Debt Leads And The Federal Trade Commission
The debt vertical is taking a hit. You know it, I know it..everyone knows it.
So lets break it down. The new FTC Ruling which comes into effect September 27, 2010
The Rule provisions will:
1. prohibit debt relief service providers from collecting a fee for services until a debt has been settled, altered, or reduced;
2. require certain disclosures in calls marketing debt relief services;
3. prohibit specific misrepresentations about material aspects of the services; and
4. extend the TSR's coverage to include inbound calls made to debt relief companies in response to general media advertisements.
The FTC determined that the typical debt settlement sales approach was:
"Debt settlement companies typically advertise through the Internet, television, radio, or direct mail. The advertisements generally follow the "problem-solution" approach - consumers who are over their heads in debt can be helped by enrolling in the advertiser's program. Many advertisements make specific claims that appeal to the target consumers - for example, claims that consumers will save 40 to 50 cents on each dollar of their credit card debts or will become debt-free. The advertisements typically then urge consumers to call a toll-free number for more information.
Consumers who call the specified phone number reach a telemarketer working for or on behalf of the debt settlement provider. The telemarketer obtains information about the consumer's debts and financial condition and makes the sales pitch, often repeating the claims made in the advertisements as well as making additional ones. If the consumer agrees to enroll in the program, the provider mails a contract for signature. Providers sometimes pressure consumers to return payment authorization forms and signed contracts as quickly as possible following the call."
Based on these assumptions the Final Rule addresses deceptive and abusive practices of debt relief service providers and includes the following elements:
* Defines the term "debt relief service" as proposed in the NPRM; (Notice of Proposed Rulemaking)
* Prohibits providers from charging or collecting fees until they have provided the debt
relief services, but
1. permits such fees as individual debts are resolved on a proportional basis, or if the fee is a percentage of savings, and
2. allows providers to require customers to place funds in a dedicated bank account that meets certain criteria;
* Requires four disclosures in promoting debt relief services, in addition to the existing disclosures required by the TSR:
1. the amount of time it will take to obtain the promised debt relief;
2. with respect to debt settlement services, the amount of money or percentage of each outstanding debt that the customer must accumulate before the provider will make a bona fide settlement offer;
3. if the debt relief program entails not making timely payments to creditors, a warning of the specific consequences thereof; and
4. if the debt relief provider requests or requires the customer to place funds in a dedicated bank account, that the customer owns the funds held in the account and may withdraw from the debt relief service at any time without penalty, and receive all funds remitted to the account.
* Prohibits misrepresentations about material aspects of debt relief services, including success rates and a provider's nonprofit status; and
* Extends the TSR to cover calls consumers make to debt relief services in response to advertisements disseminated through any medium, including direct mail or email.
* The advance fee ban provision now explicitly sets forth three conditions before a telemarketer or seller may charge a fee: (1) the consumer must execute a debt relief agreement with the creditor; (2) the consumer must make at least one payment pursuant to that agreement; and (3) the fee must be proportional either to the fee charged for the entire debt relief service (if the provider uses a flat fee structure) or a percentage of savings achieved (if the provider uses a contingency fee structure);
* Notwithstanding the advance fee ban, the Final Rule allows providers to require consumers to place funds for the provider's fee and for payment to consumers' creditors or debt collectors into a dedicated bank account if they satisfy five specified criteria; and
* The Final Rule eliminates three of the proposed disclosures that the Commission has determined are unnecessary, and it adds one new disclosure.
What does this mean for you the debt settlement or debt consolidation company? Well it doesnt mean much because in the end if you buy exclusive debt leads you wont have to worry much about getting paid.
The debt vertical will always be here, and if you dont buy debt leads then someone else will. If demand goes down, supply will go up making debt leads much cheaper in the future.
Debt Leads And The Federal Trade Commission
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