Springboard Applauds FTC in Debt Relief Rule Issued
You’ve probably heard or seen advertisements from debt settlement companies promising to eliminate half or more of your credit card or other unsecured debt. In this current economic climate, debt settlements may sound like an attractive option to consumers facing mounting debts, but the offers often come with serious consequences that should be weighed fully before making a decision.
According to a recent AP article: “Since the start of the recession, the Better Business Bureau has received more than 3,500 complaints about debt settlement companies. Customers who hired the companies complained that they ended up deeper in debt, or ended up being sued by creditors.”
In response to consumer complaints of misleading and deceptive practices, the Federal Trade Commission (FTC) has issued a new debt relief rule to protect financially distressed consumers. The ruling applies to for-profit companies that sell debt relief services over the telephone, including credit counseling, debt management, and debt negotiation services that aim to reduce credit card or other unsecure debt. Following is summary of the Telemarketing Sales Rule Debt Relief Rule issued July 29, 2010 by the FTC.
- Advance fee ban: debt relief companies may no longer charge a fee before they settle or reduce a customer’s debt.
- Disclosures: debt relief companies will be required to make four specific disclosures to consumers, 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.
- Misrepresentations: debt relief companies will be prohibited making misrepresentations, including specific misrepresentations commonly made in this area.
- Inbound calls: the rule extends the Telemarketing Sales Rule to cover calls consumers make to these firms in response to debt relief advertising.
The advance fee ban provision will be effective on October 27, 2010. All other provisions will be effective on September 27, 2010. For more information on this important consumer protection ruling, visit http://www.ftc.gov/opa/2010/07/tsr.shtm.
Photo: alancleaver
