Debt Settlement Companies Can No Longer Take Advanced Fees

Henry & DeGraaff

Over the past few years, “debt settlement” companies have proliferated to the point that one in three potential new bankruptcy clients that we see have already attempted to settle their debts with one of these companies. Most ask for exorbitant upfront fees and show little to no results.  By the time most of these clients find me they have already spent several thousand dollars in an effort to settle their debts, only to be sued in state court anyway by their credit card company.

We work hard to get back all the fees that our clients have paid debt settlement companies; when we succeed, the refund is often enough to cover what the client owes us and more. Unfortunately, it’s not always easy to recover these funds, and I can see that I will be forced to sue one of these companies in the near future. We believe that our clients should not have to pay for a solution to their debt problems twice,  and we do everything in our power to aid clients who find themselves into this situation.

On October 27, a new FTC regulation went into effect that makes it illegal for debt settlement companies to collect non-refundable advance fees before doing any work. This is actually a bit of a double-edged sword for us and our clients, as it may result in a number of these companies going out of business and make it more difficult for us to recover funds from them. Overall, though, the new regulation is great news for consumers, and we applaud the FTC for enacting it.

If you’ve already been taken advantage of by one of these unscrupulous companies and want to try to recover the funds you’ve paid them, contact us today so we can set the process in motion while the company is still around to sue.

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