August 7, 2023
Telemarketing Sales Rule (TSR) - CFPB v. Timemark Solutions, Inc.
The FTC's Telemarketing Sales Rule (TSR) enforcement, CFPB v. Timemark Solutions, Inc., and the importance of TSR compliance training.
The FTC's Telemarketing Sales Rule (TSR) enforcement, CFPB v. Timemark Solutions, Inc., and the importance of TSR compliance training.
The Federal Trade Commission’s Telemarketing Sales Rule (TSR) is one of the most impactful regulations governing telephonic sales and is the FTC’s principal weapon to combat telemarketing fraud. While the FTC serves as the primary enforcement agency for the TSR, it can also be enforced by state attorneys general, and- contrary to what most people understand- by another federal agency: the Consumer Financial Protection Bureau (CFPB).
The CFPB has authority to enforce a wide variety of statutes, rules, and regulations governing consumer financial products and services, including mortgages, credit cards, payday loans, loan servicing, and debt collection. This authority extends to those provisions of the TSR that restrict a company’s ability to collect an advance fee for certain debt-related services, as evidenced by a recent CFPB enforcement action.
In July of 2020, the CFPB announced the settlement of a lawsuit filed against Timemark Solutions, Inc. (“Timemark”), a company that offered debt relief services to consumers with federal student loan debt.
The CFPB alleged that Timemark unlawfully charged advance fees for services that included altering the terms of a federal student loan, a practice that directly violates the TSR, which strictly prohibits collecting any such fees prior to the successful delivery of the service.
According to the Complaint, from 2016 through October 2019, Timemark conducted telemarketing campaigns directed to student loan borrowers that required payment of up to $699 for preparing documents related to loan consolidation, forgiveness, or switching to income-driven repayment plans, all of which was technically available to consumers at no cost via the U.S. Department of Education.
The TSR makes it illegal to demand or accept any fees for consumer debt relief services prior to the modification or settlement of the terms of the debt. The rules also prohibit collecting a fee until the borrower has made at least one payment under the new agreement negotiated on their behalf by the service provider.
Timemark allegedly breached this rule by requesting and securing payments from customers within a few days after they signed up, well before the terms of their student loan debt were ever altered. As detailed in the CFPB’s Complaint, the TSR not only prohibits charging upfront fees of this nature, it also prohibits misrepresentations and requires debt service providers to disclose certain key information to prospective customers before signing them up.
Under the terms of the settlement, Timemark was required to issue payments totaling over $3,543,000 to 7,185 customers to compensate them for the illegal advance fees they were required to pay.
The Telemarketing Sales Rule is one of the most important arrows in regulators’ enforcement quiver and can be wielded by other agencies besides the FTC. Careful, regular, and systematic compliance with the many requirements of the TSR is the best way to avoid regulatory scrutiny. Fortunately, TSR-specific training is available on the Blacklist Academy compliance training platform. Check out the Blacklist Academy TSR course here.
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