Credit Debt Negotiation Services - How Does The Debt Settlement Industry Work?

Feb. 15, 2011 - PRLog -- Credit debt negotiation services are very popular because they do not only help the consumers to get out of their unsecured loans but at the same time, they also manage to hold the FICO score of the consumers at original level. Of all the available relief methods, the option of debt settlement is the best that the consumers can avail. This method is cheap, fast and reliable. But how does the debt settlement industry work? The FTC regulation changed the mode of operational methods for the settlement industry.

Before FTC regulation:

Before the FTC legislation was implemented, the settlement firms first attracted the consumers by marketing. They made promises to the consumers and when the consumers approached the firms, the professionals from the firms actually spoke to the consumers to find out what exactly they need and when the approach of dealing with the creditors was finalized, the firms asked for advance fees. The fee was used to cover the expenses involved in the negotiation process. Once the consumers paid the fees, the firms initiated the negotiation process and tried to eliminate the liabilities of the consumers by certain percentage. Upon completion of negotiation, the consumers paid the amount of money that was not forgiven by the creditors and move out of debts.

After FTC regulation:

Before the FTC regulations came in some fraud firms cheated the consumers by taking advance fees and then not helping the consumers. This forced the FTC to come up with a legislation where advance fees collection was prohibited. Thus, after the FTC regulation, the debt settlement industry had to change the line of action. Now when the consumers approach the settlement firms, the professionals work out the best option for the consumers and when the mode of approach is confirmed, the negotiators initiate the negotiation process. The settlement firms bear the expense of negotiation from their own money and they are also instructed to make sure that they eliminate at least 35% of the dues. When these happens the consumers pay the remaining amount of the money to the creditors and move out of their debts. When the consumers are debt free, the pay the service fee to the settlement firms.

The new FTC legislation forced the fraud companies to wind up their business and leave the industry. This gave the legit firms to operate properly and help the consumers with their liabilities. The consumers are now sure that they will get genuine help against their money. This is how the debt settlement industry works.

With the new FTC laws recently passed, debt settlement is a legitimate alternative to filing bankruptcy. Creditors are ready to negotiate and now you won't have to pay a fee unless your debts actually settle.
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