Posts Tagged ‘new payday loan debt consolidation laws’

New Payday Loan Debt Consolidation Laws

There are several debt relief companies out there in the market that claim to offer services that will help you get out of the vicious cycle of debts in an affordable manner. But, many of these companies are unscrupulous ones and they tray to take undue advantage of your financially vulnerable situation. The good news is that that several new payday loan debt consolidation laws have been introduced, which have already come into effect since October 27, 2010. Your awareness of these laws is very important when it comes to protecting yourself against frauds and scams. Following are some of the important points to keep in mind in this regard.

Upfront Fees Are Prohibited

As per the new laws, debt relief companies are now legally prohibited to charge their fee in advance. The laws require them to first finalize an affordable debt consolidation or management or settlement deal with your creditors successfully. Your creditors must first give written consent to the deal. Still, the fees can be charged only after the consolidation company helps you reduce your debt balances in at least one of your payday loan accounts. Besides that, the fees must not be charged in full at once. Debtors should be allowed to pay the fees in several small installments, basically in accordance with the amount of reduction in their overall debts with every passing month.

Disclosure Of How Much You Will Be Able To Save

The new payday loan debt consolidation laws have also made it mandatory for debt relief companies to disclose all terms and conditions in a written agreement in a clear language. There must not be any hidden expenses involved. This written contract must explain the amount of money you will be able to save on your debts if you sign up for the suggested plan. Any debt relief program that does not help you lower your debt balances is only going to add more troubles to the already over-filled bowl of your problems.

Explanation Of How The Plan Works

As per the new payday loan debt consolidation laws, debt relief companies are also required to explain the basic information to you on how the suggested plan is going to work. The fundamental information must include things like the total cost of the service, how much time it will take to pay off the entire debt, and how long the process takes before you see actual results. Besides that, the written agreement must also disclose things on how the plan is going to affect your credit. In general, debt consolidation plans damage your credit, but there are still several ways that can actually help you rebuild your credit through such programs. Debt relief companies are required to explain it clearly in their agreement how they are going to protect and improve your credit situation through their services.

No More Dedicated Saving Accounts

The new payday loan debt consolidation laws have also prohibited debt relief companies from creating dedicated saving accounts for you. Earlier, they would create these accounts, where the debtors are required to deposit a certain amount of money every month, but they would not have an option to withdraw money from these accounts (in fact, their access to their accounts would be completely restricted). This method is now prohibited under the new laws. The debt relief companies are allowed to create such accounts for you but they must meet certain conditions. For example, they must provide you complete access to these accounts. You must be allowed to withdraw money from it as and when you need. No penalty fees should be charged for such withdrawals. Most important, these accounts must be created with an FDIC-insured financial institution.

Awareness of these new payday loan debt consolidation laws will definitely help you make an informed decision when it comes to choosing the best debt relief program that makes the right fit for your specific debt situation.

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