Have you received a “personal and confidential” notice in the mail from the “debt resolution department” at a California law firm offering to help you restructure a debt. Does the letter urge you to call a toll-free number as soon as possible if you wanted to take advantage of the offer?
Such advertisements for debt resolution services are common these days, and government officials and consumer groups have increasingly raised questions about many of them.
In recent years, as consumers have gotten themselves into more debt, for-profit debt settlement, management and negotiation services have popped up to help those in debt lower their payments, interest rates or fees; extend the terms of their loan with new payment plans; or pay off the debt with a lump payment.
But often, according to the Consumer Federation of America, the firms ask for upfront fees without delivering their promised results or don’t disclose what effect the services may have on credit scores or debt collector calls, misleading consumers and leaving them worse off.
“People are given false hope,” says Steven Peck, a California business attorney located in Van Nuys, California. “The Federal Trade Commission is holding hearing related to the misleading of consumers concerning this issues” Peck says.
How to Handle Debt Resolution Services
The proposed rules currently include bans on both taking fees in advance of successful results and misrepresentations about how the service works and what consumers can expect. The proposals would also require disclosure about service costs and time necessary to achieve results. In addition, the rules say the firms must tell consumers that they may still be contacted by debt collectors. The rules would apply to both sales calls from debt relief services as well as calls consumers make to such services in response to advertisements.
If you’re in debt, instead of making such calls initially, it is recommended that you first contact your creditor to see if you can work something out yourself (ask customer service to be connected with someone who can help you renegotiate). “You may be able to resolve the problem yourself,” Peck says.
If that doesn’t work, check the National Foundation for Credit Counseling’s Web site to find nonprofit members in your area who may able to help you determine if you qualify for a debt management plan that could help rework payments for a nominal fee. Such nonprofits are governed by federal legislation.
Finally, if a debt resolution service is your only option, Steven Peck suggests looking for firms that “charge based on success” or just charge a small fee. Also, check with a state or local consumer protection agencies to make sure that the service’s advertisements meet any state regulations that may exist. To see if there are complaints about the firm, check with the local Better Business Bureau and sites like Ripoff Report.
Readers, how have you found ways to renegotiate or lower your debt?
As for notices received by clients’ unsolicited in the mail, our offices called the firm to find out where the information about my debt came from. An operator and a debt manager I spoke with said it came from public records that might have inaccurate information and that we could just “shred” the notice if we didn’t have the debt.
Be very careful of those “upfront retainers”. Should you have any questions about debt renegotiation or other business law matters please contact Steven Peck’s Premier Legal toll free at 1.866.999.9085 or contact us on-line at www.premierlegal.org.
About the Author
Attorney Steven Peck has been practicing law since 1981. A former successful business owner, Mr. Peck initially focused his legal career on business law. Within the first three years, after some colleagues and friend’s parents endured nursing home neglect and elder abuse, he continued his education to begin practicing elder law and nursing home abuse law.