The Dos and Don'ts of Debt Relief

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Next Wednesday is a banner day for America’s consumers – and a critical deadline for companies in the debt relief services industry to conduct a head-to-toe compliance check-up on their operations. As of October 27th, businesses that call prospective customers to sell debt relief services – or have customers call them in response to ads or other solicitations – have to comply with new amendments to the Telemarketing Sales Rule that make it illegal to charge fees before settling or reducing a customer’s debts.

In the past ten years, the FTC and state law enforcement partners have filed more than 250 actions to stop deceptive and abusive practices by members of the debt relief industry. Under the new rule, debt relief services can’t collect a penny from customers until:

  • they successfully settle or otherwise change the terms of at least one of the customer’s debts;
  • there’s a settlement agreement, debt management plan, or other agreement that has the OK of both the creditor and the customer; and
  • the customer has made at least one payment to the creditor as a result of the agreement negotiated by the debt relief provider.

If customers enroll multiple debts in a company’s program, the rule makes it clear you can’t front-load their fees.

Another rule change already in effect requires debt relief companies to give prospective customers the straight scoop before signing them up for their services. For example, you have to tell customers about how long it will take to get results, how much your services will cost, the negative consequences that could result from using debt relief services, and key information about dedicated accounts, if you use them. The Rule also bans false or deceptive claims about your services.

Not involved in the debt relief services industry? Not so fast. Even if you don’t directly sell debt relief services, you still may have legal obligations. The Telemarketing Sales Rule has always held telemarketers liable for violations of the Rule. In addition, 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.

Looking for more on complying with the new rule? Read Debt Relief Services & the Telemarketing Sales Rule: A Guide for Business. Visit the FTC’s bulk order site for business to get free copies for your staff.

While you’re there, print a copy of Settling Your Credit Card Debts (also available in Spanish) and pass it on to a friend who may be in financial distress.

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