New Protection from Up-Front Debt Settlement Fees

There is a new Federal Trade Commission (FTC) rule prohibiting debt relief firms from collecting up-front fees. Most companies selling debt relief services over the telephone are no longer allowed to charge a fee before settling or reducing a consumer’s credit card or other unsecured debt. Under this new rule, debt settlement companies must provide consumers with agreements from creditors indicating how much their debt will be reduced. If a consumer gives consent to move forward, then a debt settlement company may charge a fee for their services. The rule, however, does not apply to businesses selling debt settlement services in-person. The FTC is also considering whether the rule applies to tax debt relief services.