On Thursday, the Federal Trade Commission announced new rules to protect consumers from predatory and anti-consumer practices in the debt settlement industry.
Effective October 27, 2010, for-profit companies that sell debt relief services over the telephone are prohibited from charging a fee before they settle or reduce a consumer’s credit card or other unsecured debt. The common practice of charging a fee in advance of any service being delivered often left well-intended consumers worse off than when they began.
Provisions of the FTC’s new Telemarketing Sales Rule also include the following (effective September 27, 2010):
- Debt relief companies will be required to make specific disclosures to consumers.
- They will be prohibited from making misrepresentations.
- The Telemarketing Sales Rule will be extended to cover calls consumers make to these firms in response to debt relief advertising.
MMI is a member of the National Foundation for Credit Counseling (NFCC); here is an excerpt of an NFCC release explaining their position on the issue:
“Every day, consumers are bombarded with false and misleading ads on TV and radio for companies promising a quick and easy way out of debt,” said Susan C. Keating, president and CEO of the NFCC. “However, instead of providing real solutions, the FTC has found that many of those companies charge huge fees in advance while providing little in the way of actual assistance to consumers. The FTC’s rule will curtail misleading debt settlement company ads, ban advance fees, and ensure that consumers receive information and disclosures before signing up and paying for debt settlement services. The NFCC strongly supports the FTC and its efforts to protect consumers from the predatory practices of debt settlement companies.”
Taken in totality, the multiple provisions of the rule offer significant protections to consumers, helping them to more fully understand their rights and make informed decisions when resolving their financial distress.
For more information about the new Telemarketing Sales Rule, visit the FTC website.