Applied Knowledge & Practice Flashcards

A client enrolled $30,000 of debt and the first creditor settles a $5,000 account. Under the FTC Telemarketing Sales Rule, when may the company collect any fee related to that account?

Answer: After the settlement is reached, the client agrees to it, and the client makes at least one payment under it

The TSR advance-fee ban requires a settlement, client consent, and at least one payment to the creditor before a fee may be collected.

Which feature is REQUIRED for a dedicated settlement account to qualify under the TSR so funds can be accumulated before settlement?

Answer: The account is held at an insured financial institution and the client owns the funds and any interest

The TSR requires an insured institution, client ownership of funds and interest, and the right to withdraw at any time without penalty.

A client wants to leave the program and withdraw their dedicated account balance. Under the TSR, within how many business days must the funds (minus earned fees) be returned?

Answer: 7 business days

The TSR requires that funds be returned within seven business days of the client's request.

A creditor forgives $4,200 of a client's credit card balance in a settlement. What tax consequence should the agent mention?

Answer: The creditor may issue Form 1099-C and the forgiven amount may be taxable income unless an exclusion such as insolvency applies

Canceled debt of $600 or more is generally reported on Form 1099-C and may be taxable unless an exclusion applies.

Which IRS form does a client typically file to claim the insolvency exclusion for canceled debt income?

Answer: Form 982

Form 982 is used to exclude canceled debt from income, including under the insolvency exception.

A prospect's debts consist of a home mortgage, an auto loan, and $2,000 on one credit card. What is the most appropriate assessment?

Answer: The prospect is likely a poor fit because secured debts are generally not eligible and the unsecured balance is small

Settlement programs generally address unsecured debt, and a small unsecured balance rarely justifies program costs.

During a sales call, which statement would most likely be a deceptive misrepresentation?

Answer: Your creditors will stop all collection calls and lawsuits once you enroll

Creditors may continue collection efforts and lawsuits, so promising they will stop is a material misrepresentation.