The purpose of today's decision by the FTC is to allow tax debt relief firms a little more time to present the facts of their case
Greensboro, NC (Vocus) October 27, 2010
Tax debt relief firms can still collect fees in advance of services—for now. According to an announcement made Wednesday, the FTC has granted an exclusive reprieve to tax debt relief firms from an advance-fee ban that prohibits debt relief companies from charging fees before they settle customers’ debts.
The ban became effective Wednesday and is part of a broader FTC telemarketing sales rule intended to crack down on the deceptive practices of many debt relief companies, according to independent Web site easyIRS.com. For companies that sell other types of debt relief services over the phone, such as credit card debt, the advance-fee ban takes effect immediately.
“The purpose of today’s decision by the FTC is to allow tax debt relief firms a little more time to present the facts of their case,” said Jim Buttonow, a former IRS officer and cofounder of popular tax site easyIRS.com.
Leading up to the ban, some tax debt relief companies hired a lobbying firm, the National Policy Group, to question the FTC’s meaning behind the law—specifically whether tax debt is included under the rule. The FTC said it will consider their concerns.
“During the FTC’s education and outreach efforts earlier this month, some tax debt relief companies expressed uncertainty about whether the Rule applied to them. Specifically, they questioned whether tax debts are ‘unsecured,’ which would make them subject to the Rule,” the FTC said in its statement. “The FTC currently is considering these concerns, and until further notice, will defer enforcing the Rule with respect to … (tax debt relief services).”
One industry group reacted to the announcement Wednesday, emphasizing the need for a concerted industry response.
“While this is good news to tax problem resolution practitioners and a release from the uncertainty created by the new rule in recent weeks, it is not the end of the story,” said Lawrence Lawler, national director of the American Society of Tax Problem Solvers, in a society e-mail. “It is likely we will have to create and submit a bill that will govern our industry. Obviously, among a number of issues that will need to be covered within the bill is the necessity of charging fees in advance.”
The FTC also made clear that for tax debt relief companies, the ban on advance fees is the only provision open for review. Tax debt negotiation companies are still required to comply with the rest of the FTC rule, which calls for strict disclosures to customers and prohibits deceptive sales practices, according to the announcement.
Independent Web site easyIRS.com has been covering the FTC law’s implications on the tax debt relief industry from all angles. The site helps taxpayers to solve their own IRS problems online – without the need for high-priced representation.
It is a product of New River Innovation, a North Carolina-based software company that intends to do for tax problem solving what Intuit’s TurboTax™ has done for tax filing.
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