Debt Settlement Act of 2010: A Comfort to the Debtors

The new Debt Settlement Act of 2010 was set to take care that the debtors are not baffled by the illegitimate debt settlement companies. It has given the debtors a fair chance to assay the authenticity of the company.

Americans from numerous sectors are struggling to erase overwhelming debts. However, they are unable rule out the debt horrors due to unemployment or loss of jobs. At this juncture, either they declare bankruptcy or they knock the door of a debt settlement company. Many settlement companies offer a genuine service to their consumers, while there are few fake companies who trap their consumers convincingly. In order to protect the consumers from the snare of the  illegitimate debt settlement companies, the FTC has established the Debt Settlement Act of 2010.

Debt settlement is basically a procedure to remove debts wherein the settlement company works on your behalf. As soon as you register with a settlement company, they interact with your creditors on your behalf and negotiate with them to lower the principal amount and the exorbitant rate of interest. This is a legal and recognized option to bankruptcy, giving the debtor an opportunity to evade the dire consequences of bankruptcy.

Erstwhile, the debt settlement companies practiced charging a huge amount initially before providing the service to the consumers. However, it was often found that settlement companies had failed to reach the settlement successfully. Hence, a consumers were forced to pay for the commitment that was never achieved.

The Debt Settlement Act of 2010 has changed the scenario. According to the new law, the settlement companies are only allowed to collect their fees from the debtors after reaching settling the debts at a satisfying amount. The new law also requires the settlement companies to reveal themselves genuinely and prevents them from making fake demonstrations.

The new regulation therefore, protects the consumers from being victimized by the fake companies. It restrains any fraudulent companies from giving false assurances to the consumers in order to dupe them and fetching a good deal of money from them.