This just in: Some companies that promise to reduce or eliminate credit card balances and other debt for customers will no longer be allowed to charge an upfront fee under new restrictions adopted by the Federal Trade Commission.
From the FTC's news release:
Starting on October 27, 2010, for-profit companies that sell debt relief services over the telephone may no longer charge a fee before they settle or reduce a customer’s credit card or other unsecured debt.
“At the FTC we strive every day to make sure America’s middle class families get straight deals for their dollars,” Chairman Jon Leibowitz said. “This rule will stop companies who offer consumers false promises of reducing credit card debts by half or more in exchange for large, up-front fees. Too many of these companies pick the last dollar out of consumers’ pockets – and far from leaving them better off, push them deeper into debt, even bankruptcy.”
Three other Telemarketing Sales Rule provisions to take effect on September 27, 2010, will:
- require debt relief companies to make specific disclosures to consumers;
- prohibit them from making misrepresentations; and
- extend the Telemarketing Sales Rule to cover calls consumers make to these firms in response to debt relief advertising.
The Final Rule covers telemarketers of for-profit debt relief services, including credit counseling, debt settlement, and debt negotiation services. The Final Rule does not cover nonprofit firms, but does cover companies that falsely claim nonprofit status. Over the past decade, the FTC and state enforcers have brought a combined 259 cases to stop deceptive and abusive practices by debt relief providers that have targeted consumers in financial distress.
The agency also issued a guide to help businesses comply with the new debt relief rules.
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