Advocates 4 Consumer Protection, Logo
Phone Icon (855) 247-8782

Consumer Rights Consultation

Consumer Rights Information

The following consumer rights information has been derived from the Federal Trade Commission website protecting America's consumers:

The 2010 FTC ruling, the Advance Fee Ban, is something that protects consumers. Many companies are in violation of this ban. The Federal Trade Commission (FTC) issued this Final Rule to protect consumers in credit card debt.

Amendments to telemarketing sales rules prohibit debt relief companies from collecting advance fees (effective in October 2010). Starting on October 27th, 2010, for-profit companies that sell debt relief services over the telephone may no longer charge a fee before they settle or reduce a customer's credit card or other unsecured debt.

"At the FTC, we strive every day to make sure America's middle-class families get straight deals for their dollars," Chairman John Leibowitz said. "This rule will stop companies who offer consumers false promises of reducing credit card debt by half or more in exchange for large up-front fees. Too many of these companies pick the last dollar out of consumers' pockets--and, far from leaving them better off, push them deeper into debt, even bankruptcy."

Three other telemarketing sales rules provisions to take effect on September 27th, 2010 will require debt relief companies to make specific disclosures to consumers, prohibit them from making misrepresentations, and extend the telemarketing sales rules to cover calls consumers make to these firms in response to debt relief advertising.

The final rule covers telemarketers of for-profit debt relief services, including credit counseling, debt settlement, and debt negotiation services. The Final Rule does not cover nonprofit firms but does cover companies that falsely claim nonprofit status. Over the past decade, the FTC and state enforcers have brought a combined 259 cases to stop deceptive and abusive practices by debt relief providers that have targeted consumers in financial distress.

Advance Fee Ban

The final rule contains specific requirements for debt relief providers related to charging an advance fee before providing any services. It specifies that fees for debt relief services may not be collected until: the debt relief service successfully negotiates, settles, reduces, or otherwise changes the terms of at least one of the consumers' debts; there is a written settlement agreement, debt management plan, or other agreement between the consumer and the creditor, and the consumer has agreed to it; and the consumer has made at least one payment to the creditor as a result of the agreement negotiated by the debt relief provider.

To ensure that debt relief providers do not front-load their fees if a consumer has enrolled multiple debts in one debt relief program, the Final Rule specifies how debt relief providers can collect their fee for each settled debt.

First, the providers' fee for a single debt must be in proportion to the total fee that would be charged if all of the debts had been settled. Alternatively, if the provider bases its fee on the percentage of what the consumer saves as a result of using its services, the percentage charged must be the same for each of the consumers' debts.

We are NOT attorneys, and we are NOT offering legal advice.

There is an epidemic regarding the debt settlement industry as a whole, especially related to senior citizens, those individuals who are living on a fixed income, and those facing multiple hardships including medical, financial, and emotional, to name a few examples. Unfortunately, most senior citizens are not aware of the exemptions, exceptions, and protections that they qualify for. A long-term debt settlement program is never in their best interest.