Offering an early graduation loan solution to consumers can not only help save debt settlement companies thousands in overhead, but they can also be beneficial to consumers by allowing them to jumpstart their credit with this type of strategic solution. However, debt settlement companies are often hesitant to offer a solution without a complete grasp on the compliance and regulatory standards required.
LendingUSA understands the challenges that debt settlement companies encounter when striving to achieve growth without the risk of non-compliance dangling over their heads. On the surface, it may not look like much, but it can put debt settlement companies against the wall in terms of compliance. “If you’re not compliant, there are serious regulatory repercussions,” explains Michele Guanzon, a regulatory compliance professional at LendingUSA. Without compliance, debt settlement companies can face hefty fines, penalties, and potential business closure. Additionally, debt settlement companies must adhere to the American Fair Credit Council’s (AFCC) standards and guidelines if they want to remain in good standing.
For a debt settlement company who is weighing an early graduation loan solution, here’s what you need to know about navigating compliance.
Don’t Misrepresent Your Offerings to Consumers
When it comes to the dos and don’ts of navigating consumer risks, it’s important not to misrepresent what you offer to consumers. Accuracy and transparency are at the forefront of how debt settlement companies are expected to promote their program. For example, debt settlement companies should refrain from making specific promises that are out of their control, like a guaranteed increased FICO score or the promise to settle their debts. High importance is placed on feasibility and the accurate representation of that feasibility. Because debt settlement companies cannot guarantee that any creditor will agree to accept less money than what is currently owed to them, they should avoid making any promises that they will settle any or all debts. Instead, debt settlement companies should focus on what they can control, such as making promises that they will attempt to settle debts, if that is truly the case.
As a debt settlement company, it is important to study and understand the precise wording that you are using when describing your program to consumers to ensure that you do not create any false expectations that may go unfulfilled and lead to potential legal liability or regulatory scrutiny.
Do Consult Legal and Compliance Experts Early and Often
Remaining compliant is of major importance for debt settlement companies, especially when they are new to offering products such as loan solutions. It is critical to have the appropriate resources in place to minimize the risk of non-compliance or legal liability. From federal regulatory requirements to state-specific laws, there are many different aspects to compliance. It’s critical that experts are in place to guide the organization early and often through a robust compliance management system.
For example, adhering to the Telemarketing Sales Rule is very important, so it is incumbent that sales calls are recorded, deviations from compliant scripts are identified, and any non-compliance is remediated. Debt settlement companies should thoroughly and meticulously address each compliance gap and set up processes to remain compliant.
Do Exercise Caution with Consumer Compliance Regulations
While some consumer compliance regulations are obvious, understanding the nuance within each is critical to ensuring that you stay compliant. Exercising caution will help you avoid running afoul of regulatory watchdogs such as the AFCC, the Consumer Financial Protection Bureau, and several others set up to ensure the fair treatment of consumers. By utilizing the resources offered by regulatory agencies and staying up to date with the everchanging legal and regulatory landscape, debt settlement companies will be better poised to overcome new and existing compliance hurdles.
If you are a debt settlement company that is considering offering an early graduation loan solution to consumers, partnering with a company like LendingUSA, which offers Freshstart loans, can help you have a partner who not only understands the importance of compliance, but who also knows what challenges your industry is up against in day-to-day-operations.
To learn more about how a partnership with Freshstart Lending can keep your business running smoothly, visit our website.