If you have credit problems, you may be intrigued by those ads promising to "cut your credit card debt in half,"or "slash your debt to pennies on the dollar," or "free you from the clutches of debt," yadda yadda yadda. Or, driven to insanity or suicide by your friendly mortgage servicer, you may cave and just turn the whole HAMP mess over to a smiling suit who promises you a mortgage modification with a 2% rate, a principal reduction, and a trip to Disneyland. And that's fine; these folks are still free to make all the dubious claims they want, and you are free to believe them (it's easier though after a couple of drinks).

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What these companies can no longer do, thanks to Federal Trade Commission (FTC) regulations, is charge you upfront for these services.

One of the biggest complaints against these outfits (besides the inevitable dinner-time calls) was that they made extravagant promises and then once they had extracted a sizable fee from the customer they did nothing. So now they have to do something before they can collect from you. Specifically, they have to "successfully renegotiate, settle, reduce or otherwise change the terms of at least one of the consumer's debts" before collecting anything.

But it's still buyer beware.


The FTC's new debt settlement rules cover telemarketing by for-profit debt settlement services, credit counseling services and debt negotiation companies as well as companies falsely claiming to have nonprofit status. However, the rules do not apply to in-person or Internet-only sales. Nonprofit credit counseling services are not covered in the new rules, according to the FTC.


Mortgage modification scammers also run out of town.


The LA Times reports that the con artists who have been making big promises to desperate folks and scamming them out of big upfront payments will have to find a new business model.
Under new rules, companies that offer mortgage relief will have to contact your lender or servicer and then furnish to you a written proposal describing the key changes to your mortgage terms that the note holder is willing to make before any money can be collected in advance.

Modification companies also will be required to make clear that they have no connection with any government agencies or program (no more of those cheesy mailers from "Federal Mortgage Modification Department"), and that you're free to reject any offer from the lender with no requirement to pay a fee.

Once the felons, scammers and dirtbags that comprise 90% of these industries go back to televangelism or fencing mufflers, the firms remaining in business might actually be able to help you.