New rule cracks down on debt settlement industry

Companies that promise to reduce or eliminate credit card balances and other debt for customers will no longer be allowed to charge an upfront fee.

The Federal Trade Commission said Thursday the new rule is intended to crack down on the debt settlement industry, which has flourished in the downturn as borrowers struggle to pay their bills. The rule goes into effect October 27th.

Since the start of the recession, the Better Business Bureau says it received more than 3,500 complaints about debt settlement companies.