Significant changes in the Telemarketing Sales Rule recently introduced by the Federal Trade Commission will soon alter the way debt settlement companies are allowed to operate. The need for the new rules, which were specifically designed to protect vulnerable consumers, became evident last week when the FTC released a stunning 229-page report detailing the egregious behavior of many debt relief agencies.

Unfortunately, because accounts of the government’s efforts were hardly front-page news, many consumers may be unaware that the new protections won’t take effect right away. In the interim, it is expected that the debt settlement industry will spend millions more on its television, radio and Internet advertising, luring unsuspecting consumers to enroll before the first wave of new regulations takes effect on September 27th. 

The Federal Trade Commission’s report clearly illustrates the deplorable actions of settlement companies that put profit-taking before their claimed purpose of providing debt relief to financially desperate individuals. Instead, the TC found that settlement agencies frequently misrepresent their services, eventually resulting in significant financial harm to their trusting clients. The ads are tempting, and nearly unavoidable.

Last year alone, nearly 9 million Americans responded to sensational advertisements featuring video clips of President Obama, seemingly suggesting that debt settlement is a form of government-sanctioned bailout for individual consumers – it’s not. But as with any other advertising claim that appears too good to be true, repeated exposure to the industry’s messages leads millions of consumers to believe that the service is legitimate.

Before it released its new rules, the FTC performed a review of some common settlement industry claims, and it also asked the Government Accountability Office to conduct an undercover investigation of the industry. The results were disturbing.

Clients of debt settlement firms saved approximately $58.1 million, a statistic frequently boasted by industry defenders; however, those consumers paid at least $55.6 million in agency fees, virtually canceling out the savings in many cases, particularly when late fees and other charges are factored in. Another industry claim was based on a study of just 12 clients, a sampling too small to be a reliable representation of the millions of consumers who’ve enrolled with settlement firms over the last few years.

Many of the FTC’s new protections go into place on September 27, 2010, with the exception of the advance fee ban, which will take effect on October 27th. That small window of opportunity isn’t likely to go unnoticed. The settlement industry already spends millions of dollars on advertising, and it’s expected that companies will increase their efforts before they’re forced to change their business model.

To get help with your credit call 888-650-2804, a professional counselor can help get you on the right path.