FTC Issues Enforcement Policy Statement on New Debt Relief Rule

The Federal Trade Commission has issued an enforcement policy statement on a new FTC rule that protects consumers by barring debt relief firms from collecting up-front fees. In its statement, the FTC says that while most companies that sell debt relief services over the telephone are now prohibited from charging fees before settling or reducing a consumer’s credit card or other unsecured debt, it will defer enforcement of the new rule for tax debt relief services.

The ban on advance fees reflects changes that the FTC made to its Telemarketing Sales Rule last July. These change take effect today. During the FTC’s 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 “unsecured,” which would make them subject to the Rule. The FTC currently is considering these concerns, and until further notice, will defer enforcing the Rule with respect to “services that represent, directly or by implication, to renegotiate settle, or alter the terms of obligation between a person and a taxing entity (tax debt relief services).”

The enforcement policy states, however, that tax debt relief services must comply with the FTC’s Telemarketing Sales Rule, except for the debt relief amendments, during the enforcement deferral period. It also reminds providers that they must comply with the FTC Act, which prohibits unfair and deceptive practices. The FTC’s Enforcement Policy on Debt Relief Amendments to the Telemarketing Sales Rule can be found on the agency’s website and as a link to this press release.

The Commission vote approving the policy was 4-0-1, with Commissioner J. Thomas Rosch not participating.

Information for Businesses and Consumers

The FTC has issued a new list of frequently asked questions about the new rule, providing expanded advice on how businesses can comply with the debt relief rule, and building on earlier guidance that the agency issued in July. The FAQs help businesses determine if they are covered by the new rule, and discuss how fees may now be collected. “Debt Relief Services & the Telemarketing Sales Rule: What People are Asking.”

The FTC also released a new video providing business guidance about the new rule, which can be found at http://business.ftc.gov/multimedia/videos/debt-relief-services-and-telemarketing-sales-rule. Finally, the compliance guide for business, "Debt Relief Services & the Telemarketing Sales Rule: A Guide for Business," released in July, can be found on the agency’s website at http://www.ftc.gov/bcp/edu/pubs/business/marketing/bus72.pdf. Information for consumers, "Settling Your Credit Card Debts," can be found at http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre02.shtm.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,800 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.