Although the Federal Trade Commission made sweeping changes earlier this year to the federal telemarketing sales rule in order to rein in deceptive marketing and fraudulent practices by shady debt help companies that had been taking advantage of struggling consumers, the FTC last week granted an exclusive reprieve that has some debt relief firms breathing a little easier.
A prohibition in the revised telemarketing sales rule preventing companies that sell debt management, debt settlement, debt negotiation, or other debt relief services over the phone from charging consumers upfront fees has been suspended for firms that specifically provide tax debt help.
The suspension of the upfront-fee ban, which went into effect for all other debt relief companies on Oct. 27, comes after several tax debt relief companies hired a lobbying firm, the National Policy Group, to question the meaning of the prohibition and ask whether the law specifically applied to tax debt, according to a statement released by the FTC.
âDuring the FTCâs education and outreach efforts earlier this month, some tax debt relief companies expressed uncertainty about whether the Rule applied to them. Specifically, they questioned whether tax debts are âunsecured,â which would make them subject to the Rule,â the FTC said (âFTC Issues Enforcement Policy Statement on New Debt Relief Rule,â FTC press release, Oct. 27, 2010).
Unsecured debts are debts that arenât backed by assets or collateral â debts such as credit card accounts and student loans. Secured debts, on the other hand, such as car loans and home mortgages, are typically tied to some type of collateral that a creditor could seize or repossess if a consumer fails to pay the debt.
Tax debt relief companies are proposing that tax debts may actually be considered secured debts.
âThe FTC currently is considering these concerns, and until further notice, will defer enforcing the Rule with respect to âŚ tax debt relief services,â the FTC said.
The FTC clarified that tax debt relief companies are still subject to all other regulations of the telemarketing sale rule, as well as the FTC Act, which bans unfair and deceptive marketing practices.
Read the full amended Telemarketing Sales Rule:
Federal Trade Commission. Telemarketing Sales Rule: Final Rule. Federal Register, 16 CFR Part 310. August 10, 2010.
Popularity: 1% [?]