According to debt.org, it is no secret that debt is now one of the most prevailing issues for millions of people in America, as more than 120 million Americans today deal with credit card debts spearheaded with outstanding credit card balances. With the ever-evolving interest rates along with the never-ending escalation in the housing, medical and other utility costs, more people are looking for debt relief programs. There are particular debt relief agencies or companies in the finance domain that render services in debt relief which deals with resolving debts for the clients and providing them with lower monthly payments.
Needless to say, when you hear such claims in the market, a part of you think that these are true, while the other part acts skeptical. There are certain agencies that run scams in the name of debt relief options, particularly debt consolidation and offer you debt management instead with a hefty upfront fee. However, opting for debt consolidation company that works under the bright daylight complying with the law and following the ethics is a great option especially when you are dealing with multiple debts at the same time.
Here is a guide that will help you in learning what to look in a debt consolidation company, the laws guiding debt consolidation and what to avoid.
What Is a Debt Consolidation Company?
The professional debt consolidation companies in the U.S. offer services in debt relief by helping you to combine your multiple loans and provide you with a new loan at a lower rate of interest. Such a program serves as an effective alternative to other solutions such as credit counseling, debt management, and debt settlement. Apart from that, when you work with a reliable debt consolidation firm, there is likely to get an expert’s help in negotiating with your creditors and resolve debt in a much effective manner, saving both your time and effort.
Debt Consolidation: FTC Rules and Regulations
FTC or the Federal Trade Commission has endowed a strict set of rules administering for-profit operating firms in the debt relief business. Also known as TSR or the Telemarketing Sales Rule, it is astutely designed to save consumers from unethical companies that appear to provide debt consolidation services. As there are many different aspects related to the laws surrounding debt consolidation, the most important TSR provisions are:
Avoid Paying Upfront Fees: Organizations cannot ask for a fee for their offerings until they have resolved the loans of the customer or provided what they had promised in the beginning. The consumer and the creditor must come to a written agreement regarding the settlement and the customer must make a single payment to the creditor prior to the collection of the fee by the debt consolidation firm.
Learning What You Are Getting: The debt consolidation firm must provide you with an overview of their offerings where they should grant information regarding how long will it take to achieve the results and what will be the estimated cost of the service along with the negative aspects of availing the program will be which varies according to the customer’s loan and credit situation.
Misleading Services: Organizations are strictly prohibited from making any sort of false claims about their programs in order to try to attract new customers. These unethical claims include their offerings and how much it costs, as well as, the overall success rate of the program so far.
Entrusting your financial future to the hands of a debt consolidation company may go wrong if they violate these rules and regulations. Hence, it is really important to rest assured of working with an organization that is known for its credibility in the market and has gained a huge debt consolidation rating.
Due to the changes laid out by the governing bodies, most of the unethical firms have fled the business. However, it is important to safeguard your financial future and keep these signs of a scam in mind when seeking assistance from a debt consolidation firm:
Guarantee to Eliminate All Your Debt
There are many questionable companies that will provide you with an assurance of paying off your debt effortlessly. However, it goes without saying that debt consolidation is an effective financial tool to get rid of multiple payments and a higher rate of interest; it is still a loan that you need to repay. A reputable debt consolidation establishment is outfitted with the motivation and desire to work hard and obtain the best result possible when it comes to client service. If you do not find a company that is being open and honest about its working procedure and results, it is a big red flag.
Claiming to Prevent Lawsuits and Creditor Calls
The beginning stages of debt consolidation are really eventful and challenging from both the ends of the company and the client. The debt consolidation program requires a great evaluation of your debts in order to combine them into one. The creditors, on the other hand, might keep calling you on a frequent basis or even threaten you with lawsuits. A professional firm will guide you throughout the procedure and address the concerns, but will never claim to prevent the collector calls or legal actions.
Advising You to Stop Interacting with Collectors
Even though it is easy and convenient for a firm to tell you not to be in touch with your collectors, it might not always be the best interest for your situation. A reliable debt consolidation firm leaves the decision up to you and they offer you guidance while communicating with the creditors. Besides, there are experts in the organization who also offer information on how to best manage any conversation you need to have with the collectors.
Finally, it is important to remember that it takes time to resolve your debts and take your finances at the exact position where you want them to be. This is largely determined with the type of debt consolidation company you work with that follows each and every rules and regulation laid out by the governing bodies.