$100 bills and a credit card machine.
$100 bills and a credit card machine. - 
Listen To The Story


JEREMY HOBSON: Starting today, there's a new rule from the Federal Trade Commission meant to protect consumers who are in big debt trouble. It involves debt settlement services -- companies that say they'll straighten out your credit problems for a fee. Now as Marketplace's David Gura explains they won't be able to charge the fee up front.

David Gura: Used to be, people who turned to debt settlement services had to pay them a monthly fee to try to reduce their debt. That process could take years. And trouble was, people had to pay even if there was no progress.

Gail Hillebrand: In the past, you'd pay fees, and really knock on the benefits. There's a new rule now that the debt settlement companies are not supposed to take the fees until they actually settle at least one debt.

Gail Hillebrand, of Consumers Union says it's high time companies were restricted from charging clients any money until they've reached an agreement to reduce some of what the client owes.

Jenna Keehnen heads a group representing dozens of debt settlement companies. She says the industry as a whole offers a valuable service.

Jenna Keehnen: I think it's important that people understand there's a big distinction between actual debt settlement companies and scam artists. If they're a criminal, they're a criminal regardless of the hat they're wearing.

And, Keehnen says, many small debt settlement businesses can't operate without those monthly payments.

In Los Angeles, I'm David Gura for Marketplace.