On Oct. 27, 2010, a new law called the Telemarketing Sales Rule (TSR) becomes active. This rule is designed to keep debt settlement companies from charging exorbitant upfront fees for their services. In addition, this rule will make debt settlement companies wait until a debt has actually been settled before they can collect their fees.
The TSR will also require that debt settlement companies offer full disclosure to clients seeking help. For example, they must inform prospective clients that they will continue to receive collection calls during the process, and that no specific results are guaranteed and that the client’s credit report will be adversely affected.
Certain debt settlement companies will also need to clean up their advertising as well. No longer can they advertise that they routinely settle debts for pennies on the dollar. I’m sure you’ve seen these misleading ads on TV, radio and in magazines.
Why This Law Was Needed
With the difficult economy of the past few years, many people found themselves facing serious financial difficulties for the first time in their lives. I’m talking about good, honest, decent people not being able to meet their financial commitments. My phone consultations with these folks often began with, “Mark, I never thought in a million years that I would not be able to pay my bills … “.
Many people ran out of options, felt hopeless, and felt they needed a lifeline. Sadly, some companies exploited the misfortune of others and created debt settlement “programs” that grossly overstated the results that could be achieved. Thankfully, not all debt settlement companies are like this, and many do provide a legitimate service for a reasonable fee. However, enough people were harmed by unscrupulous debt settlement companies that it warranted the creation of this new law.
A Good Law For Consumers
I usually feel that the government should leave people’s personal financial issues alone. But in this instance I agree with this law because too many desperate people were being taken advantage of. Now under the TSR, debt settlement companies will either have to be honest or leave the industry.
I’ve worked in this industry since 1995 and there are plenty of reputable debt relief firms that provide valuable services at reasonable rates. People experiencing financial difficulty deserve the option to get professional help, but they don’t deserve being ripped off or mislead. In time, I believe this law will clean up the industry and ultimately be a good thing for consumers.
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