In order to provide true ‘relief’ to the debtors and to keep them away from any harassment during obtaining a loan or repaying it, the Federal government has designed several laws and regulations. If you are into such a business then you should definitely know all about these rules and abide by it to prevent and legal consequences that can range anywhere from a monetary penalty to suspension or even cancellation of the license.
Image Credit: www.creditcarecounseling.org
These laws are called the Debt Relief Services and Telemarketing Sales Rule. There are lots of amendments made in the recent times to the Telemarketing Sales Rule or TSR that you should comply at all times. To know more about it, start from the basics.
Most of the American citizens struggle with their debts and find it difficult to pay their credit card bills. A major portion of these struggling debtors more often turn to businesses that offer “debt relief services.” These companies are usually for-profit companies and their primary objective is to renegotiate the amount the consumers owe to their creditors. They often claim that they can get the rates of interest reduced, if not waived off entirely.
There are several such companies such as Nationaldebtrelief.com that you will come across when you surf through the internet but remember, just as in any other situations where you get a multitude of options, here too you will need to be careful when you make your choice among a list of such debt relief companies. This is because all are not created equal and certainly all do not follow the set rules and regulations.
About the law
The Federal Trade Commission or FTC happens to be the consumer protection agency of the nation and has made a few amendments in the Telemarketing Sales Rule. There are several reasons to make these amendments that provide a lot of benefits to the struggling debtors.
- These amendments are made with intent to add a few specific provisions so that they can oversee and eliminate the deceptive and abusive practices that are usually associated with debt relief services by a significant margin.
- The key change in the TSR has made it obligatory for all such businesses to follow this rule strictly as all are subject to it.
- Typically, the purpose of the debt relief companies to use telemarketing is primarily to contact the potential customers. They hire someone to call these people on their behalf. All these companies now are also covered by the TSR.
The new rule magnifies the space to cover all outbound calls which are the calls placed to potential customers as well as the in-bound calls which are the calls the customers place to the debt relief companies in response to the advertisements or any other solicitations.
Principles of TSR
All business involved in debt relief services must follow the three key principles of the new TSR. If you are unaware of these then here is the list and its features.
- Upfront fees: According to the new rule the FTC has banned any debt relief service providers from receiving any upfront fees. It is now illegal to collect any fees from any customer before the company settles the debt or resolved the debt issue otherwise.
- If there are renegotiation of debts of the customer one after the other the company can however collect their fees for each debt that they have renegotiated but they can never front-load payments.
- Moreover, the debt relief company may require the customers to set aside the agreed sum of money in a dedicated savings account for the fees as well as for the payments to be made to the creditors or even the debt collectors as negotiated by the debt relief company. However, the new rule also has a clear mention and has specific restrictions placed on those accounts just to make sure that the customers are well protected.
- Proper disclosure: According to the new TSR, all debt relief companies are bound and legally obligated to make proper and honest disclosure to their customers before they sign on any agreement to hire their services. It is required that these companies disclose the specific information regarding the fundamental aspects of their services as well as of the debts relief and its consequences.
- This disclosure must include the expected time it may take to settle the debt, the cost the customers have to pay to get the desired results, all the negative consequences that may result while using debt relief services such as impact on the credit score and their finance, and also about the key information and facts about the dedicated accounts that needs to be created for making the necessary payments to the creditors as well as the debt relief company.
- Misrepresentation of services: The law also prohibits all debt relief companies from misrepresenting their services in whatsoever way. These companies cannot make any false or unsubstantiated claims regarding their services such as increasing the amount of money the customers actually owe to the creditors or charge them more for their service.
- Debt collectors cannot represent them as law enforcement or any attorney or use their names or references during their services. They cannot threaten anyone for legal consequences whether it is the consumer or the creditor saying that they are from the legal departments of the government.
Therefore, if you are into debt relief services make sure that you know about these laws and follow it strictly. It is essential that your business is covered by the new rule and you are certain about your legal obligations. This rule is applicable for not only the for-profit companies but also to those companies that claim their nonprofit status falsely.
You can also visit the website of the Federal Trade commission to read the Guide that will tell you how to comply with this new rule that is designed to supplement the publication of FTC. However, this Guide to the Debt Relief Services and Telemarketing Sales Rule simply represents the views of the staffs and is not binding on the Federal Trade Commission.