Jul 30th, 10:39am
The U.S. Federal Trade Commission said companies helping consumers dig out of debt would be barred in the future from accepting payment in advance.
FTC Chairman Jon Leibowitz said the industry employed a business model based on deceit.
The rule change applies to for-profit, debt-relief firms and goes into effect Oct. 27, The Washington Post reported Friday.
A month before that, on Sept. 27, debt-relief companies must be up-front about the cost of their debt-reduction services and offer consumers an estimate on how long it will take to benefit from the program.
Leibowitz announced the rule changes in Washington with Vice President Joe Biden, who said, We can significantly help the bottom line of the middle class by protecting them as consumers.
David Leuthold, executive director of the Association of Settlement Companies, said the rules already catch the average consumer between a rock and a hard place, unable to afford a debt-consolidation loan, but unable to file for bankruptcy. He said many debt-relief firms would close their doors with rules that prohibit payments in advance.
