On February 27, the Federal Trade Commission filed a stipulated order, which includes a $9 million judgment, against another debt relief provider, United Debt Counselors, LLC, its owners, and officers (collectively “United”) for violating the FTC Act and the Telemarketing Sales Rule.  This serves as another warning from the FTC that debt relief companies need to be vigilant about ensuring that their marketing materials are accurate and that any statistics presented account for data from all consumers partaking in the services.  It also provides valuable insight into the definition of a “face-to-face sale presentation.” 

According to the Complaint, United engaged in unfair or deceptive acts prohibited under the FTC Act by exaggerating how much money a consumer could save by using its services.  United also solicited thousands of consumers, promising to each consumer that it could settle their delinquent debts with an original creditor.  Moreover, United provided misleading information to consumers regarding the success of its program.   

The FTC uncovered that fewer than half of the consumers who bought services from United actually completed the debt relief program and even fewer were free from debt following completion of the program.  The order bans United from making misleading representations about its debt relief products and services.  The order demonstrates that representations to consumers must be accurate and based on the collective experiences of the seller’s clients, including those that did not complete the program (not just the clients that experienced the best results).  Importantly, the FTC indicates that when the amount of any savings are disclosed to consumers, the savings must be calculated based on the debt amount owed at the time of enrollment rather than at the time of settlement. 

The Telemarketing Sales Rule (“TSR”) generally does not apply to a telephone transaction for a sale of services that is not completed until after a face-to-face presentation by the seller, and the consumer is not required to pay or authorize payment until then.  The FTC alleged in the Complaint that United engaged in abusive telemarketing acts or practices that violate the Telemarketing Sales Rule by requesting or receiving payment from consumers after a face-to-face meeting with a hired notary public.                                                                   

The FTC argues that the meetings between consumers and notary publics cannot be considered face-to-face sales presentations and, consequently, United cannot rely on the exemption provided under the TSR.  Thus, a face-to-face sales presentation must involve a member of the seller who is able to answer consumer questions and speak to the material components of the services. 

The Order requires United to charge advance fees in accordance with the TSR by ensuring that consumers have a face-to-face presentation with an individual who can discuss United’s services in specific detail.  The $9 million judgment is suspended upon United’s payment of $500,000 and continued compliance with the Order.  Failure to comply with the Order will result in the entire judgment being due.   

The case is Federal Trade Commission v. United Debt Counselors, LLC, et al., Civil Action No. 4:17-cv-143 in the United States District Court for the Eastern District of Texas.