By Lesley Fair

When times are tough, you see the flyers staple-gunned to a telephone pole or plastered on a windshield:  “Bothered by bill collectors?  We can reduce your credit card debt.  Guaranteed!”  What the flyers don’t disclose is that many companies charge hefty upfront fees and then don’t live up to their promises – leaving cash-strapped consumers worse off than before.  Misleading claims targeting consumers in financial trouble are nothing new, but they’ve hit the big time – TV commercials, radio “talk shows,” impressive webpages with all the virtual bells and whistles, and Internet ads served up on the sites of well-known retailers.

But the Federal Trade Commission (FTC) has standards in place that companies offering debt relief services – and businesses that work with them – need to follow.  The agency has amended the Telemarketing Sales Rule (TSR) to add tough new provisions to curb deceptive and abusive practices associated with debt relief services.  One key change is that many more businesses are now subject to the TSR.  Debt relief companies that use telemarketing to contact potential customers or hire someone to call people on their behalf have always been covered.  The new Rule expands the TSR’s reach to include not only outbound calls―calls debt relief companies place to potential customers―but in‑bound calls as well―calls consumers place to them in response to TV commercials, web promotions, or other solicitations.

In addition to expanding the scope of the TSR, the Rule makes two other significant changes.  First, it’s illegal for debt relief companies to charge upfront fees.  Businesses can’t collect a penny from a customer until they have settled or otherwise resolved the person’s debts.  Second, companies have to give potential customers the straight story before signing them up for their services, including how long it will take to get results, how much their services will cost, and the negative consequences that could result from using debt relief services.

Not involved in the industry?  Not so fast.  Even if you don’t directly sell debt relief services, you still may have legal obligations.  The TSR has always held telemarketers liable for violations of the Rule.  In addition, the TSR makes it illegal to provide “substantial assistance” to another company if you know they’re violating the Rule or if you remain deliberately ignorant of their actions. What amounts to substantial assistance depends on the facts, but some examples could include obtaining and selling leads or helping a debt relief company with its back-room operations by reviewing customer files, processing payments, or contacting customers’ creditors once they’ve signed up.  If you work with debt relief companies in any capacity, it’s wise to review their policies and operations to make sure they’re complying with the Rule.  Willful ignorance isn’t a defense.

Questions?  Read Debt Relief Services and the Telemarketing Sales Rule: A Compliance Guide for Business, available at business.ftc.gov.

Lesley Fair is an attorney with the FTC’s Bureau of Consumer Protection.