FTC rule protects consumers from predatory practices

On Thursday, the Federal Trade Commission announced new rules to protect consumers from predatory and anti-consumer practices in the debt settlement industry.   

Effective October 27, 2010, for-profit companies that sell debt relief services over the telephone are prohibited from charging a fee before they settle or reduce a consumer’s credit card or other unsecured debt. The common practice of charging a fee in advance of any service being delivered often left well-intended consumers worse off than when they began. 

Provisions of the FTC’s new Telemarketing Sales Rule also include the following (effective September 27, 2010):

  • Debt relief companies will be required to make specific disclosures to consumers.
  • They will be prohibited from making misrepresentations.
  • The Telemarketing Sales Rule will be extended to cover calls consumers make to these firms in response to debt relief advertising.

MMI is a member of the National Foundation for Credit Counseling (NFCC); here is an excerpt of an NFCC release explaining their position on  the issue:

"Every day, consumers are bombarded with false and misleading ads on TV and radio for companies promising a quick and easy way out of debt," said Susan C. Keating, president and CEO of the NFCC. "However, instead of providing real solutions, the FTC has found that many of those companies charge huge fees in advance while providing little in the way of actual assistance to consumers. The FTC's rule will curtail misleading debt settlement company ads, ban advance fees, and ensure that consumers receive information and disclosures before signing up and paying for debt settlement services. The NFCC strongly supports the FTC and its efforts to protect consumers from the predatory practices of debt settlement companies."

Taken in totality, the multiple provisions of the rule offer significant protections to consumers, helping them to more fully understand their rights and make informed decisions when resolving their financial distress.

For more information about the new Telemarketing Sales Rule, visit the FTC website. 

Kim McGrigg is the former Manager of Community and Media Relations for MMI.

  • The Consumer Federation of America (CFA) is an association of nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. Today, nearly 300 of these groups participate in the federation and govern it through their representatives on the organization's Board of Directors.

  • Since 2007, the Homeownership Preservation Foundation (HPF) has served as a trusted, neutral source of information for more than eight million homeowners. They are partnered with, and endorsed by, numerous major government agencies, including the U.S. Department of Housing and Urban Development and the Department of the Treasury.

  • The mission of the U.S. Department of Housing and Urban Development (HUD) is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD works to strengthen the housing market in order to bolster the economy and protect consumers; meet the need for quality affordable rental homes; utilize housing as a platform for improving quality of life; and build inclusive and sustainable communities free from discrimination.

  • The Council on Accreditation (COA) is an international, independent, nonprofit, human service accrediting organization. Their mission is to partner with human service organizations worldwide to improve service delivery outcomes by developing, applying, and promoting accreditation standards.

  • The National Foundation for Credit Counseling® (NFCC®), founded in 1951, is the nation’s largest and longest-serving nonprofit financial counseling organization. The NFCC’s mission is to promote the national agenda for financially responsible behavior, and build capacity for its members to deliver the highest-quality financial education and counseling services.