During a Middle Class Task Force meeting last week, Vice President Joe Biden and Chairman of the Federal Trade Commission Jon Leibowitz revealed new rules that protect consumers from unfair practices in debt-relief services.

The rules, which will take effect Oct. 27, 2010, will require companies that sell debt-relief services over the telephone to no longer charge a fee before they settle or reduce a customer’s credit-card, or other unsecured, debt.

“At the FTC, we strive every day to make sure America’s middle-class families get straight deals for their dollars,” Leibowitz said. “This rule will stop companies who offer consumers false promises of reducing credit-card debts by half or more in exchange for large, up-front fees. Too many of these companies pick the last dollar out of consumers’ pockets – and far from leaving them better off, push them deeper into debt, even bankruptcy.”

According to FTC, the rules specify the companies cannot collect fees until the debt-relief service successfully renegotiates, settles, reduces, or otherwise changes the terms of at least one of the consumer’s debts, there is a written settlement agreement between the consumer and the creditor and the consumer has made at least one payment to the creditor as a result of the agreement negotiated by the debt-relief provider.