Thursday, July 1, 2010

Groups opposed safe harbor for advance fees

The national and local groups submitting this letter are strong supporters of the FTC’s proposed advance fee ban amendment to the Telephone Sales Rule. We submit this additional comment to share with the Commission the reasons for our strong opposition to The Association Settlement Companies’ (TASC) proposal to undermine the advance fee ban with a safe harbor that would allow the use of advance fees as long as another option is also offered to the consumer.

We oppose the addition of any safe harbor that would continue to permit the charging of advance fees for debt relief services, including debt settlement. The reasons for our opposition include:

1. Safe harbors should be used rarely, and only to encourage positive behavior. A safe harbor that immunizes the charging of advance fees cannot meet that standard.

2. The experience of the GAO mystery shoppers and others illustrates the risk that debt settlement employees will steer consumers toward advance fees if they are a permitted “option.”

3. The very different base amounts on which a percentage advance fee and a percentage settlement fee would be calculated (whole debt vs. the smaller savings amount) would make comparison of percentage fees highly misleading.

4. A choice for a harmful fee approach would in no way ameliorate the harms from advance fees.

5. Savings-based-only fees are fair to any segment of the debt relief industry that does in fact reduce consumer debt.

Read more here.

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