If it’s possible for a consumer to win against the battle of unmanageable debt, then the Federal Trade Commission’s recently unveiled debt settlement protections are a step in the right direction. Aimed at cracking down on debt settlement scams and better informing the consumer, the FTC is placing some pretty substantial demands on debt settlement companies that have seen business flourish since the recession hit.

Perhaps the biggest role these new laws will play in debt management is to better inform the debtor of the nature of the process. MoneyShow reported that now, “debt settlement companies will be required to make certain pre-contract disclosures, including how long it will take to get results and how much it will cost.” Translation: debtors need to be informed of the advantages and disadvantages associated with using a debt settlement company before they enter into an agreement with the company. Currently, the new laws will only apply to for-profit companies that offer services over the phone.

Starting September 27, 2010, debt companies will no longer be able to collect any fees until they make a settlement on at least one of the consumer’s debts. The consumer also must agree to the settlement in writing – a requirement which will help even those financially confused debtors get a better idea of whether the debt settlement process is the right choice in their situation.

Determining the best way to handle consumer debts can be a daunting task, and one more and more people face as the economy changes. Negotiating debt can be a great alternative to filing for bankruptcy, especially since its effects are not as lasting or serious. That being said, there are still some drawbacks to superficially promising debt negotiation solutions. The FTC’s new rules will hopefully provide some transparency to the debt settlement process and allow consumers to better educate themselves on their options before they get even deeper in debt.

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