Debt Consolidation Must Be Done According To The FTC Rules

Debt Consolidation Must Be Done According To The FTC Rules: When you are struggling with your debt and want to take out a debt consolidation loan to deal with them successfully, you must make sure that you do it according to the set rules and regulations. Right from choosing the debt consolidation company to the following of the specific process, everything should be in accordance to the law.

Debt Consolidation Must Be Done According To The FTC Rules

When you are looking for a debt consolidation company you must need to verify that it follows the rules and regulations. You must be wary of those organizations that:

• Charge high up-front fees or monthly fees for their service
• Pressure you upfront fees or to make voluntary contributions
• Refuse to send you information about the services they provide for free
• Ask for personal financial information such as credit card account numbers and balances
• Makes you enroll in a DMP without reviewing your current financial situation
• Offer to enroll you in a DMP without teaching you proper money management and budgeting skills and
• Demand for payments into a DMP even before your creditors have actually accepted you into the specific program.

If you want to know more about such guidelines that a debt consolidation company should follow according to the law, then you can always visit the FTC website and read the guidelines to know what is illegal. In fact, all credit companies, debt management companies and debt relief providers are legally bound to follow the FTC rules. It is therefore recommended that you only visit reliable and reputed sites such as https://www.nationaldebtreliefprograms.com/ and others to prevent ending up on the wrong side of the law.

Protect your credit

Debt consolidation will affect your credit but the way it will do so will largely depend on the type of option you choose. Remember whenever you opt for a loan or apply for a credit card there will be a few hard inquiries into your credit and this is the time when your credit score can take a dip.

Therefore, be smart to check your free credit score online before you start your consolidation plan. This will not impact your credit report card. There are several online sites that will not only provide you with such information but will also offer several other services such as:

• Free monthly credit score update
• Free credit monitoring
• Identity theft protection and
• Marketplace to find different mortgage options.

You must also know that your credit score partially depends on your credit utilization which is the amount of debt that you carry which is compared to the total amount of debt that is available to you.

• If you max out all of your credit cards then while opening a new one will increase your available debt. This means that your credit utilization ratio will go down which will in turn help your credit score.
• On the other hand, your credit score will take a ding when you carry a high balance on any one of your credit card. That means, if you transfer multiple credit card balances to one single credit card and in the process get too close to or reach the credit limit, your credit score will take a hit even if you pay off the balances on your other cards.
• Your credit score will also be affected if you want to consolidate your credit card debts by taking out a personal loan to pay them off. This is because it will result in your utilization ratio going down and thereby pushing your credit score high up. To make this work you will have to leave the credit card accounts open even after you pay the balances off.

On the other hand, your credit rating can go down if any underwriter has sufficient reason to believe that you can easily rack up new debts on the now balance-free and open credit cards. This is the case seen in most of the people and therefore is the primary concern of the underwriter.

Company rules to follow

There are several rules and regulations formulated by the FTC for all debt consolidation, debt settlement and debt relief service providers to follow. The debt relief services are for-profit companies that claim that they can renegotiate with the creditors on the amount you owe and get the interest rates reduced. This is a growing business model and the Fair Trade Commission has therefore put together the Debt Relief Rules as well and enforced it with effect from October 2010.

All these regulations are very broad and exhaustive and are aimed to restrain any deceptive and abusive practices that are usually associated with debt relief services provided by the debt consolidation companies.

• As per the law all for-profit companies are required to provide the consumers with upfront disclosures regarding the proposed fees along with their refund policies. They cannot get away now with providing vague estimates or any random potential ranges of fees. All fees proposed must be based on the real results and on experiences with the individual creditors.
• They are also required to disclose the time it would take to get through the program just like in a mortgage. This good faith estimate must be done on the basis of your debts and their ability to save you money when you settle.
• All firms must also accurately estimate the amount of money you will need to save in order to deal with your debt, especially when you want to get it settled. This figure should be based on the actual amount determined after the negotiation with your creditors or on the actual settlements made before on behalf of other clients.

Apart from the above primary disclosures, the debt consolidation and relief companies must also let you know about the following:

• The negative effect on credit
• Potential risk of lawsuits
• Possible tax consequences
• Accurate estimate of the money you can save
• The dedicated savings account to be maintained and
• Provide all agreements in writing.

When you find all these characteristics in a debt consolidation company, you can go ahead with your finance and debt management process.

from Chop News http://bit.ly/2VF7H0f