The Federal Trade Commission issued stringent new rules cracking down on the burgeoning debt-relief industry on Thursday, saying it too often charges consumers hefty upfront fees but fails to reduce the amount of money they owe creditors.

The new regulations prevent any for-profit debt-relief company from collecting advance fees as of Oct. 27, a significant victory for consumer advocacy groups that have lobbied extensively over the past year for tighter oversight of the industry. Starting Sept. 27, it also requires companies to disclose how much the process could cost and how long it may take consumers to see results. The FTC also set new rules for creating and managing the accounts consumers use to save money to pay off debt. Advertising claims were also restricted.

The moves are aimed at a new sector of the debt-relief industry known as debt settlement, which promises to negotiate with creditors to lower the amount of money consumers owe. Other programs, such as credit counseling and debt management, negotiate only the terms of the loans, not the principal debt. But consumer groups criticized debt-settlement companies as having low success rates, high fees and rampant fraud.

In announcing the regulations, FTC Chairman Jon Leibowitz said debt-settlement companies used "a business model based on deceit" and pledged to enforce the rules aggressively. He was joined by Vice President Biden.

"We can significantly help the bottom line of the middle class by protecting them as consumers," Biden said.

But a trade group representing the industry said the new regulations are so strict that many debt-settlement companies will probably go out of business. Almost all rely on advance fees to cover the cost of acquiring new customers and managing their accounts before the debts are settled, said David Leuthold, executive director of the Association of Settlement Companies.

The settlement association has about 170 members, but Leuthold estimates there are 1,000 debt-settlement companies across the country. The average customer has about $30,000 in credit card debt. These borrowers cannot afford a debt-consolidation plan but do not qualify for bankruptcy, Leuthold said.