On March 4, 2024, a federal trial court in New York immediately banned a slew of debt relief service providers from charging and/or collecting any advance fees for debt relief services, finding that the defendant’s initial in-person presentations did not satisfy the “face-to-face” exemption under the Telemarketing Sales Rule (“TSR”) and thereby did not exempt the defendants from the prohibition against charging or collecting upfront fees. See Consumer Financial Protection, Bureau, Et Al., Plaintiffs, v. Stratfs, LLC (f/k/a Strategic Financial Solutions, LLC), et al., Defendants, & Daniel Blumkin, et al., Relief Defendants, No. 24-Cv-40-Eaw-Mjr, 2024 Wl 911518, At *1 (W.D.N.Y. Mar. 4, 2024).
After a two-day evidentiary hearing in February, the Court found that the face-to-face presentations by the defendants were in fact performed by independent contractor notaries who (i) had no substantive knowledge of the defendant’s debt relief program; (ii) cannot and will not answer any substantive questions by consumers about the program; and (iii) have as their primary purposes the mere signing of the contract for the debt-relief services.
As explained in the Order, the application of the face-to-face exception “requires a sales presentation involving direct, substantive, and personal contact between the consumer and the seller.” The Court stated that in this case “[e]ven if the notaries qualified as sellers of debt-relief services under the TSR, which the Court has found they likely do not, the face-to-face exception likely still does not apply here. Under the TSR, the face-to-face exemption applies only where there has been a ‘face-to-face sales ... presentation.’ 16 C.F.R. § 310.6(b)(3) (emphasis added).” The Court was not persuaded that the notaries’ in-person meetings were in fact “sales” presentations where it found that, for example, if any consumer had questions about the debt relief services during the initial presentation, the consumers were simply given a telephone number to call, which simply went back to the telemarketing company.
This Order further clarifies the narrow face-to-face exemption to the TSR advance fee prohibition. Any companies wanting to operate under such exemption will certainly want to, among other things, reexamine their relationships with purported “agents” who provide any initial in-person presentation and ensure that the objective of the meeting is in fact to sell their services, and not merely to obtain signatures to contracts.
