully settle your debts.
- FTC compliant companies will not charge upfront fees.
- FTC compliant companies can't make guarantees on how much money you save and how much debt you receive. However, they can give you a rough estimate of how much you will save with debt settlement.
- They will let you know that you only have to pay once a settlement has been reached. Debt settlement firms can only collect fees when:
- The debt relief service has settled, reduced, or changed one of the consumer's debts
- A written agreement has been laid out and the consumer agrees to it
- The consumer has made at least one payment to their creditor as a result of negotiations
- An FTC compliant company must disclose their proposed fees and refund policy. These fees are based on results they have gotten with creditors and are based on real results, not just the best ones.
- You can check a company's accreditation to ensure they are fully compliant with the FTC final TSR rule 16.C.F.R. Part 310. This lets you know that the company only collects fees when all your debts have been settled with your creditors. You should also receive a link to the new FTC law.
- They should inform you of the time it takes to complete their program.
- You must be informed of how much you have to save in order to settle. These numbers are based on previous settlements made with clients.
- Companies must inform you that debt settlement has a negative effect on credit and that you could face potential lawsuits and tax consequences.
- FTC compliant companies should let you know the odds of successfully completing their program. Around 60% of clients leave the program before completion.
- Your savings must be held in an insured financial institution. These funds include accrued interest and they are owned by the consumer, which means you can withdraw funds anytime without penalty. The provider doesn't own, control, or have any kind of affiliation with the company administering the account. Additionally, the provider doesn't exchange referral fees with the company administering the account.
- Debt relief companies that don't follow these regulations can be reported to your state attorney general's office or have a complaint filed against them with the FTC.
If you're ready to take the first step into relieving your debts and you're looking for an accredited and FTC compliant company, you can find our recommendations for the top debt relief services here.
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