The debt settlement industry has recently gone under a radical change. I believe the change is good for consumers. As of October 27, 2010, the entire industry has essentially been regulated by the FTC. I see this as a good thing, as it will help keep some of the more undesirable characters out of the industry.
Prior to October 27, 2010 the settlement industry was not regulated at all which led to a lot of conmen telling people they could settle their debt, charging a huge upfront fee, and then not doing any work at all and keeping the money. Talk about kicking a guy when he’s down!! That’s not to say everyone who was in this industry was a scam, but consumers became very leery about who they did business with, and rightfully so! So the good news is that there is finally regulation in the debt settlement industry, and a lot of the bad guys have gone away.
The new law from the FTC states that any company or persons who are attempting to negotiate a debt for an individual may not charge ANY fees until they have settled at least one account for the individual.
So the new FTC law basically prevents a settlement company from charging any fees until they settle a debt. That means a settlement company must do the work for the client first! It also means they must work for free for the client until a settlement is made. For most people joining a program the first settlement isn’t made until about the 6th month. How many people do you know who will work for free for 6 months?
So now rather that work for free for 6 months, a lot of settlement companies have joined up with law firms in order to get around the new law. How you ask? These companies charge an attorney retainer. The FTC can’t regulate attorneys fees, so now you will still wind up paying upfront, but it is for the retainer, not for the fees.
No matter what anyone tells you, you do not need to have an attorney to negotiate your debts.
However if you do hire an attorney to negotiate your debt, you need to check your contract for one thing. You need to make sure if your creditors do take you to court that the attorney you are hiring will represent you in court.
That means you should only hire an attorney to negotiate your debts if that attorney is licensed in your state!
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