The Telemarketing Sales Rule (TSR) has a dramatic effect on anyone or any company that wants to help consumers improve their finances. Specifically, those individuals or companies that want to offer credit repair or credit counseling. The TSR is not a new regulation. The Federal Trade Commission passed the Telemarketing Sales Rule in 1995. It has since seen several revisions which have included various industries such as debt relief and credit repair.
The Telemarketing Sales Rule States the Following:
Upfront Payment Restrictions
No upfront fees: Under the TSR, credit repair companies are prohibited from charging upfront fees for services. They can only collect payment after they have successfully delivered the promised results. This means that credit repair companies must wait until they have improved a customer’s credit score or removed inaccurate information from their credit report before billing. The estimated time frame before charging fees is approximately 6 months.
Telemarketing Regulations
Since many credit repair companies market their services over the phone, they must comply with the TSR's broader telemarketing rules. These include restrictions on the times they can call, rules about honoring the National Do Not Call Registry, and regulations that prevent misleading sales tactics during phone calls. Recent information suggests that no phone contact at all can be made, even if the prospective customer calls the company.
Disclosure Requirements
Credit repair companies are required to clearly disclose certain key details about their services to consumers. These disclosures include information about the total cost, the nature of the services, and that the consumer has the right to dispute inaccurate information in their credit report for free with credit reporting agencies.
Misrepresentation Ban
Credit repair companies are prohibited from making false or misleading statements to consumers. For example, they cannot guarantee the removal of accurate negative information from a credit report or promise specific improvements to a credit score that they cannot deliver.
Written Contracts and Cancellations
Credit repair companies must provide consumers with a written contract detailing the services they will perform. The TSR also gives consumers the right to cancel the contract within three days of signing without incurring any penalties or obligations.
Death to the Credit Repair Industry. Or is it?
It is quite reasonable to enforce disclosure of service details, prohibition of false and misleading information, and providing a written contract to a prospective client. Further, these are regulations that any company offering a service to a consumer should be able to adhere to.
However, the first two regulations listed above, by their definition, will derail any individual or company from starting or staying in a credit repair business. It is not feasible in any industry to start a company, market your service, provide that service, and not be paid for 6 months or any length of time remotely close to that. Especially when you aren’t allowed to talk to prospective clients over the phone or teleconferencing. How will any company procure clients without being able to speak with them before they become clients? Some very smart online marketers will figure that out. But for most, it’s a non-starter.
The Federal Trade Commission is Serious About the Telemarketing Sales Rule
Two of the largest companies in the credit repair industry, Lexington Law and Credit Repair Cloud were successfully sued by the FTC. Both companies will suffer or have suffered severe financial consequences which may lead to one or both becoming insolvent.
It’s Time to Change the Credit Repair Business Model
The fact is that it is nearly impossible to offer a “done for you” credit repair business model in the United States. If talking to prospective clients is not allowed, and it is mandatory to go without compensation for the service provided for 6 months, the traditional credit repair business model is done. If someone wants to help people improve their credit, it’s time for a new way to give clients the knowledge and tools to accomplish the same outcome as before.
FreedomPath – A Software Platform Providing a DIY Credit Improvement Tool
Watch the video below and meet Co-Founder and President of FreedomPath, Ryan Ragland. Because the TSR is not new, Ryan knew that FreedomPath had to develop a business model that avoided providing a “done for you” credit repair service.
The FreedomPath software platform provides video tutorials and tools to help consumers educate themselves about and improve all areas of their finances. This includes a DIY credit repair service. A client will have their own software platform. Through the FreedomPath credit monitoring service, a client will see their credit reports and credit scores from all 3 credit bureaus. Their derogatory items, if any, will be highlighted. If these items are erroneous or obsolete, they will be able to choose these items, download dispute letters, and send those letters directly to the credit bureaus.
Becoming a FreedomPath Independent Broker
ERA Credit Services is an independent FreedomPath Broker, and you can be too. You can offer consumers our robust software platform that uses AI technology to assist consumers in every aspect of their financial health. And comes with a fully functional, accurate, easy to use, and effective “Do It Yourself” tool for improving their credit scores.
To learn more, visit Credit Repair Business Model and watch our full business overview video. Below the video you’ll see how to schedule a phone appointment with me to get to know each other and get your questions answered.