The Federal Trade Commission (FTC), in order to maintain control over the debt-service industry, has enacted certain additional restrictions to the Telemarketing Sales Rule (TSR). According to FTC, these restrictions are essential to increase the agency’s control over the debt-relief providers.
However, the proposed TSR amendment applies only to for-profit debt-relief entities and not to non-profit entities. The amendments are meant to significantly expand the coverage of the TSR in various ways. It states that those profit entities that earlier were exempted from the TSR’s disclosure, are now required to act in accordance with the rule on incoming or outgoing calls.
“As a result, virtually all debt-relief telemarketing transactions would be subject to the TSR once the proposed modifications to the Rule are adopted.”- The FTC stated.
The new proposal seeks to concentrate on new additions. The debt-relief providers are required to make six additional material disclosures that are not followed by any other telemarketers.
The amendments that are included in the new disclosures are:
1.The time needed to achieve the results in a DMP or debt-settlement program;
2.The sum of money or percentage of each of the consumer’s outstanding debts that the consumer needs to save before the debt-relief provider can make a settlement offer to your various creditors.
3.A declaration that “not all creditors or debt collectors will accept a reduction in the balance, interest rates, or fees the customer owes to the creditor or debt collector”;
4.A notice stating, “pending completion of the represented debt-relief services, the customer’s creditors or debt collectors may pursue collection efforts, including initiation of lawsuits”;
5.It is likely that the use of the debt-relief services will negatively affect the consumer’s
creditworthiness. This may lead to the consumers being sued by their creditors, an increase in the amount owed to creditors due to the addition of other fees and interest.
6.A notification stating that any “savings a customer realizes from using of a debt-relief service may be taxable income.”
The FTC has also added amendments designed to protect consumers from false or misleading statements in order to gain clients. The disclosures debt solutions firms are prohibited from making include misstatements regarding the number or percentage of clients that have successfully used their services and the time the firm requires to obtain the desired results.
With these regulations, the FTC hopes to better regulate the debt relief industry and prevent consumer fraud in this tough economic climate.