Beware of debt settlement companies if you are debt strapped

There are a lot of advertisements these days promising debt relief from debt settlement companies, but what do they do and are they a good idea for people in serious debt?

Debt-strapped consumers are being warned by consumer advocates that using debt settlement companies could leave them deeper in debt. The Commissioner of the Federal Trade Commission has spoken out in regard to the need for greater regulation over the debt-settlement industry. As a Chicago Tribune reporter stated, "debt settlement has brought salvation and heartbreak for troubled borrowers." This statement sums up the dangerous cycle of the industry; signing up consumers buried in debt with promises of salvation from the burdens and leaving them heartbroken, in a worse situation than before.Not all businesses purporting to help consumers manage their debt are troublesome. There are important functions that they could serve. For example, a consumer may be too timid or embarrassed to negotiate with a creditor, or be weary of the creditor retaliating against him or her by raising rates or worse. However, consumers should be aware of the possibility that a debt-settlement company can hurt more than help and should also be aware of their rights under the Fair Debt Collection Practices Act (FDCPA).The FDCPA protects consumers from certain actions by debt collectors. Many people probably do not realize that a debt-settlement company is considered a debt collector under the FDCPA. More specifically, the act covers organizations, even non-profits that counsel and assist consumers in the management of their debt by receiving payments for distribution to creditors. Consumers should know their rights and take advantage of the protections afforded to them by federal law.Attorneys tell us that under the law, debt-settlement companies are prohibited from engaging in certain activities. For example, employees of debt-settlement companies may not contact consumers outside of the hours of 8 a.m. and 9 p.m. local time. Also, they may not misrepresent or use deceit to collect the debt. There are additional measures and actions that debt-settlement companies are prohibited from undertaking as well.

In addition to prohibited actions, there is also specific conduct required under the FDCPA. Some examples of required conduct are debt-settlement companies/employees identifying themselves in every communication, notifying the consumer of their right to dispute the debt and providing verification of the debt.

Dealing with debt can be confusing and frightening for many consumers. It is important to know that people in debt have rights and protections under the law