FTC Wants Your Feedback on New Regulations on Debt Settlement and Debt Relief Services

In an ongoing effort to better protect financially distressed consumers, the Federal Trade Commission is seeking public comment on proposed rules to combat deceptive and abusive telemarketing of debt relief services – services that purportedly can reduce consumers’ credit card and other unsecured debt.

In the Noticed of Proposed Rulemaking (NPRM) announced today, the Commission proposes amendments to the Telemarketing Sales Rule (TSR) that would:

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  • Prohibit companies from charging fees until they have provided the debt relief services;
  • Require disclosures about the debt relief services being offered, including how long it will take to obtain promised debt relief and how much it will cost;
  • Prohibit specific misrepresentations about material aspects of debt relief services, including success rates and whether a debt relief company is nonprofit;
  • Extend the TSR to cover calls consumers make to debt relief services in response to their advertisements; and
  • Define the term “debt relief service” to cover any service to renegotiate, settle, or in any way alter the payment terms or other terms of the debt between a consumer and one or more unsecured creditors or debt collectors, including a reduction in the balance, interest rate, or fees owed.

The NPRM provides an overview of the debt relief services industry, including three major categories of debt relief – credit counseling, debt settlement, and debt negotiation – and
the abuses observed in each area. It also describes FTC and state law enforcement efforts to combat deceptive and abusive practices in this industry. Additionally, the NPRM summarizes
the Commission’s September 2008 public workshop, “Consumer Protection and the Debt Settlement Industry.”

The FTC adopted the TSR on August 16, 1995. It requires certain disclosures and prohibits misrepresentations during telemarketing calls. It also bars abusive practices, including
charging up-front fees for certain services such as credit repair, recovery services, and offers of a loan or other extension of credit when granting it is “guaranteed” or is represented as having a
high likelihood of success. The TSR was amended in 2003 to create the National Do Not Call Registry and again in 2008 to curtail telemarketing calls that deliver prerecorded messages.

Comments should include the reference “Telemarketing Sales Rule – Debt Relief Amendments – R411001.” Full instructions for submitting comments are found below. The NPRM has a 60-day public comment period, which ends on October 9, 2009. Additionally, the NPRM announces that the Commission will hold a public forum on this rulemaking, and it provides instructions for individuals wishing to participate. The date of the public forum will be announced separately.

If you wish to provide feedback and your opinion use the information below to do so.

ADDRESSES: Interested parties are invited to submit written comments electronically or in paper form. Comments should refer to “Telemarketing Sales Rule – Debt Relief Amendments, R411001” to facilitate the organization of comments. Please note that your comment – including your name and your state – will be placed on the public record of this proceeding, including on the publicly accessible FTC Website at http://www.ftc.gov/os/publiccomments.shtm.
Because comments will be made public, they should not include any sensitive personal
information, such as any individual’s: Social Security Number; date of birth; driver’s license
number, other state identification number, or foreign country equivalent; passport number;
financial account number; or credit or debit card number.

Comments also should not include any sensitive health information, such as medical records or other individually identifiable health information. In addition, comments should not include any “[t]rade secret or any commercial or financial information which is obtained from any person and which is privileged or confidential,” as provided in Section 6(f) of the Federal Trade Commission Act (“FTC Act”), 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2). Comments containing material for which confidential treatment is requested must be filed in paper form, must be clearly labeled “Confidential,” and must comply with FTC Rule 4.9(c), 16 CFR 4.9(c).1

Because paper mail addressed to the FTC is subject to delay due to heightened security
screening, please consider submitting your comments in electronic form. Comments filed in
electronic form should be submitted by using the following weblink:
https://secure.commentworks.com/ftc-TSRDebtRelief (and following the instructions on the webbased form). To ensure that the Commission considers an electronic comment, you must file it on the web-based form at the weblink https://secure.commentworks.com/ftc-TSRDebtRelief.

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