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Federal Debt Settlement Laws

The Telemarketing Sales Rule, or the TSR, is a federal law enforced by the Federal Trade Commission (FTC) which governs telemarketing generally. The original act was passed in 1995, and although it has been amended many times, and there was a major amendment with regard to how debt settlement companies must operate in 2010. One of the most important parts of the amendment was the ban on advance fees. The TSR, as amended, specifies that fees may not be collected until:

  • The debt relief service successfully renegotiates, settles, reduces, or otherwise changes the terms of at least one of the consumer’s 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.

Very few debt settlement companies comply with the ban on advance fees. There is an exemption in the TSR relating to meeting the client for a face-to-face meeting. In order to continue charging advance fees, many companies send an agent to perform an in person “signing” with the consumer. Whether this permits the company to fit within the face-to-face exemption of the TSR is a very complicated legal issue and you should consult a consumer law attorney to analyze your particular facts and situation. The TSR also requires a debt settlement company to make certain disclosure and prohibits a debt settlement company from making misrepresentations. There is a private cause of action for a violation of the TSR; however, a consumer must have $50,000 in actual damages, which is very rare in such situations. As a result, a consumer law attorney must review the state consumer law statute which will typically give great weight to a violation of a federal statute or FTC rule, and consider such a deceptive act under the state consumer statute. For example, the Ohio Consumer Sales Practices Act basically indicates that a violation of an FTC rule is also a violation of the Ohio Consumer Sales Practices Act, which does have a private cause of action and allows for statutory as well as actual damages. The lengths that debt settlement companies take to circumvent the TSR, and the interplay between State and Federal law add to the complexity of a potential claim against a debt settlement company. If you believe you have a claim, it is recommended that you contact an experienced consumer law attorney for the legal advice and counsel.

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Financial difficulty can be a stressful and overwhelming emotional experience for anyone. Your hard earned dollars are a stake and it is understandable that you have a lot of questions. The Luftman, Heck & Associates Consume law attorneys are on your side. Get answers to your questions and concerns by contacting Luftman, Heck & Associates Consumer Law attorneys today at or email us at advice@ohiodebthelp.com.
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