Debt Relief Services & the Telemarketing Sales Rule: A Guide for Business
July 2010
In July 2010, the Federal Trade Commission (“FTC”) released a guide to help businesses understand the application of the Telemarketing Sales Rule (“TSR”) to debt relief services. Many consumers struggling with credit card debt seek assistance from companies that offer to renegotiate or lower their debts. In response to deceptive practices in the debt relief industry, the FTC amended the TSR to expand protections for consumers.
The key changes introduced by the amendment address both outbound and inbound telemarketing calls, meaning debt relief businesses must comply with the TSR whether they initiate calls or receive them from potential clients in response to advertisements. One critical change is that debt relief companies are now prohibited from charging upfront fees before successfully resolving or renegotiating a consumer’s debts. Fees can only be collected once the debts have been settled, and if multiple debts are renegotiated, fees can be charged for each one, though payments cannot be front-loaded. Companies may require customers to set aside funds in a dedicated account, but strict rules govern these accounts to protect consumers.
The new rule also mandates that businesses must provide clear and accurate information to potential customers before they sign up for services. This includes disclosures about the duration of the debt resolution process, potential costs, and the risks involved. Additionally, the rule prohibits businesses from making false or unsubstantiated claims about their services.
The guide serves as a supplement to the FTC’s broader publication on complying with the TSR, offering businesses detailed advice on adhering to the new rule, including who is covered, what information must be disclosed, and the proper handling of fees and dedicated accounts. It also emphasizes the importance of recordkeeping and best practices for compliance. The FTC’s staff views are outlined in the guide, although these views are not legally binding.
For more information, see here: https://www.ftc.gov/tips-advice/business-center/guidance/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. These may not be the most recent versions. 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.
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