For years, the Federal Trade Commission and the Consumer Financial Protection Bureau have actively investigated and taken action against entities and individuals that engage in deceptive student loan debt relief and mortgage assistance relief operations.
Red flags for regulators include, but are not limited to:
- False claims – including those made via text messages and telephone calls – of affiliation with the federal government, including the U.S. Department of Education
- Creating a false sense of urgency (e.g., time-limited participation in forgiveness programs)
- False promises to eliminate or reduce consumers’ student loan balances or monthly payments through loan forgiveness or other programs
- Unsubstantiated success rate claims
- Charging illegal upfront fees
Marketers of debt relief services, including those engaged in document preparation services, must take care to ensure compliance with a number of laws and regulations, including, without limitation, the FTC Act, the Mortgage Assistance Relief Services Rule and the Telemarketing Sales Rule.
This article is intended to focuses upon the latter, the Telemarketing Sales Rule.
The TSR contains specific provisions intended to curb deceptive and abusive practices associated with debt relief services.
Debt relief companies that use telemarketing to contact potential customers or hire someone to call people on their behalf are covered by the TSR. The TSR covers both outbound calls and in-bound calls placed in response to advertisements and other solicitations.
If you are a marketer of debt relief services, there are a few key principles that you should be aware of:
- It is illegal to charge upfront fees. You cannot collect any fees from a consumer before you have settled or otherwise resolved the consumer’s debts. If you renegotiate a consumer’s debts one after the other, you can collect a fee for each debt you have renegotiated, but you cannot front-load payments. You may be able to require consumers to set aside money in a dedicated account for fees and for payments to creditors and debt collectors, but the TSR places restrictions on such accounts.
- Marketers must disclose certain information before signing people up for debt relief services. Before consumers sign-up, you must disclose fundamental aspects of the services, including, but not limited to, how long it will take for them to get 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 are utilized.
- Marketers cannot misrepresent the services offered. The TSR prohibits false or unsubstantiated claims about services.
Consult with an FTC compliance lawyer for further information regarding who is covered by and what must be disclosed pursuant to the Telemarketing Sales Rule and other applicable laws and regulations, or if you are the subject of a regulatory investigation or enforcement action.
Richard B. Newman is an Internet marketing compliance and regulatory defense attorney at Hinch Newman LLP focusing on advertising and digital media matters. His practice includes conducting legal compliance reviews of advertising campaigns, representing clients in investigations and enforcement actions brought by the Federal Trade Commission and state Attorneys General, commercial litigation, advising clients on promotional marketing programs, and negotiating and drafting legal agreements.
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