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Green Attorney is Looking for Debt Relief Business Advice. – L

“Dear Steve,

I’m a newly admitted “green state” attorney and have been doing loan modifications and settlements for over a year now for clients who come to me based on referrals.

I absolutely love your site and have been going through all of the material related to the debt settlement industry and the new regulations for weeks now.

I have an opportunity and wanted to know your opinion as to what i should do. A group aproached me and told me they were starting a new settlement company in my state. they wanted to hire me as in house counsel to work on the settlements. they do no advertising out of the state and do not accept out of state debt.

They asked me to research the new rules so that they will fully comply with the TSR. I told them the rule didn’t apply to them. They still want me to be in house counsel and open an escrow account so that the clients will be able to deposit the company’s fees and repayment monies there.

They are charging the clients an option of 15% of the debt enrolled or 10% of the savings realized. they want the money kept in their/my escrow account in case the client decides not to pay once the services have been performed.

My questions are:

  1. can i work as in house counsel and have an escrow account dedicated to holding the clients deposits?
  2. can they claim to be attorney backed if the attorney is working in house?
  3. since the tsr does not apply to them can they collect their fees in advance?
  4. and if they can’t, can they collect a monthly maintenance fee and charge an initial set up fee of $50 so that they can cover costs of operation (they say they will not collect any of the percentage feesunless they successfuly settle and the client agrees and makes first payment as provided by the rule)?

i would appreciate a quick response because they want to move quickly and i don’t want to lose out on the opportunity if it is legitimate. Thank you.

L”

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The Answer

Dear L,

I can’t give you legal advice, but I can give you my opinion. For legal advice in this area I would suggest contact the guys at Loeb & Loeb or Venable.

My opinion is jaded by two things. 1. I’m not a gambler and would never gamble with my law license if I had one. 2. Unless you were making the sale I would never trust what an agent would say to make the sale.

It seems like the reason to include you in this scheme is to try and avoid the FTC telemarketing sales rules. That alone on face value is a huge red flag for me. The minute someone wants me to avoid a rule by doing something intentional to avoid it, I would get VERY worried.

Let’s look at this situation from a different point of view. The majority of debt settlement companies are going to start advertising their FTC TSR compliant model. They are also going to educate the public why they don’t need an attorney to do this. So in order for your guys to overcome objections and make the sale they are just naturally going to start pushing the line and making troubling statements and promises. How else are the going to overcome the attraction of a consumer to company X that charges no fee?

There’s also been enough examples of attorneys getting disbarred and even forced into bankruptcy by letting others use their name or not playing an integral role in the debt relief business. Lookup Liberty Law or Allegro Law on this site.

So maybe you still are not convinced this is a bad idea. Consider this. What is the purpose of skirting the law and charging fees upfront? Probably to make quick cash and not focus on actually settling debts and delivering the service. If the focus was on settling the debts quickly and not quick cash then what is wrong with complying with the FTC TSR and moving to settle debts fast. If the fee is not sucked out of consumers first then debts can be settled fast. All you have to do to earn the fee is enter into a settlement and make the first payment.

You can comply with the TSR, protect your license, use a third-party escrow account and get paid well for actually settling debts.

I learned a long time ago that people with financial problems are considered a disadvantaged class of people. Regulators and courts are not going to take kindly to ANYONE, even a lawyer, taking advantage of a consumer in trouble.

If this was something you were personally going to do then my advice might be different. But when you are talking about getting into bed with loopholers, I’d run away.

Almost forgot, the use of your escrow account for settlement funds is a, excuse me, stupid move. If you want to stay out of trouble then you need to provide your settlement clients with easy and transparent access into their escrow account like NoteWorld or Global Client Solutions offers.

You sound like a good person that is being attracted by the lure of a big plan. Don’t do it this way is my vote. If you do want to get into debt settlement, do it yourself and in full willful compliance with the rules.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big Hug!

Green Attorney is Looking for Debt Relief Business Advice.   L
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About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
  • ComplianceSlave

    There is no protection for it. If they cancel, they get their $ back.
    Again, I must say, that if youre an attorney and they are a legitimate DS company, I do not see your role as in-house counsel to them. If you give them advice to give their clients, they will be practicing law w/o a license. The Rules of Conduct fall on you too if you knowingly assist a non-lawyer in practicing law. They better make you rich, because they will get rich at the expense of your law lic… You can be disbarred for some of the offenses I mentioned. I do not see the benefit for you at such a small level (referral biz, no advertising, etc. I have seen many lawyers get duped into doing some of this and grievance complaints went wild- If they continued, and many do, they lose everything. If there is a legitimate role for you, I don’t see it. Sorry.

  • “L”

    Thank you so much for your answers. Since i have not read the blog until today i wanted to update you. Holding escrow money in my account cannot work because if i am working as in house counsel there is a conflict of interest as to who i am serving. I have decided that a third party escrow is the way to go. They are not actually advertising at all. Most of the business comes from referrals and walk ins. If they were to advertise, and they might, it one only be from the green state they are in to the same state. The upfront fees are only as to the maintenance fees, which will be monthly and not front loaded. It will help cover costs of operations. The monies collected for settlement purposes will be set aside. The client can cancle at any time, forfeiting only the monthly maintenance fees. All monies saved towards a settlement will be returned if client cancles or a favorable result is not reached. They wanted to use my escrow account to assure that once they delivered the settlement they promised the client wouldn’t cancel, run to the bank/creditor and take the same settlement without having to pay for the fee negotiated and the work they put in. In fact how does a settlement company protect against that post TSR?
    Thank you to compliance slave for the follow up answer. I appreciate it.
    -L

  • “L”

    Thank you so much for your answers. Since i have not read the blog until today i wanted to update you. Holding escrow money in my account cannot work because if i am working as in house counsel there is a conflict of interest as to who i am serving. I have decided that a third party escrow is the way to go. They are not actually advertising at all. Most of the business comes from referrals and walk ins. If they were to advertise, and they might, it one only be from the green state they are in to the same state. The upfront fees are only as to the maintenance fees, which will be monthly and not front loaded. It will help cover costs of operations. The monies collected for settlement purposes will be set aside. The client can cancle at any time, forfeiting only the monthly maintenance fees. All monies saved towards a settlement will be returned if client cancles or a favorable result is not reached. They wanted to use my escrow account to assure that once they delivered the settlement they promised the client wouldn’t cancel, run to the bank/creditor and take the same settlement without having to pay for the fee negotiated and the work they put in. In fact how does a settlement company protect against that post TSR?
    Thank you to compliance slave for the follow up answer. I appreciate it.
    -L

    • http://www.ftc.gov ComplianceSlave

      There is no protection for it. If they cancel, they get their $ back.
      Again, I must say, that if youre an attorney and they are a legitimate DS company, I do not see your role as in-house counsel to them. If you give them advice to give their clients, they will be practicing law w/o a license. The Rules of Conduct fall on you too if you knowingly assist a non-lawyer in practicing law. They better make you rich, because they will get rich at the expense of your law lic… You can be disbarred for some of the offenses I mentioned. I do not see the benefit for you at such a small level (referral biz, no advertising, etc. I have seen many lawyers get duped into doing some of this and grievance complaints went wild- If they continued, and many do, they lose everything. If there is a legitimate role for you, I don’t see it. Sorry.

  • ComplianceSlave

    “They are charging the clients an option of 15% of the debt enrolled or 10% of the savings realized. they want the money kept in their/my escrow account in case the client decides not to pay once the services have been performed.”
    These are two very different numbers. My guess is they are charging both. 10% of the savings is closer to 6% of the debt. Also, WHY would they ONLY ask you to hold their fee, if that’s what you are saying? That’s odd.
    Are they asking you to defend lawsuits in court? What is your role? If you are in house counsel than you are not representing their clients, no? If they take your work and provide it to a client, they are engaging the unauthorized practice of law. We have lawyers on retainer… Does that mean we can say we are attorney backed? What’s the difference?
    I don’t understand your role, If you are to be inhouse counsel, what does that do for their clients?
    If you’re an attorney, you would know that you can only have an attorney’s escrow account for money belonging to your clients. As an employee of a company, how would you be responsible for their clients funds?
    If they are only marketing in your state, are they marketing FROM your state? If not, TSR applies.
    If their name rhymes with Legal Helpers Debt Resolution, they are subject to the TSR as they have been recruiting sales offices to sell nationally, not in state.
    There are a lot of other problems as well, but I think that covers it.

  • http://www.ftc.gov ComplianceSlave

    “They are charging the clients an option of 15% of the debt enrolled or 10% of the savings realized. they want the money kept in their/my escrow account in case the client decides not to pay once the services have been performed.”These are two very different numbers. My guess is they are charging both. 10% of the savings is closer to 6% of the debt. Also, WHY would they ONLY ask you to hold their fee, if that’s what you are saying? That’s odd. Are they asking you to defend lawsuits in court? What is your role? If you are in house counsel than you are not representing their clients, no? If they take your work and provide it to a client, they are engaging the unauthorized practice of law. We have lawyers on retainer… Does that mean we can say we are attorney backed? What’s the difference?I don’t understand your role, If you are to be inhouse counsel, what does that do for their clients?If you’re an attorney, you would know that you can only have an attorney’s escrow account for money belonging to your clients. As an employee of a company, how would you be responsible for their clients funds?If they are only marketing in your state, are they marketing FROM your state? If not, TSR applies. If their name rhymes with Legal Helpers Debt Resolution, they are subject to the TSR as they have been recruiting sales offices to sell nationally, not in state.There are a lot of other problems as well, but I think that covers it.

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