A tipster (send in your tips here) sent me the following presentation from Tax Investigation Corporation.
The cover email said, “Our programs allow you to maintain control of the client and set your own fees while our Tax Resolution affiliates handle the case work.” That certainly seems like a big invitation for consumers to pay some wild amounts for these tax relief services.
You will notice the affiliate presentation makes the pitch that the FTC laws do not cover this product. However, that has been yet to be determined and the FTC has not set aside their telemarketing sales rule that covers these services, only said they would forgo prosecution while they examined the matter further.
According to the FTC:
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. 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. – Source
The FTC official notes on this position say:
On August 19, 2010, the Federal Trade Commission (“FTC” or “Commission”) published amendments to the Telemarketing Sales Rule (“TSR” or “Rule”) addressing the practices of providers of debt relief services. The amended Rule covers entities engaged in the telemarketing of services that assist consumers with settling or otherwise reducing unsecured debt. All provisions of the Rule, other than the provision prohibiting the collection of fees prior to the performance of services – commonly referred to as the advance fee ban – took effect on September 27, 2010. Compliance with the advance fee ban is required as of October 27, 2010.
During the course of the Commission’s education and outreach efforts following publication of the Rule, certain providers of services to assist consumers in reducing, renegotiating, or settling their federal or state tax debts expressed concern and uncertainty about the coverage of those services under the Rule. These providers have questioned whether tax debts are “unsecured,” and thus subject to the Rule, arguing that the Internal Revenue Service obtains a lien on an individual’s current or future assets upon administrative assessment of a tax debt.
The Commission is in the process of considering these concerns and, until further notice, will defer any enforcement action for violation of the TSR’s debt relief amendments1 with respect to the provision of programs or services that represent, directly or by implication, to renegotiate, settle, or alter the terms of a tax obligation between a person and a taxing entity (“tax debt relief services”). The Commission emphasizes, however, that tax debt relief services remain subject to other TSR provisions and Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45, which prohibits unfair or deceptive acts or practices. The Commission will closely monitor this industry and will bring enforcement actions, as appropriate, against providers of tax debt relief services that make false or unsubstantiated claims. The Commission is considering other options, including additional rulemaking, to address deception and abuse within the tax debt relief industry.
This deferral of enforcement applies only to tax debt relief services. The Commission will enforce the TSR as to other debt relief services according to the schedule set forth in the Rule. – Source
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