A debt professional is beneficial for people who need help when it comes to getting out of debt. While there are debt relief programs that you can do on your own, some people prefer to spend on experts who can do the legwork for them. That way, they can concentrate on growing their income to raise more funds to pay off what they owe. In some cases, a debt expert proves to be very useful in negotiating and communicating with creditors and lenders. If the consumer is intimidated because of their inability to contribute to their outstanding balance, a debt professional can take over for them.
Having someone who knows what they are doing is a great comfort for people who are struggling to manage their finances. Sometimes, all you really need is a little push and someone to tell you where you should go so you can continue by yourself without getting lost.
When hiring a debt expert
But while a debt professional is helpful, you need to exert extreme caution in selecting who you will trust to aid you. There are debt relief laws that you need to know if you plan on hiring an expert that will not run off with your hard earned money without improving your debt situation.
Thankfully, the government took steps to help protect the average consumer from illegal debt relief companies. The laws are already in place – you just need to research about them. There are many laws that you need to know about that protects your right as a consumer. The knowledge of these will really keep you from more trouble in the future.
When it comes to hiring debt relief professionals, what you need is knowledge of the Telemarketing Sales Rule or simply TSR. It has to be noted that the TSR is mostly applicable to for-profit debt relief companies.
3 rules that debt relief companies must follow
There are three important rules that legitimate debt relief companies must follow.
Rule 1: No upfront fees
The Federal Trade Commission or the FTC strictly prohibits debt relief companies from asking for upfront fees. These are the fees that they ask from you even before they have done anything to help you out. If the company you are talking to starts mentioning upfront payments, you’d better forget about them. No legitimate company will ask this from clients. They are, however, allowed to ask you to set up an escrow account. That way, both of you will be protected. The only time they are allowed to get any payment from you is when they:
have submitted a plan or agreement that is beneficial to the consumer. It can be a debt management plan or even a settlement agreement – whatever is applicable.
have proof of a successful negotiation with at least one credit account of the consumer.
have proof of one payment towards the creditor in accordance to a plan that the consumer is aware of and has previously approved.
It is also stated in the TSR that debt professionals can only charge you with service fees if the debt payments have begun to take effect. Also, the fees must be proportionate to the debt or settled amount. This is probably why some companies charge fees in percentage form.
Rule 2: Honest representation of services
Debt relief companies are prohibited from misrepresenting the services that they will offer – not to mention the results. They must be told if the company can work on the type of debts that they owe. Not only that, the company is not allowed to advertise any promises that are actually beyond their control. For instance, promising to reduce an interest rate should not be advertised because this can only be guaranteed by the creditor – not the debt relief company. If the company publishes successful transactions with previous clients, it should always be explained that every situation is different and that the consumer must not expect to get the same results.
Rule 3 : Complete disclosure of fees and programs
The next rule that you have to understand is the transparency of the debt relief company. Everything must be disclosed during the first meeting.
All costs must be revealed from the very beginning. You have every right as the consumer to dispute any fees being charged to you if it was not discussed previously. And not only that, any fee that you have to pay must be explained by the debt professional.
Length of program. Apart from discussing the program, you have know how long you have to wait until you can complete the program.
Effects of the program. All debt relief programs have effects on the consumer (e.g. credit score). All of these must be declared immediately.
Account ownership. In most debt relief programs presided by a debt professional, you are asked to open an account where you will deposit the money for your debt payments. Make sure that it remains under your full control the whole time.
In case you find that the company you are dealing with violates any of these rules, you can file a complaint through the FTC.gov website.