FTC Telemarketing Sales Rule

The Federal Trade Commission (FTC) announces New Debt Relief Rule to Protect Financially Distressed Consumers

Amendments to Telemarketing Sales Rule Prohibiting Debt Relief Companies from Collecting Advance Fees Will Take Effect in October 2010

The following are a few points of the TSR. For the entire Telemarketing Sales Rule click here www.ftc.gov/opa/2010/07/tsr.shtm

Starting on October 27, 2010, for-profit companies that sell debt relief services over the telephone may 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," Chairman Jon 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."

On the subject of Open and Transparent: "Disclosures should be how well your company has performed with a particular creditor or their retention and completion rates. The consumer is saying, let me choose the company that gives me the best chance to get out of debt." CEO of US Debt Resolve Scott Johnson said.
Additional comments www.ftc.gov/os/comments/tsrdebtrelief/543670-00319.pdf

Three other Telemarketing Sales Rule provisions to take effect on September 27, 2010, will:

• require debt relief companies to make specific disclosures to consumers
• prohibit them from making misrepresentations
• extending the Telemarketing Sales Rule to cover calls consumers make to these firms in response to debt relief advertising

The Final Rule covers telemarketers of for-profit debt relief services, including credit counseling, debt settlement, and debt negotiation services. The Final Rule does not cover nonprofit firms, but does cover companies that falsely claim nonprofit status. Over the past decade, the FTC and state enforcers have brought a combined 259 cases to stop deceptive and abusive practices by debt relief providers that have targeted consumers in financial distress.

Advance Fee Ban

The Final Rule contains specific requirements for debt relief providers related to charging an advance fee before providing any services. It specifies that fees for debt relief services may not be collected 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, debt management plan, or other agreement between the consumer and the creditor, and the consumer has agreed to it
• the consumer has made at least one payment to the creditor as a result of the agreement negotiated by the debt relief provider
• To ensure that debt relief providers do not front-load their fees if a consumer has enrolled multiple debts in one debt relief program, the Final Rule specifies how debt relief providers can collect their fee for each settled debt. First, the provider's fee for a single debt must be in proportion to the total fee that would be charged if all of the debts had been settled. Alternatively, if the provider bases its fee on the percentage of what the consumer saves as result of using its services, the percentage charged

Disclosures and Prohibited Misrepresentations

Under the Final Rule, providers will have to make several disclosures when telemarketing their services to consumers. Before the consumer signs up for any debt relief service, providers must disclose fundamental aspects of their services, including how long it will take for consumers to see results, how much it will cost, the negative consequences that could result from using debt relief services, and key information about dedicated accounts if they choose to require them.

The Final Rule also prohibits misrepresentations about any debt relief service, including success rates and whether the provider is a nonprofit entity. The FTC's Statement of Basis and Purpose, which accompanies the Final Rule, provides extensive guidance about the evidence providers must have to make advertising claims commonly used in selling debt relief services.

The Rulemaking Process

In August 2009, the FTC published in the Federal Register a notice of proposed rulemaking proposing amendments to the Telemarketing Sales Rule and requesting public comments. Over 300 comments, representing a wide variety of stakeholders, submitted comments in response. The Commission also held a public forum on the proposed amendments on November 4, 2009. The FTC developed the Final Rule based on the public comments, the record of the public forum and the FTC's September 2008 Workshop on the debt settlement industry, recent testimony before Congress, and law enforcement actions brought by the Commission and the states.

The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, click: www.ftc.gov/ftc/complaint.shtm or call 1-877-382-4357.

The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to more than 1,800 civil and criminal law enforcement agencies in the U.S. and abroad. For free information on a variety of consumer topics, click ftc.gov/bcp/consumer.shtm.

About US Debt Resolve
US Debt Resolve (USDR) in Dallas, Texas provides debt settlement services for consumers coast to coast. To learn more about USDR, go to www.usdebtresolve.com/bsi-case-study.pdf. To speak with a member of the Consulting Staff about your financial situation call 1-866-991-3328. To discuss compliance with the TSR guidelines our audit department can be reached at 1-888-991-3328.

US Debt Resolve Media Contact:
Gary McConnel
972-982-9667
Gary.McConnel@usdebtresolve.com
www.usdebtresolve.com

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