The Credit Card Debt Relief Act

The Credit Card Debt Relief Act has been referred to in commercials by debt settlement companies and other debt counseling services, but is not an actual law that has been passed or proposed. It is sometimes used as a marketing strategy playing off the Mortgage Debt Relief Act of 2007. This law allowed people who had debt forgiven as the result of a short sale on their home to exclude the forgiven debt from their income, and save on taxes.

Premise

Advertisements for some debt settlement and consolidation companies, at one time marketed their services as if a new federal law called "The Credit Card Debt Relief Act," would allow debtors to renegotiate reductions on their credit card debts. These ads often talked about the assistance that some banks received in federal funds, and would say that this money allowed the banks to write off credit card debt. People often draw the conclusion that if the banks received help, why wouldn't the government bail out the borrowers as well?

Broken Promises

Often, these ads were just for organizations that solicit your information to pass on to potential debt settlement companies. These companies would sometimes use deceptive practices to get you to commit to using their services, such as promising that they can eliminate certain amounts of debt without any negative effects. Debt settlement companies often collected large fees before they even did anything for you at all. And using their services may result in a creditor suing you.

Government Relief

The Federal Trade Commission established rules in late 2010 that affected how debt settlement companies operate, limiting the deceptive practices that they have used in the past. Debt settlement companies now must disclose to anyone how long it is likely to take to settle debt, and how much the company will charge in fees to negotiate this settlement. Debt settlement companies can no longer charge a fee in advance, and can not charge the debtor anything until they have negotiated or settled at least one debt, or the debtor has made at least one payment on the reduced amount.

On Your Own

You can pursue debt settlement on your own without a settlement company. Contact a creditor and offer them a cash settlement for a lower amount than the balance of the debt. The creditor may accept or refuse this offer. If they refuse, you can then continue to negotiate with them, until you receive an offer that is acceptable to you both. There is no guarantee that you can settle with a creditor, but if you are not able to do so, a debt settlement company would probably not be able to settle either.