Debt Relief Companies Prohibited From Collecting Advance Fees Under New FTC Rule

News

The FTC has amended its Telemarketing Sales Rule to prohibit debt relief companies that sell debt relief services over the telephone from collecting fees before delivering the services they promise.

"The rule change is a major victory for consumers struggling to control and manage their debt without inadvertently digging themselves in deeper," Chairman Jon Leibowitz said. "...if you charge consumers before actually helping them, you will find the FTC and state enforcers knocking at your door to enforce the Rule. We look forward to working with our state partners to ensure that the Rule is enforced across the country."

The new advance fee ban specifies that fees for debt relief services may not be collected until:

  •  the debt relief service successfully settles or changes the terms of at least one of the consumer’s debts;
  •  there is a settlement agreement, debt management plan, or other
  •  agreement between the consumer and the creditor that the consumer has agreed to; and
  •  the consumer has made at least one payment to the creditor as a result of the agreement negotiated by the debt relief provider.


The rule covers telemarketers of for-profit debt relief services, including credit counseling, debt settlement, and debt negotiation services. The rule does not cover nonprofit firms, but does cover companies that falsely claim nonprofit status.

Comments

  • +1
    orca
    i bet half of the debt relief companies now have to close...
  • +1
    Zapp
    More than likley that will be way more than half...
  • +1
    gaz1023
    | 1 reply
    I have a debt relief company working for me. So far, no fees but I know it will be coming. Better than what I actually owe.
  • 0
    Anonym
    If anyone of you believes Leibowitz, I have a bridge to sell you. :-(
  • +1
    Bryan
    | 2 replies
    Still doesn't prevent Rachel or Heather from Card Holder Services contacting me to lower my credit card interest rate, but at least it's a win for consumers trying to reduce their debt.
  • +1
    lone stranger
    This will work until they figure a loophole, or a way to fudge a cheat.  Suppose they find some old uncollectible debt, give them a call, and offer them a small settlement (which the debt holder will jump at).  Then claim that they have complied with the law and bill you while the others are "in settlement".  

    That might muddy the waters for them to stave off legal action against them, at least for long enough to take the money and run.  Remember, these are crooks.  They don't need to actually comply with the law, they just need a smokescreen to avoid being shutdown before they can make a big haul.
  • +1
    Julia replies to Bryan
    | 1 reply
    robocalls are banned since Aug. 2009

    https://800notes.com/news/A8hCeRYPvwAGuAjL9gLyGA
  • 0
    Dave - The Credit Specialist
    | 1 reply
    Lone stranger
    "10 Feb 2011This will work until they figure a loophole, or a way to fudge a cheat.  Suppose they find some old uncollectible debt, give them a call, and offer them a small settlement (which the debt holder will jump at).  Then claim that they have complied with the law and bill you while the others are "in settlement".  That might muddy the waters for them to stave off legal action against them, at least for long enough to take the money and run.  Remember, these are crooks.  They don't need to actually comply with the law; they just need a smokescreen to avoid being shutdown before they can make a big haul"
    Here are some of the problems with your position
    1. "Remember, these are crooks" that's as ridicules a statement as saying that anyone who can't pay off their debt as agreed is a deadbeat. We all know that stuff happens to affect people’s ability to payback money they have borrowed from; Changes in income, employment, illness, familial status such as divorce etc...... Likewise not ALL theses Guy’s are Crooks. The Crooks, at least the ones who do business across state lines have been SHUT DOWN! If they are still in business and assisting clients across state lines they ARE Legit.
    2. "This will work until they figure a loophole, or a way to fudge a cheat" exemptions are created for all type of legitimate business purposes.
    3.  “at least for long enough to take the money and run.” It’s sad that some unscrupulous organizations have tarnished another wise beneficial industry; however it brought about much needed protections’. Please show me ANY industry or person willing to work for years often 2-3 before being paid. How long would or could you work for your employer if he said I am not going to pay you until 2013 or 2014, if I’m still alive and haven’t filed bankruptcy.
    4. These consumers have already entered into agreements with organizations who would be happy to keep them in financial slavery all the days of their lives charging 20-35% APR plus late fees over limit fees and penalties.
    5. The So Called Nonprofits are sponsored by the BANKS and are in fact representing the banks not the consumer. Every State in the union prohibits the undisclosed conflict of interest in  other types of financial transaction i.e. Insurance agents, securities brokers and lawyers just to name a few.
  • 0
    Unknown2
    It,s so funny to me, each time the FTC passes a new law, my telephone call increases.
  • +1
    GG
    | 1 reply
    You can bet if the government changes rules, the consumer will get the shaft. I worked with 2 of these companies, the same with both. They collected from me, my creditors collected nothing.
  • +1
    lone stranger replies to Julia
    Julia,

    That is true, but I just got one myself last week.  I suppose some crooks expect to make such a big haul that they are willing to risk the penalties.  Besides, with a copy of asterisk, a pc, and a voip account, you can set up in a hurry at minimal cost, then shut down, take the money and run. In this economy distressed office space and people desperate for work probably make the up front costs pretty low.  And when I see these operations paying penalties that are a fraction of the millions of dollars they took in, and having the technical skills needed, well, if I wasn't such an honest person... ;)

    Take Care.
  • +1
    lone stranger replies to Dave - The Credit Specialist
    Dave,

    I stand by my opinion.  The vast majority of these plans fail.  They do just about as much damage to a credit rating as a bankruptcy.  They do nothing that the debtor could not do for themselves.  And the industry has a very bad track record, as I am sure you know.

    People are much better served to follow the advice of someone like Dave Ramsey, which costs them nothing, gets them out of debt, and teaches them how to stay out of debt going forward.  The record shows that your industry fails miserably at all of those things.

    Sorry if you do not like your "Golden Goose" being impugned.
  • 0
    lone stranger replies to GG
    GG,

    I am very sorry you got burned, but I am not in the least surprised.  

    Next time try spending $10 on a copy of "Total Money Makeover", or borrow a copy from your local library - if you follow the advice given it will improve your life forever.
  • 0
    Azhar replies to gaz1023
    Would you like to recommend that company as I am looking for a good company...
  • 0
    Dave The Credit Specialist
    Lone stranger
    I don’t have a problem with your Opinion! It's your "Facts" I have challenged. The TSR regs. put 90% of the Bad Guys out of Business. The rest have to eak out a living sliming their way into your hearts by having a local office you can come into or pretending to be a not for profit so you can have a warm fuzzy feeling while they take advantage of you.
    As For Dave Ramsey Brilliant, But millions of Americans just won’t have the integrity to follow his advice.
    The BANKS are charging 25-35% interest; they are the ones you should fear.
    CCCS pretends to be your friend But they are subsidized by the banks that is a huge issue if it is not disclosed.
    Here is an article you probably won’t bother to read either http://finance.yahoo.com/banking-budgeting/ar ... ies-m-article-c   ; but Let me help you a little.
    "Debt settlement doesn't affect scores as badly as you would think. In fact, many people don't realize that late payments affect scores more than a debt settlement. Here is an example of how a debt settlement can affect credit scores, and how that compares to late payments."

    I hope that by giving some facts  instead of opinion you readers can choose the path that works best for them.

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