/Vol. 75, No. 153/Tuesday, August 10, 2010/Rules and Regulations
call provisions or the TSR’s other requirements. 16CFR 310.6(a).
16 CFR 310.6(b)(5)-(6) (provisionsrelated to general advertisements and direct mailsolicitations).
The TSR requires that telemarketers solicitingsales of goods or services promptly disclose severalkey pieces of information in an outbound telephonecall or an internal or external upsell: (1) the identityof the seller; (2) the fact that the purpose of the callis to sell goods or services; (3) the nature of thegoods or services being offered; and (4) in the caseof prize promotions, that no purchase or paymentis necessary to win. 16 CFR 310.4(d);
16CFR 310.2(ee) (defining
). Telemarketersalso must disclose in any telephone sales call thecost of the goods or services and certain othermaterial information. 16 CFR 310.3(a)(1).In addition, the TSR prohibits misrepresentationsabout, among other things, the cost and quantity of the offered goods or services. 16 CFR 310.3(a)(2). Italso prohibits making false or misleadingstatements to induce any person to pay for goodsor services or to induce charitable contributions. 16CFR 310.3(a)(4).
16 CFR 310.4(a)(7); 16 CFR 310.3(a)(3).
16 CFR 310.4(a)(2).
16 CFR 310.4(a)(3). As the Commission haspreviously explained, [in] recovery room scams ...adeceptive telemarketer calls a consumer who haslost money, or who has failed to win a promisedprize, in a previous scam. The recovery roomtelemarketer falsely promises to recover the lostmoney, or obtain the promised prize, in exchangefor a fee paid in advance. After the fee is paid, thepromised services are never provided. In fact, theconsumer may never hear from the telemarketeragain.
TSR Final Rule
, 60 FR at 43854.
16 CFR 310.4(a)(4);
see TSR Amended Rule,
68FR at 4614 (finding that these three services were
16 CFR 310.3(c).
16 CFR 310.3(b).
16 CFR 310.4(b)(iii).
16 CFR 310.4(a)(7).
16 CFR 310.4(b)(1)(iv) (a call abandonment safeharbor is found at 16 CFR 310.4(b)(4)).
16 CFR 310.4(b)(1)(v).
TASC (Oct. 26, 2009) at 7; NFCC at2; Federal Reserve Board,
Charge-off and Delinquency Rates
(May 24, 2010),
) (charting recent increase in creditcard delinquency rate);
Debt Settlement:Fraudulent, Abusive, and Deceptive Practices PoseRisk to Consumers: Hearing on The Debt Settlement Industry: The Consumer’s Experience Before the S.Comm. on Commerce, Science, & Transportation,
Cong. at 1 (2010) (statement of Philip A.Lehman, Assistant Attorney General, NorthCarolina Department of Justice) (
Weinstein (Oct. 26, 2009) at 8 (
attachedBernard L. Weinstein & Terry L. Clower,
Debt Settlement: Fulfilling the Need for An EconomicMiddle Ground
at 7 (Sept. 2009) (
)). It is not clear, however, how wide a
of the debt-impaired population is suitable for debtsettlement programs.
Summary of Communications (June 16, 2010) at 1 (according toindustry groups, consumers who can afford to pay1.5-2% of their debt amount each month shouldenter debt settlement). Moreover, even for thoseconsumers for whom debt settlement might beappropriate, the practice of charging large advancefees makes it much less likely that those consumerscan succeed in such a program. CFA at 9; CareOneat 4;
SBLS at 2-3.
List of FTC Law Enforcement ActionsAgainst Debt Relief Companies, following Section Vof the SBP, for a list of cases that the FTC hasprosecuted since 2003 (
FTC Case List
). Inaddition, as detailed in the subsequent List of StateLaw Enforcement Actions Against Debt Relief Companies (
State Case List
), state lawenforcement agencies have brought at least 236enforcement actions against debt relief companiesin the last decade.
Settling Your Credit Card Debts
Fiscal Fitness: Choosing a Credit Counselor
For People on Debt Management Plans: A Must-Do List
Knee Deep in Debt
In September 2008, the Commission held apublic workshop entitled
Consumer Protection andthe Debt Settlement Industry
), which brought together stakeholders to discuss consumerprotection concerns associated with debt settlementservices, one facet of the debt relief servicesindustry. Workshop participants also debated themerits of possible solutions to those concerns,including the various remedies that weresubsequently included in the proposed rule. Anagenda and transcript of the Workshop are availableat (
). Public commentsassociated with the Workshop are available at(
). As discussed below, in November 2009, the Commission held apublic forum on issues specific to the rulemakingproceeding.
A more detailed description of the history andevolution of these different forms of debt relief can be found in Section II of the Notice of ProposedRulemaking in this proceeding.
GP (Oct. 22, 2009) at 2; Cambridge (Oct. 26,2009) at 1. Each creditor determines what, if any,repayment options to offer the consumer based on
However, there are certain
from some of the TSR’s exemptions thatlimit their reach, such as the carve-outfor calls initiated by a customer inresponse to a general advertisementrelating to investment opportunities.
The TSR is designed to protectconsumers in a number of differentways. First, the Rule includesprovisions governing communications between telemarketers and consumers,requiring certain disclosures andprohibiting materialmisrepresentations.
Second, the TSRrequires telemarketers to obtainconsumers’
express informed consent
to be charged on a particular account before billing or collecting payment and,through a specified process, to obtainconsumers’
to be billed through anypayment system other than a credit ordebit card.
Third, the Rule prohibits asan abusive practice requesting orreceiving any fee or consideration inadvance of obtaining any credit repairservices;
or offersof a loan or other extension of credit, thegranting of which is represented as
or having a high likelihoodof success.
Fourth, the Rule prohibitscredit card laundering
and other formsof assisting and facilitating sellers ortelemarketers engaged in violations of the TSR.
Fifth, the TSR, with narrowexceptions, prohibits telemarketers fromcalling consumers whose numbers areon the National Do Not Call Registry orwho have specifically requested not toreceive calls from a particular entity.
Finally, the TSR requires thattelemarketers transmit to consumers’telephones accurate Caller IDinformation
and places restrictions oncalls made by predictive dialers
andthose delivering pre-recordedmessages.
C. Overview of Debt Relief Services
Debt relief services have proliferatedin recent years as the economy hasdeclined and greater numbers of consumers hold debts they cannotpay.
A range of nonprofit and for-profit entities – including creditcounselors, debt settlement companies,and debt negotiation companies– offerdebt relief services, frequently throughtelemarketing. Thus, consumers withdebt problems have several options forwhich they may qualify. Those whohave sufficient assets and income torepay their full debts over time, if theircreditors make certain concessions (
,a reduction in interest rate), can enrollin a debt management plan with a creditcounseling agency. On the other end of the spectrum, for consumers who are sofar in debt that they can never catch up,declaring Chapter 13 or Chapter 7 bankruptcy might be the mostappropriate course. Debt settlement isostensibly designed for consumers whofall between these two options,
,consumers who cannot repay their fulldebt amount, but could pay somepercentage of it.
Over the last several years, theCommission has addressed consumerprotection concerns about debt relief services through law enforcementactions,
andoutreach to industry and other relevantparties.
The brief description of thedebt relief services industry in the nextsection is based upon information in therecord, the enforcement activities of theFTC and the states, and independentresearch by Commission staff.
1. Credit Counseling AgenciesCredit counseling agencies (
)historically were nonprofitorganizations that worked as liaisons between consumers and creditors tonegotiate
debt management plans
). DMPs are monthly paymentplans for the repayment of credit cardand other unsecured debt, enablingconsumers to repay the full amountowed to their creditors underrenegotiated terms that make repaymentless onerous.
To be eligible for a DMP,
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