Debtors beware. Consumers should invest time researching and evaluating debt elimination or debt settlement organizations before enlisting their aid and paying the fees associated with the majority of debt negotiation programs. Many debt settlement firms offer claims bordering on unbelievable. Recent federal rules limit the bravado as well as curb fees charged by these debt management companies. Some agencies offer free credit counseling services aimed at educating consumers about the credit process.
Free Assistance
Self-help may be the first step in taking control of finances. Developing a realistic budget that lists necessary expenses, and aligning them with household income, is free. All it takes is a pencil and some paper. A household budget creates a basis for prioritizing other drains on finances, and gives the creator an opportunity to focus on bringing debt under control. The public library offers books on budgeting, and there are free, online sources as well. If the consumer finds it impossible to stick to a budget, he may investigate a credit-counseling organization or a debt-settlement company, bearing in mind that non-profit or not-for-profit does not mean free.
Credit Counseling
Credit counseling may work for a consumer who cannot stick to a budget she created. Certified credit counselors discuss the entire financial picture with the consumer, and offer methods to overcome and manage overwhelming debt. The U.S. Cooperative Extension service, generally associated with county governments, may offer classes, information or credit counseling at no charge for residents. Other free counseling resources might include colleges and universities, housing authorities, military bases, credit unions and some houses of worship. If employing the services of a certified credit counselor outside of a free setting, have a clear understanding of the fee before signing a contract.
Debt Management Plans
Debt management plans should include credit counseling that evaluates an individual's debt situation. A reputable firm should offer the services of a certified credit counselor who reviews an individual's indebtedness before making a debt management plan recommendation. With a debt management plan, the debtor makes periodic payments to the plan administrator who distributes the funds to creditors in a prearranged fashion. Before committing to the plan, a debtor should verify that his creditor accepts the terms negotiated by the debt settlement company. Debt settlement firms may offer an initial credit consultation at no charge, although additional fees may apply for additional services. Have a clear understanding of any applicable fees before signing a contract.
FTC Rule
On July 29, 2010, the Federal Trade Commission adopted new rules aimed at regulating for-profit debt settlement companies and the fees they charge. The new law, which went into effect on Oct. 27, 2010, bans the collection of up-front fees and limits any payment to the debt settlement agency until the debtor has made at least one payment to the creditor. Other rules require up-front disclosure of costs and repayment criteria, as well as an option for program cancellation and refund of fees paid in advance. The FTC has the authority to impose and govern such regulations under the Fair Credit Reporting Act.
0 comments:
Post a Comment