Under amendments to the Telemarketing Sales Act that took effect October 27, 2010, debt settlement agencies that offer to renegotiate or settle consumer debts for a fee are now prohibited from collecting advance fees from consumers. Before such an agency can collect a fee, three things must happen:
The company has settled, reduced, renegotiated or otherwise changed at least one of the consumer's debts.
There is a written agreement between the consumer and the debt settlement agency.
The consumer has made at least one payment under the terms of the negotiated or changed agreement with her creditor.
This law applies to credit card or other unsecured debt, and is not applicable to companies that claim to renegotiate mortgage loans.
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