What Information Must you Disclose to Customers according to the Telemarketing Sales Rule?

What Information Must you Disclose to Customers according to the Telemarketing Sales Rule?

If you provide debt relief services, the new Rule lays out several key pieces of information you must disclose both truthfully and clearly and conspicuously – either orally or in writing – before people sign up for your services. The “clear and conspicuous” standard means that information must be presented in a way that average consumers would notice and understand. Burying required disclosures in a lengthy fine-print contract, disclosing them in a hard-to-read block of text, or including them in a rapid-fire oral presentation isn’t sufficient to meet the standard. The Rule isn’t specific about type sizes, and it gives some flexibility on how to convey the information, but it’s very clear that you must communicate certain disclosures as effectively as you communicate your sales message. Read Complying with the Telemarketing Sales Rule for more on how to make your disclosures clear and conspicuous.

Under the existing disclosure requirements of the TSR – which now apply to your in-bound calls – and a new provision of the Rule, you must disclose key facts to consumers, including:

  1. How much your service costs and other important terms. Before someone signs up for your service, you must disclose all fees. If you charge a specific dollar amount, you must disclose that amount. If you charge a percentage of the amount a customer would save as a result of your program, you have to disclose both the percentage and the estimated dollar amount it represents for that customer. In addition, before someone signs up, you must disclose any material restrictions, limitations or conditions on your services. If the sales presentation includes a statement about your company’s refund policy, you must also include a clear and conspicuous disclosure of all terms and conditions of the policy. If you don’t give refunds, the Rule requires you to tell people that before they sign up for your service.

Example 7: A debt settlement company, Company G, charges a service fee of 10% of any debt reduction it gets for its customers. Adam signs up for the program with a single credit card debt of $5,000. Based on its experience with that credit card company, Company G estimates it can settle Adam’s debt for $3,000 – a reduction of $2,000. Under the new Rule, before Adam signs up for the program, Company G must disclose that it will charge him 10% of the amount of debt reduction, or an estimated $200 (10% of $2,000).

  1. How long it will take to get the advertised results. You must tell your customers how long it will take for them to get the results you represent. For example, if your service includes debt settlement, you must give a good faith estimate of how many months or years the customer will have to wait before you’ll make an offer to each creditor that’s likely to result in a settlement. You have to have a reasonable basis for any statements you make – for example, you can base your estimates on your experience with previous customers. Be precise: If you have experience with certain creditors, your estimate must reflect that experience. Your estimate should take into account the circumstances of each customer, and the results achieved by customers in similar circumstances.

  2. How much money a customer must save before you’ll make a settlement offer to creditors. You must tell potential customers how much money or what percentage of each outstanding debt they must accumulate before you’ll make an offer to each creditor that’s likely to result in a settlement. If you’re estimating, you must have a reasonable basis for your estimate. For example, if someone owes $10,000 to a creditor and your data shows that this creditor is likely to settle the debt for $6,000, you must tell the potential customer before he or she signs for your program that he or she will have to save about $6,000 to settle the debt.

  3. The consequences if the customer fails to make timely payments. If you ask your customers to stop making timely payments to their creditors – or if your program relies on that practice – you must tell them about the possible consequences of doing so, including:

  • damage to their credit report and credit score;

  • that creditors may sue them or continue with the collections process; and

  • that they may accrue new fees and interest, which will increase the amount they owe.

  1. The customer’s rights regarding dedicated accounts. If you ask or require your customers to set aside funds, first you must make sure the funds are in an account at an insured financial institution. Next, you must disclose that:

  • the customer owns the funds held in the account;

  • the customer may withdraw from your service at any time without penalty; and

  • if the customer decides to withdraw from your service, he or she will get back all the money in the account other than fees you earned in compliance with the TSR.

 

For more information, see here:  https://www.ftc.gov/tips-advice/business-center/guidance/debt-relief-services-telemarketing-sales-rule-guide-business

 

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