Debt Relief Industry

TASC Adjusts Member Standards to Prohibit Upfront Fees, But Not Front Loaded Fees

The Association of Settlement Companies today released the following press release. My comments are in [ ].

TASC Enhances Consumer Protection

Association Revises Member Standards to Prohibit Upfront Fees And To Require Strict Marketing Guidelines

WASHINGTON, July 20 /PRNewswire-USNewswire/ — The Association of Settlement Companies (TASC) today announced aggressive new requirements for its members to better protect consumers who enroll in debt settlement programs. In addition, TASC adopted strong prohibitions against deceptive advertising, and stated that it will refer violations to law enforcement officials when warranted. [No mention that it will kick members out that engage in deceptive advertising.] TASC encourages all debt settlement companies to meet these new standards.

“In this difficult economy, consumers need to have the best opportunities to avoid bankruptcy, repay their debts, and get back on their financial footing,” said David Leuthold, executive director of TASC. [Why? Why does TASC want consumer to avoid bankruptcy, even if it is the most appropriate solution?] “The best way for our members to help consumers is to provide the best service possible, and to make sure they have complete confidence in their debt settlement company.” [It seems that from the initial statement the best way members can help consumers is by turning people away from bankruptcy and into debt settlement. If you turned someone away from bankruptcy even when it was the most logical solution just so they could enroll in debt settlement would that be deceptive?]

“We recognize that there is a wide variety of services available to consumers. Without common rules and disclosures, consumers could be confused, not only about the program terms but also as to the program objectives,” said Leuthold. “TASC strongly believes that a comprehensive set of standards and practices will better enable consumers to regain financial stability by helping them distinguish between those programs that can actually help them from those that may not serve their best interests.” [Such as debt settlement with a poor historical track record of resolving consumer debt problems despite of charging consumers thousands of dollars?]

READ  Report From the TASC Conference. Attendee Sends in Their Notes,

The new TASC requirements governing debt settlement programs include the following:

  • No program can exceed 48 months in duration.
  • TASC members cannot charge either “upfront” fees as defined in the standards, or program termination fees. [According to the TASC standards an upfront fee is “Upfront fees: Members are prohibited from charging upfront fees. An upfront fee is a fee charged prior to the consumer having the opportunity to put money into savings.” – Source. This does not prevent fees paid mostly in the beginning of the debt settlement program from going towards fees or the initial four payments once the client starts to save to go toward fees. In fact the standards say “Program fees charged by the provider, excluding monthly fees, should not be collected over less than half the length of the program, unless accelerated by the individual or until offers of settlement are obtained from creditors on at least half of the enrolled accounts.”]
  • TASC members will be strictly limited in the amount of fees that can be collected in the initial months of the program. [But the same TASC standards referenced above say this about fees “Maximum fees: The total of all Program fees charged by the provider should not exceed 20 percent of the principal debt amount, unless the majority of the fees earned are done so based on the amount of savings to the consumer through the settlement of the debts. The initial fee, often termed a setup fee or retainer fee, should not exceed 5% of the principal debt amount, and should not exceed 1.25% of the principal debt amount for any of the first 4 months.”]
  • Members must have a good faith refund policy related to fees associated with unsettled debts. [Not that they have to actually refund fees.]

In addition, TASC adopted several provisions related to marketing and advertising:

  • Ads that might lead the consumer to believe that the service being offered is related to the government are strictly prohibited.
  • Advertising that, in TASC’s view, could be false, misleading or deceptive will result in immediate member suspension, pending investigation, and may result in a referral to law enforcement authorities. [What are the boundaries or is it all up to TASC at will?]
  • Law firms may now become members. This will help ensure that law firms providing settlement services to consumers have the same general set of TASC standards to which they must adhere. [OK so now that debt settlement companies are scrambling to the attorney model to skirt regulation, TASC will let law firms in. But if the complaint attorneys are making is that their debt settlement services can’t be regulated by government because they are attorneys I wonder if they will submit to operating according to TASC standards and being regulated by TASC?]

TASC will aggressively enforce these standards with its member companies. – Source


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Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.


  • While the focus of regulators (both state and federal), consumer advocates (individual and groups) is largely on the abusive fee models used throughout the industry, and with good reason, the new TASC release written about here suggests programs should run no longer than 48 months.

    Any person or company selling people into as much as a 48 month plan is a farce, but then I think the same way about 36 month plans too, or even 24 months for most.

    Program duration is directly attributable to increased risk of getting sued resulting in lien levy & garnishment.

    Any one selling long program duration is doing so to get paid, not to help a consumer who is likely not even suited for debt settlement.

  • While I applaud TASC for taking steps in the right direction, you will have to excuse my cynicism at the timing of these latest announcements about all of this great consumer protection they are rolling out all of the sudden. Something tells me that none of this would be happening if they didn’t have these regulations breathing down their necks.

    Also, this looks to me like more smoke and mirrors. They talk about discouraging upfront fees, but not front loaded fees which do much more harm to consumers than small fees charged upfront. Don’t be surprised when the new mantra of “TASC member” settlement sales people is now going to be, we don’t charge any upfront fees like all those bad actors you read about all over the web. We are good guys. Yet all the while TASC has no problem with these companies ripping consumers off for up to 20% of their debt as a fee and then charging all of that fee over only half of the estimated program length.

    So while I am glad TASC is trying to actually do something that might provide a bit of a benefit to consumers over what they used to do (which was not much) all I see is TASC forced to give the illusion of consumer protection. The reality is what they are touting as ground breaking new rules (pronounced suggestions) are really nothing more than fluff, and they haven’t done anything to correct the actual problems in the industry. When I see TASC call for all member companies to charge a fee based on performance or at the very least require that the fees are spread out over the entire length of the program, then maybe I would concede that TASC is providing a benefit to consumers. Until that time, it remains clear that TASC is only interested in helping consumers to the extent that it will benefit their image and as such, the bottom lines of their member companies.

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