More and more consumers are opting for debt settlement as they are wrestling with their debts. Debt settlement is usually opted for when you fail to get the desired results from debt consolidation or you have not qualified for bankruptcy. Filing bankruptcy has become increasingly difficult after the new federal bankruptcy laws were introduced in 2005.

In debt settlement, the amount you owe is greatly reduced and if the debt settlement company you are hiring is capable enough, the amount you owe can get reduced by as much as 40% to 60%. A debt settlement company has always acted as the Good Samaritan but lately the Federal Trade Commission; state attorney generals have received several complaints against debt settlement companies.

The common complaint against these debt settlement companies is that these companies charge very high upfront fees and before they can deliver what they have promised, they want to get paid for the services. If a debtor is enrolling for debt settlement, the company helping the debtor in settling the debts has to be paid when the debtor signs up for the program. Alternatively, the debtor can make the payment when the program kicks off. However, the payment has to be made during the first few months of the program.

The incidence of dropouts of such program is also high. So, a debtor may have to shell out the entire money even if he drops out in the middle of the program. In order to do away with such anomalies, bill AB350 that is expected to regulate the modus operandi of debt settlement companies in California is “moving closer to passage”.

As far as paying upfront fees is concerned there is a “twist” in the bill which says “The provider