Struggling with credit card bills?

If so, you’ve probably noticed TV or radio ads by companies promising to reduce or eliminate debt. These companies will come under new regulations starting next week.

SOME BACKGROUND

Debt settlement companies often charge an up-front fee to negotiate with creditors on behalf of customers. Since the start of the recession, the Better Business Bureau has received more than 3,500 complaints about the industry.

WHAT’S NEW

Starting Monday, companies will be required to disclose information including how long it will take to get a deal, how much it will cost and any negative consequences that could result from the process. For example, customers may go deeper into debt or be sued by creditors if interest and late fees continue piling up as they wait to reach a settlement.

Customers are also often required to start setting aside money in a separate account maintained by the debt settlement company.

This money is intended to eventually pay off any remaining debt. Under the new rule, companies will only be able to require such an account if it’s maintained at an independent financial institution under a customer’s name.

The flagship new regulation, which bans companies from charging a fee until debt has been reduced, settled or renegotiated, goes into effect Oct. 27.

WHAT TO WATCH

The Federal Trade Commission’s new regulations apply to companies that sell services over the phone. The FTC says most of the industry will be covered since companies typically advertise a phone number in TV and radio ads for customers to call.

The rules do not apply if the initial contact is in person or if the services are rendered entirely online.

Also keep in mind that the Better Business Bureau suggests borrowers first try contacting lenders directly to negotiate debt.

Borrowers can also seek help from nonprofit credit counseling centers, which typically charge small fees for helping you manage debt.