Debt Relief Act
Legislation Helps You Battle Debt

The Credit Card Debt Relief Act of 2010 passed by the Federal Trade Commission has just taken effect. It is designed to remove some of the risks for consumers when dealing with debt settlement agencies.

Up until recently, the debt relief and debt settlement industries have been rife with scams as illegitimate businesses try to take advantage of the credit crunch. This comes after the 2007 Mortgage Forgiveness Relief Act, which aimed to help struggling homeowners deal with their debts. Another bill currently up for consideration will help reduce the effects of medical debt on credit scores if it becomes law.

The law changes have largely centered around changing the way debt settlement agencies are allowed to do business. In the past, these agencies were allowed to charge fees up front before they had even shown customers that real positive results could be delivered. The claims companies can make in their marketing have also been restricted by the new laws.

Changes to the Law

With the new laws now in effect, debt settlement companies can no longer charge up front fees. This means they have to actually follow through on the promises they make in your initial consultation, and provide results in terms of reducing your debts, before you're liable to actually pay.

This makes the whole process of debt settlement easier on the consumer in a number of ways:

• It's safer, since these laws essentially eliminate scams.
• It means only the best companies who consistently get results will make a profit eventually making the choices available to the consumer of higher quality.
• Now it is easier to take a debt settlement company to court if they use unethical practices.

Essentially, the act has made it much easier and safer to use debt settlement, which is a legitimate process that has been tarnished over the years by scam operators.

The Mortgage Forgiveness Relief Act

This act was not as forgiving as the name may suggest at first. Rather than helping people save their homes, this act simply allowed for the forgiveness of taxes owed after the loss of a home to foreclosure.

Typically, when a home is foreclosed on and the mortgage debt is forgiven, that money is classified as income. That means under normal circumstances you would have to pay tax on the amount of debt forgiven by your lender. But under the Mortgage Forgiveness Act, if your debt was forgiven in the calendar years from 2007 through 2009, you don't have to pay tax on the transaction.

Medical Debt Relief Act

There is another debt relief bill currently being debated which is yet to become law. This involves outstanding medical bills which damage the credit rating of otherwise responsible credit users. Unpaid medical bills can lead to a lower credit score, which in turn makes various other borrowing more expensive. Consumers with low credit scores are forced to accept higher fees and interest rates.

If the new bill becomes law, outstanding medical bills which are resolved will be removed from your credit report in 45 days, rather than the current 7 years.