THIS IS A VERY IMPORTANT ARTICLE.
EVEN IF YOU ARE DOING BUSINESS WITH A DEBT SETTLEMENT COMPANY THAT STATES IT IS A LAW FIRM, DO NOT AUTOMATICALLY ASSUME IT IS IN COMPLIANCE WITH THE LAW.
Debt settlement companies—which promise to negotiate with creditors on behalf of strapped consumers—are switching tactics to skirt new consumer protection rules.
The debt settlement business has boomed in recent years as more Americans find themselves unable to keep up with credit-card balances and other loans. The number of debt settlement firms grew tenfold, to about 1,000 in 2010, from 100 or so in 2007, according to estimates by Andrew Housser, an executive board member at the American Fair Credit Council, an industry lobbying group.
As the industry grew, so did the complaints. Consumers said some firms charged thousands of dollars in upfront fees and never delivered any debt relief. The Better Business Bureau has received more than 2,500 complaints about debt relief firms this year, according to Katherine Hutt, a spokeswoman. The bureau started tracking the debt relief services industry as a separate category in 2010 in response to a “significant increase” in the number of complaints it received about the companies, she says.
Hoping to stop rip-offs, the Federal Trade Commission last year barred debt settlement companies that use telemarketing from accepting upfront fees. (The FTC regulates firms that sell over the phone.) Some companies soon found a loophole, though. It remains unclear whether the rule applies to legal fees, so debt settlement firms are affiliating with lawyers to charge initial fees as high as $7,000 or more.
Read more at Buisnessweek: