New Legislation Reins In Debt Settlement Promises

Debt settlement companies that promise to provide relief by slashing consumers' outstanding balances in half and removing negative information from their credit reports will no longer be allowed to make such promises, due to new legislation that recently went into effect.

The Federal Trade Commission enacted new rules banning false promises and overestimations. The new rules will also require debt settlement companies to be more transparent in their dealings with consumers.

"Consumers have been led to expect that results are going to come much quicker and more easily than they do, and that draws them in and gets them to enroll," FTC attorney Evan Zullow told CNN Money. "So we want them to know how much money and time they are really going to have to invest to get those results."

Financial experts encourage consumers to seek debt relief options through credit counseling agencies, which generally charge low fees and provide educational and financial resources to individuals that allow them to improve their credit slowly. Credit counselors have also been instrumental in helping consumers establish a budget, build their savings and pare down debt.