The FTC and Credit Card Relief

You may not know how it happened, or even when it happened. But the fact is, you’ve lost control of your debt. You’ve heard a bit about credit card relief, but is that a viable option for you?

Let’s see what the Federal Trade Commission (FTC) says.

What Are Debt Settlement Companies?

These firms negotiate with your creditors – usually card issuers — on your behalf to get them to accept less than what you owe to settle your debt.

So that you’re able to make that payoff, the company will request that you stop paying your creditors and instead deposit cash each month into an escrow-like account. When you have accumulated sufficient funds, the company will begin making settlement offers.

Are There Risks In Debt Settlement?

Yes. It may take three years or more to resolve all your debts. So, the FTC advises that you be sure you can stick with the program – and make the payments – for that long.

You should also note that creditors are not obliged to “settle” what you owe, though many often do. Also, some debt settlement firms will attempt to negotiate the smallest debts first. In the meantime, interest and fees on larger debts continue to mount.

Since you likely won’t be making any payments on your plastic your credit score will be hit and you could be sued. While that could lead to garnished wages or a lien on your home, most creditors stand down when they learn you’re in a legitimate debt settlement program.

Watch For Scams

To be sure you’re getting a reputable settlement company, check out credit card relief services at www.freedomdebtrelief.com. You’ll see how a reputable company operates, which will help you more easily spot a disreputable one. It’s important to be aware there are scam artists out there waiting to take advantage of your financial situation and vulnerability.

Beware of companies that overpromise or “guarantee” to settle for a certain amount, or those that seek to be paid up front before they’ve performed a service. Also avoid programs that tell you they can stop all debt collection calls and lawsuits.

Do Your Homework

Check out the company you’re interested in with your state attorney general and local consumer protection agency. You can find out whether any consumer complaints have been lodged. You can also Google to see what others have said about the firms you have in mind. Finding positive reviews shouldn’t be a problem.

Fees

A firm can only charge you part of its full fee for each debt it settles. For instance, if you owe money to four creditors and the company works out a settlement with one of them, the company can only charge you part of its fee at that point because it still must negotiate with three other creditors.

If fees hinge on a portion of the amount you save through settlement, the company must disclose both the percentage it charges and the estimated amount it represents.

Disclosure Requirements

Before you commit to a plan, the debt relief company must disclose certain information including price and terms. The company must also tell you how long – months, years — it will take to get results. In addition, you have the right to know how much cash you must save before the company will go to creditors on your behalf.

The company must also explain to you the likely consequences of not making payments to your creditors, and that the funds in the savings account and any earned interest are yours. They must tell you that you can withdraw your money any time without penalty.

Now that you have the last word on the FTC and credit card relief, you can make an informed decision about whether the financial strategy is the right call for you!