Who Must Comply with the FTC's New Telemarketing Sales Rule ("TSR")?
The TSR regulates “telemarketing” — defined in the Rule as “a plan, program, or campaign . . . to induce the purchase of goods or services or a charitable contribution” involving more than one interstate telephone call. (The FCC regulates both intrastate and interstate calling.) With some important exceptions, any businesses or individuals that take part in “telemarketing” must comply with the TSR. This is true whether, as “telemarketers,” they initiate or receive phone calls to or from consumers, or as “sellers,” they provide, offer to provide, or arrange to provide goods or services to consumers in exchange for payment. It makes no difference whether a company makes or receives calls using low-tech equipment or the newest technology. Similarly, it makes no difference whether the calls are made from outside the United States; so long as they are made to consumers in the United States. Those making the calls, unless otherwise exempt, must comply with the TSR’s provisions. If the calls are made to induce the purchase of goods, services, or a charitable contribution, the company is engaging in “telemarketing.”
Certain sections of the TSR apply to individuals or companies other than “sellers” or “telemarketers” if these individuals or companies provide substantial assistance or support to sellers or telemarketers. The Rule also applies to individuals or companies that help telemarketers gain unauthorized access to the credit card system by using another merchant’s account to charge consumers, a practice known as credit card laundering.
The new Rule applies to for-profit sellers of debt relief services and telemarketers for debt relief companies. The new Rule defines a “debt relief service” as a program that claims directly, or implies, that it can renegotiate, settle, or in some way change the terms of a person’s debt to an unsecured creditor or debt collector. That includes reducing the balance, interest rates or fees a person owes. The TSR defines “telemarketing” as a “plan, program, or campaign . . . to induce the purchase of goods or services” involving more than one interstate telephone call. Most of the provisions of the TSR apply to sellers and telemarketers, so the terms “company” and “provider” in this Guide refer to both. In addition, certain parts of the Rule apply to those who provide substantial assistance or support to sellers or telemarketers.
I operate a non-profit organization. Does the new Rule apply to us?
Bona fide non-profit organizations aren’t covered because the TSR applies only to for-profit companies. However, the Rule covers companies that falsely claim nonprofit status.
Some examples of debt relief services include:
• Debt settlement – Companies that say they can settle customers’ debts for less than the full balance.
Example 1: Company A advertises a program to help people settle their credit card debts for less than what they owe. It requires customers to set aside monthly payments as savings. Company A waits until there is enough money in the account to make an offer to the creditor or debt collector. It negotiates an offer from the creditor or debt collector to settle the debt and gets the customer’s approval. The customer pays the reduced amount to settle the debt. Company A is covered by the new Rule.
• Debt negotiation – Companies that say they can reduce their customers’ monthly payments by getting creditors to reduce interest rates or agree to other concessions.
Example 2: Company B says it can reduce customers’ credit card debt or monthly payments by negotiating with credit card companies to get a lower interest rate. After a person signs up for the program, Company B calls the credit card company – sometimes with the customer on the line – and asks for concessions. Company B is covered by the new Rule.
Example 3: Company C says it can reduce customers’ credit card debt or monthly payments by negotiating with credit card companies to get a lower interest rate. When people sign up for the program, Company C gives them a payment schedule with accelerated payments, claiming it only promised to “show” customers how they could save money. Company C is covered by the new Rule.
• Credit counseling – Companies that work as a liaison between customers and their creditors to negotiate and administer a monthly payment plan (often called a “debt management plan”) that makes it more manageable for a customer to repay the debt – for example, by lowering interest rates or forgiving late fees.
Example 4: Company D says it can consolidate customers’ multiple credit card payments into a lower single monthly payment. When a person signs up for the program, Company D works with creditors and secures an agreement to a debt management plan on behalf of the customer. As part of that plan, the customer agrees to make monthly payments to each creditor, and the creditors agree to reduce the customer’s interest rates or make other concessions so that the payment is more manageable. Company D administers the customer’s monthly payments. The customer sends the payment to Company D, which then sends the payments to each of the customer’s credit card companies. Company D is covered by the new Rule.
Even if you don’t directly sell or provide debt relief services, you may have obligations under the new Rule. Specifically, it’s illegal to provide “substantial assistance” to another company if you know they’re violating the Rule or if you remain deliberately ignorant of their actions. What amounts to substantial assistance depends on the facts. In the context of debt relief services, substantial assistance may include:
• obtaining and selling leads – the contact information of potential customers – to other companies;
• helping a debt relief company with its back-room operations, for example, by reviewing customer files, processing customers’ payments or contacting customers’ creditors once they’ve signed up; or
• offering dedicated accounts to customers where they set aside the debt relief provider’s fees and funds for payments to creditors or debt collectors.
If you work with debt relief companies, review their policies, procedures and operations to make sure they’re complying with the Rule. Willful ignorance isn’t a defense.
I'm an attorney and I provide debt relief services. Am I covered by the new Rule?
There’s no general exemption from the TSR for attorneys who engage in telemarketing. However, most attorneys are likely to fall outside the Rule for at least two reasons. First, the TSR applies only to providers who use interstate tele-marketing. Second, providers – including attorneys – who meet face-to-face with their customers before signing them up are likely exempt from most of the Rule’s provisions. Read Complying with the Telemarketing Sales Rule to see if the face-to-face exemption applies to you.
For more information see here: http://www.business.ftc.gov/documents/bus72-debt-relief-services-telemarketing-sales-rule-guide-business
These materials were obtained directly from the Federal Government public websites and are posted here for your review and reference only. No Claim to Original U.S. Government Works. This may not be the most recent version. The U.S. Government may have more current information. We make no guarantees or warranties about the accuracy or completeness of this information, or the information linked to. Please check the linked sources directly.