In 2010, the FTC banned the practice of charging advance fees imposed by many debt settlements companies. This industry change caused many agencies to leave the industry and/or change their business practices, altogether. Some modifications included partnering with law firms who claimed exemption from the FTC ruling by offering, “Attorney Model Debt Settlement.”
To date, this practice continues to fall under heavy scrutiny and attorneys are now being regulated by the Consumer Financial Protection Bureau (CFPB). New requirements outlined in CFPB Section 1002, include paragraph 15(A)(viii) providing financial advisory services to consumers on individual financial matters or relating to proprietary financial products, which include (I) providing credit counseling to any consumer; and (II) providing services to assist a consumer with debt management or debt settlement, modifying the terms of any extension of credit, or avoiding foreclosure.
This means, the “Loop Hole” in which attorneys were able to charge upfront fees within the “Attorney Model Debt Settlement” is now closed leaving debt settlement companies who are fully compliant with current regulation to be the best option for resolving debt matters.
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