Debt Laws Require A Dedicated Account And Keeping Proper Records

Under the new debt law, you are required to set aside some amount of money in a separate and dedicated account if you want to take up any debt relief services for dealing with your debt or debts. This will help you to ensure that you have the required amount of money as and when it is required to pay for the service fees of the debt relief company as well as have the required funds to pay off your debts.

However, the law also states that when you create such a dedicated account, no company or an individual can influence you. It is up to you to decide where and how you will create such an account. There are a few requirements of the law that you must meet with when you create such an account of your choice. The law states that an account will be considered as a dedicated account for such purposes as long as:

• Such an account is held at any insured financial institution
• The holder of the account or the customer owns the funds including the interest accrued on the amount deposited and controls them enabling them to withdraw the amount any time
• The debt relief company has no interest, ownership or control on the account or the particular company administering the account ensuring that the debt relief company does not have any affiliation with it
• The customer does not split the fees with the company administering this dedicated account and
• The customer can stop working with the debt relief company at any time and there will be no penalty charged for such sudden termination of the service contract.

If you want to terminate the relationship with the debt relief company then as per the law the company is legally bound to return the money in the dedicated savings account to you within a stipulated time frame which is ideally within seven working days after informing the company about such termination of relationship. However, the law allows the company to deduct any fees that you may have earned from the account during this period.

This means that there is no rule to compel you to stick to a debt relief company that you do not like and prevent you from choosing another debt relief company providing the same services such as Nationaldebtrelief.com but in a better way.

Administering the account

To ensure that the savings account created and everything is in compliance with the TSR there will be an independent company that will administer the account. In return of such administering services the company will charge a reasonable fee from you but there are a few restrictions laid down as per the law for such companies as well.

• According to the law this company may not transfer any of the funds of the customer to the debt relief company directly or indirectly till the time the debts have been renegotiated, or settled, or reduced, or the terms are changed otherwise for at least one of your debts.
• In addition to that, the related requirements in the rule states that it is illegal for any company to provide and “substantial assistance” to another debt relief company if it is known for sure that they are violating the Rule.

There are several legal ways in which these companies administering the dedicated accounts may avoid such liability for facilitating violations or being deliberately ignorant of such actions that are prohibited as per the new rule. A few of these ways are:

• Reviewing the business policies
• Knowing about the working procedures and
• Overseeing the operations of the debt relief service companies.

This will enable them to know whether or not the debt relief providers are complying with the advance fee ban provision of the TSR along with the different provisions that are related to the dedicated accounts.

While these companies continue to administer the dedicated accounts they are also required to look into and investigate any complaints that the customers may have lodged regarding any disputed payments.

However, all such companies administering the dedicated accounts may not be subject to the jurisdiction of FTC but other laws enforced by other government agencies may still be applicable to them. A proper research and a timely consultation with a debt settlement attorney will keep you knowledgeable about these laws and its exemptions and help you in the debt management and repayment process.

Keeping proper record

It is also required under the new rule that any debt settlement, debt management plan or any other debt resolution plan provided by your creditor must be given in writing. This is important as it will help you to keep proper records of all the documents for at least two year as required by the law.

There are different types of documentations required but it usually depends on the type of services provided. A few specific examples of standard documentation are as follows.

• For a credit counseling service it is the debt management plan that must contain the new terms that are binding for both the creditors as well as the debt collectors along with clear evidence that the customer has made the first payment.
• For a debt settlement service the document is the letter or the receipt from the creditor or debt collector that states that the debt has been settled satisfactorily and the amount agreed of the payment is received. It may also include other documentation that may contain a specific settlement offer from the creditor or debt collector as well as an evidence of a corresponding payment made to them.
• For debt negotiation service it will be a written document from the creditor or debt collector that will mention that the creditors have agreed to make a concession in the form of a lower rate of interest for a credit card and a evidence that you have made at least one payment as per the new terms.

You will also need to retain documents of all fees paid to the company. Therefore, make sure that you collect copies of all paperwork as a good practice.