Debt Relief Industry

Tax Relief Providers Get Temporary Pass Under FTC TSR Effective Today

Enforcement Deferred for Tax Debt Relief Services, but Most Companies Are Now Prohibited From Collecting Advance Fees

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.

Sincerly,
Steve

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About the author

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.

8 Comments

  • This is huge news for reputable/credible tax resolution firms. I am a big proponent that the industry needs regulation, however at least now we will get to offer our feedback and input to the FTC and mutually introduce a Bill that protects the consumer and but permits the “good” firms to represent and be an advocate for thier clients. IRS Circular 230 (which governs practice before the IRS) states, that we (cpas, attys & eas) vigorously advocate for our clients before the IRS. We would have been prevented from doing so if “tax” was not carved out of the amended TSR.

  • This is huge news for reputable/credible tax resolution firms. I am a big proponent that the industry needs regulation, however at least now we will get to offer our feedback and input to the FTC and mutually introduce a Bill that protects the consumer and but permits the “good” firms to represent and be an advocate for thier clients. IRS Circular 230 (which governs practice before the IRS) states, that we (cpas, attys & eas) vigorously advocate for our clients before the IRS. We would have been prevented from doing so if “tax” was not carved out of the amended TSR.

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