Who are TASC and the FTC?
At first glance The Association of Settlement Companies (TASC) and the Federal Trade Commission (FTC) might seem to be natural opponents but this does not have to be the case. TASC is a body that represents the interests of all its member settlement companies but it also strives to create uniformity and responsibility within the industry. The FTC is a government body that is charged with the mandate of protecting consumers across several different industries and so must be exceedingly vigilant. Since these two bodies represent parties on different sides of the equation there is a natural level of negotiation that may occur, however the FTC is backed by the force of the Government and therefore has the clout to make certain recommendations for issues to be placed into law so the TASC must acknowledge this and respond accordingly.
What are the New Rules of the FTC?
The FTC has placed some new restrictions on debt settlement companies that are expected to take effect from September 2010 while others will come on stream in October 2010. These new rules include the following;
A prohibition on the practice of demanding an advance fee for debt settlement services. The FTC believes that this single practice is majorly responsibly for perpetuating the notion that debt settlement companies are nothing more that scams and that front-loaded fees do not act in the consumer’s best interest. The FTC will ban all for-profit debt settlement companies from taking money upfront for services that they have yet to perform. Instead the debt settlement company should only be able to collect a fee after debt negotiations have taken place and the consumer can be assured of the results.
The FTC demands that debt settlement companies make sufficient disclosures to consumers concerning how much the service will cost, how long it will take to see results and the negative effects of pursuing their services. This type of information must be made readily available and the debt settlement company should go the extra mile to ensure the consumer understands what is placed before them.
The FTC also now requires debt settlement companies to create a dedicated account to hold their funds. These funds will be used for future negotiations and can also receive deposits from the consumer to cover costs. The settlement company should not try to maintain control of the account or prohibit the consumer from accessing the funds.
These issues have been on the front burner for quite some time and the view of the TASC has changed vastly over time. The executive director of the TASC was quoted as saying “We’re disappointed the FTC came out with this ruling… It’s just a fact that companies need revenue coming in prior to the actual settlement being made” in response to the FTC’s proposal to impose the ban on advance fees. However both sides of the divide has made strides to understand each other and now TASC has changed its tune to one that is much more harmonious with that of the FTC. TASC is now in full support of the initiatives proposed by the FTC and they are set to ensure that they are enforced on their member companies.