On February 18, the Federal Trade Commission filed a complaint against PSC Administrative, LLC and Coastal Acquisitions, LLC seeking injunctive and equitable relief stemming from the defendants’ acts or practices in violation of, among other things, the FTC’s Telemarketing Sales Rule (TSR).
The defendants primarily market debt relief services via radio and Internet advertisements to consumers who owe multiple debts arising from high-interest, short-term payday loans and cash advances. The FTC’s complaint alleges that the defendants induce consumers to enroll in their programs by claiming that they can renegotiate and reduce the consumers’ repayments such that, within four to six months, the consumer loans will be paid off or otherwise eliminated. The complaint further alleges that in many instances the defendants failed to deliver on their promises to enrollees. Instead, the defendants’ efforts allegedly have involved sending form letters to the lenders requesting validations of the loans, which the lenders typically ignore as they continue their collection efforts.
The TSR prohibits sellers – persons who, in connection with a telemarketing transaction, offer to provide goods or services – from misrepresenting any material aspect of any debt relief service, including the amount of money or portion of debt that a customer may save by using that service. Furthermore, the TSR prohibits sellers from seeking or receiving fees for any debt relief service until after the seller has (1) renegotiated, settled, reduced, or otherwise altered the terms of at least one debt pursuant to a valid contractual agreement, and (2) the consumer has made at least one payment pursuant to that agreement. Furthermore, the TSR requires that the fee for such services be proportional and consistent in accordance with the terms of the TSR.