Better Business Bureau is notifying financially troubled consumers of new rules—effective fall 2010—that will help them avoid paying advance fees or getting ripped off while trying to lower debt.
Since late 2007, BBBs nationwide have received over 3,500 complaints on debt settlement companies. In many cases, complainants alleged that they paid hundreds in advance fees, but received no assistance—causing further debt.
In a statement released by the Federal Trade Commission, amendments to the Telemarketing Sales Rule (TSR) will help prevent abusive or deceptive practices from for-profit companies marketing debt relief or debt settlement services:
1. Debt Relief Rules, Sept. 27, 2010: Marketers, sellers and telemarketers will be required to disclose information about their services, including: costs, timelines, and other details or potential consequences that could pertain to the debt relief process. Specifically, companies will be prohibited from making misrepresentations about their services, success rates or potential results. TSR's rules will also cover inbound calls, where consumers contact providers in response to advertisements, websites and direct mail solicitations.
2. The Advance Fee Ban Provision, Oct. 27, 2010: Companies marketing services must not charge fees before they settle or reduce credit card balances or unsecured debt, as promised to the consumer; debt relief providers will be prohibited from collecting a fee for services until debt has been settled, altered or reduced.
The Final Rule covers for-profit debt settlement companies that solicit or advertise the following services: debt relief, debt negotiation and credit counseling. However, legitimate non-profit organizations are not covered. To clarify changes for debt relief providers, the FTC offers instructions on how to comply: Debt Relief Services & The Telemarketing Sales Rule: A Guide for Businesses.
For those considering debt settlement companies, BBB serving Alaska, Oregon and Western Washington suggests the following resources:
- FTC: Review Money Matters: Dealing with Debt and Credit Repair: How to Help Yourself.
- BBB: Check out businesses, utilize Managing Credit—Made Simpler and read articles on Rising Debt Settlement Complaints and Phony Debt Relief Calls.
- Oregon Department of Consumer and Business Services: Check licensing and read FAQs For Consumers About Debt Management Companies.
About your BBB serving Alaska, Oregon and Western Washington:
Your Better Business Bureau is a not-for-profit organization funded by Better Business Bureau Accredited Businesses. The BBB's mission is to be the leader in advancing marketplace trust. For more information about the services and products provided by your BBB, call 206-431-2222 or 253-830-2924 in Washington, 503-212-3022 in Oregon, 907-562-0704 in Alaska, or visit our Web site at www.bbb.org.