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CareOne Jumps on Bandwagon with Credit Counseling Request for FTC to Take Action Against Rogue Debt Settlement Companies

A pretty smart move by CareOne. See press release below.

CareOne Jumps on Bandwagon with Credit Counseling Request for FTC to Take Action Against Rogue Debt Settlement Companies
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CareOne Expands On Push to Close Debt Settlement Loopholes

Columbia, Md. (December 16, 2010) – CareOne Services Inc. is adding its support to an effort launched December 15th by 11 nonprofit debt relief providers seeking more aggressive enforcement of the Federal Trade Commission’s recently amended Telemarketing Sales Rules. However, the concerns raised by the nonprofits in their open letter to the FTC obscure the biggest threats to consumers that must also be addressed.

The additional loopholes that need to be addressed include:

  1. Ensure that regulations apply to all debt settlement providers, regardless of tax status. Approximately 85 percent of the debt relief industry is comprised of nonprofit companies who are exempt from the FTC rules.
  2. Require that debt settlement providers not operate as “dual agents” by being compensated by both consumers and credit card companies. Under the current practice in the nonprofit industry, companies are allowed to charge consumers for services while also accepting payments from the credit card companies they are negotiating with.

“Many nonprofits, including agencies that are part of the current push for stronger enforcement of the FTC rules, are beginning to offer debt settlement services,” said Mike Croxson, president of CareOne Services. “Fixing these two loopholes, as well as the other concerns that have been raised, such as the use of text messages and online chats to communicate with customers, will ensure that all providers are acting in consumers’ best interests.”

CareOne has been a leading proponent of the FTC rules since they were first announced and supports aggressive enforcement of the rules. In August, CareOne asked the three leading nonprofit trade associations to voluntarily comply with the FTC rules. Although none of the associations agreed to that request, CareOne believes the current effort by 11 nonprofits is consistent with the views it has long championed.

For example, CareOne has consistently advocated that the practice of Fair Share needs to be more closely examined. Under Fair Share, nonprofit providers of debt management programs not only receive a fee for their services from the customer, but also receive payments from credit card companies for ensuring that bills are paid in full and on-time. In some instances, the payments from credit card companies can equal 50 percent of a nonprofit’s income. Payments like these can create a real conflict of interest in debt management programs, but that conflict becomes more pronounced as nonprofits move into debt settlement.

“How can companies say they are acting in a consumer’s best interest to settle their debt for less than they owe, while still accepting payments from the credit card companies?” Croxson said. “As long as these organizations are accepting Fair Share payments, their real motives will always be questionable.”

To help provide the scrutiny required of all members in the debt relief industry, regardless of tax status, CareOne has been a staunch supporter of the Consumer Financial Protection Bureau, which Congress created this summer and which will have the authority to regulate both for-profit and nonprofit providers.

“We agree that there are several bad players in debt relief and that there should be tough and enforceable laws to govern the industry and protect consumers,” Croxson said. “The new FTC rules and laws enacted by many states are a good first step. However, regulations must be put in place that will hold all companies to the same standards, regardless of tax status.”

About CareOne

CareOne Services Inc. is a debt relief company formed in 2002 to provide consumers with multiple solutions to complex money issues. CareOne takes a holistic approach to assisting customers in debt and reviews each situation to create achievable financial solutions. CareOne’s services include credit counseling, debt management, debt settlement, as well as free referrals to bankruptcy attorneys if that is in the best interest of the consumer.

CareOne also provides the CareOne Community (Community.CareOneCredit.com), a free online resource for consumers that includes educational tools, blogs and forums where more than a million people share their experiences and receive support from others in similar situations.

Headquartered in Columbia, Md., CareOne has helped more than 2 million people. In 2009, it provided consumers with the tools and assistance to pay down more than $294 million in debt. CareOne provides services in 41 states. For more information, call 1-800-373-3225 or visit CareOneCredit.com.

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CareOne Jumps on Bandwagon with Credit Counseling Request for FTC to Take Action Against Rogue Debt Settlement Companies by

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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.
  • Ken

    I enjoyed reading about these recommendations from Mike Croxson of Care One. This debt relief
    company seems to be a shining example of how a good debt relief company should be run.

    But I’m interested in knowing what the numbers were with CareOne for debt settlements before the FTC ruling in October of 2010 and what it is now. Can we contrast say May 2010 and May 2011. Can those stats be obtained?  
    Also curious as to whether they were doing the performance model before the FTC ruling. I did look
    through Steve Rhodes resources on this but did not see it. 

    A1A

  • Andy Faria

    I’m not going to bash your post, but I also can’t agree with any of it.

    Reasonable time. Is over a year not enough time? The rule was announced in July 2009, it was obvious from it’s inception that it would inevitably pass. The rule didn’t go into effect until Oct 2010, any business that needs more than 15 months to get it right shouldn’t be in business at all.

    To me it doesn’t matter whether or not they are not they are “folks that care deeply about the customer’s liberation from debt”. They either comply or they don’t. And the one that don’t will be flushed out, sooner or later.

    I applaud CareOne with this press release.

  • Sean

    Ill go 1st. And I am his competitor.
    Mike Croxon, you may have noticed did NOT sign the letter sent from all the other CCC companies. This letter is an excellent indication of why.
    The debt settlement industry WAS rife with scum & the industry had nearly a year of KNOWING the changes were coming fast.
    What debt settlement was with the upfront fees was no more than a license to steal. The so called “legal models” is still nothing more.
    The ONLY way to ensure high levels of success is to get paid AT settlement.
    It came to this whether we wanted it or not because of they way the majority in the industry was acting.
    The CCC industry, moreover is looking to the 60-60 plan to eliminate what is left in the industry. Mike makes an excellent point that if you allow non-profits to circumvent the TSR and into DS, the conflict of interest is overwhelming as now youre allowing a client to default while arranging a payment directly AND being paid by the creditor & the client to do so.
    This letter demonstrates Care One is NOT signing on to the DS bashing group of CCC’s but simply stating that they agree the need to eliminate those DS companies still charging fees before service by loopholing.
    We complied with the “new” TSR from 10-27-10 4 years ago. If you feel you didnt have enough time, I disagree.

    Sean Ryan
    Active Debt Solutions

  • LifeLibertyHappiness

    It’s sad to see the level of suck-up to the FTC and how scared the Credit Counseling Industry is of some competition. Instead of bashing with a broad brush all those that work in DS (in which by the way, there are many folks that do care deeply about the customer’s liberation from debt), why don’t you just concentrate on doing what you believe you do so well, and leave customers with options? If your solution is so superior, customers will reward you and the market will take care of things. Groveling to government to effectively wipe out your competition is about as lame as you can get (oh wait, you only have the consumer’s best interest in mind!) Believe me, your time will come when the FTC, or the like, will gun for you, and then your love will grow cold.
    Regardless of whether the FTC was within their boundaries, or even if what they did was good, the fact that they gave DS companies so little time to comply shows an utter ignorance of business issues and/or a total disrespect to the employees of such companies. Consumer protection can’t work if the bottom line assumption is that “everyone in such-and-such industry is evil,” and if consumer protection doesn’t try to make rule adherence reasonable for businesses.
    You would have seen a much better result, and hundreds if not thousands of jobs saved if the FTC would have simply given the DS companies a reasonable time to prepare for and comply to the rules.
    Let the bashing of my post begin…

  • LifeLibertyHappiness

    It’s sad to see the level of suck-up to the FTC and how scared the Credit Counseling Industry is of some competition. Instead of bashing with a broad brush all those that work in DS (in which by the way, there are many folks that do care deeply about the customer’s liberation from debt), why don’t you just concentrate on doing what you believe you do so well, and leave customers with options? If your solution is so superior, customers will reward you and the market will take care of things. Groveling to government to effectively wipe out your competition is about as lame as you can get (oh wait, you only have the consumer’s best interest in mind!) Believe me, your time will come when the FTC, or the like, will gun for you, and then your love will grow cold.
    Regardless of whether the FTC was within their boundaries, or even if what they did was good, the fact that they gave DS companies so little time to comply shows an utter ignorance of business issues and/or a total disrespect to the employees of such companies. Consumer protection can’t work if the bottom line assumption is that “everyone in such-and-such industry is evil,” and if consumer protection doesn’t try to make rule adherence reasonable for businesses.
    You would have seen a much better result, and hundreds if not thousands of jobs saved if the FTC would have simply given the DS companies a reasonable time to prepare for and comply to the rules.
    Let the bashing of my post begin…

    • Sean

      Ill go 1st. And I am his competitor.
      Mike Croxon, you may have noticed did NOT sign the letter sent from all the other CCC companies. This letter is an excellent indication of why.
      The debt settlement industry WAS rife with scum & the industry had nearly a year of KNOWING the changes were coming fast.
      What debt settlement was with the upfront fees was no more than a license to steal. The so called “legal models” is still nothing more.
      The ONLY way to ensure high levels of success is to get paid AT settlement.
      It came to this whether we wanted it or not because of they way the majority in the industry was acting.
      The CCC industry, moreover is looking to the 60-60 plan to eliminate what is left in the industry. Mike makes an excellent point that if you allow non-profits to circumvent the TSR and into DS, the conflict of interest is overwhelming as now youre allowing a client to default while arranging a payment directly AND being paid by the creditor & the client to do so.
      This letter demonstrates Care One is NOT signing on to the DS bashing group of CCC’s but simply stating that they agree the need to eliminate those DS companies still charging fees before service by loopholing.
      We complied with the “new” TSR from 10-27-10 4 years ago. If you feel you didnt have enough time, I disagree.

      Sean Ryan
      Active Debt Solutions

    • http://northeast-properties.com Andy Faria

      I’m not going to bash your post, but I also can’t agree with any of it.

      Reasonable time. Is over a year not enough time? The rule was announced in July 2009, it was obvious from it’s inception that it would inevitably pass. The rule didn’t go into effect until Oct 2010, any business that needs more than 15 months to get it right shouldn’t be in business at all.

      To me it doesn’t matter whether or not they are not they are “folks that care deeply about the customer’s liberation from debt”. They either comply or they don’t. And the one that don’t will be flushed out, sooner or later.

      I applaud CareOne with this press release.

  • Errick

    Before you light the torches and sharpen the pitchforks, think a bit. CareOne receives something like 30-40 percent of a debt settlement customer’s savings from the initial balance of the account, in conformance with the FTC rules. When they settle an account, the customer and CareOne share the concession given by the creditor. CareOne receives the creditor’s asset, not the customer’s. They get it by tacking it on to the client’s payments. The client can’t just pay the settlement and worry about CareOne when it’s all over.

    This is actually the purest form of a conflict of interest, although it’s hard to see at first. The creditor only cares about the net settlement amount and the date of settlement, they are indifferent to the arrangement between CareOne and the customer. But CareOne and the customer are competing for the same money, the customer wants it for the next settlement but CareOne wants it for fees. CareOne has an incentive to maximize, not minimize, the total benefit to the creditor, because it results in the most fees, especially since the representation is designed to end prematurely.

    This is why CareOne’s customers are often happy for six months, many of them get small and easy settlements. This is easy money for CareOne, but by the time the game gets hard and the customer needs the money that has gone to fees to avoid bankruptcy and ruin, CareOne has left the building. Why? Because they are running the 45+15=50 racket. It’s really beautiful to watch unless you’re the customer.

  • Errick

    Before you light the torches and sharpen the pitchforks, think a bit. CareOne receives something like 30-40 percent of a debt settlement customer’s savings from the initial balance of the account, in conformance with the FTC rules. When they settle an account, the customer and CareOne share the concession given by the creditor. CareOne receives the creditor’s asset, not the customer’s. They get it by tacking it on to the client’s payments. The client can’t just pay the settlement and worry about CareOne when it’s all over.

    This is actually the purest form of a conflict of interest, although it’s hard to see at first. The creditor only cares about the net settlement amount and the date of settlement, they are indifferent to the arrangement between CareOne and the customer. But CareOne and the customer are competing for the same money, the customer wants it for the next settlement but CareOne wants it for fees. CareOne has an incentive to maximize, not minimize, the total benefit to the creditor, because it results in the most fees, especially since the representation is designed to end prematurely.

    This is why CareOne’s customers are often happy for six months, many of them get small and easy settlements. This is easy money for CareOne, but by the time the game gets hard and the customer needs the money that has gone to fees to avoid bankruptcy and ruin, CareOne has left the building. Why? Because they are running the 45+15=50 racket. It’s really beautiful to watch unless you’re the customer.

    • Cupid

      Nonprofit DMP-ers rely on creditors “donations” to survive yet say they represent the consumers they serve. Is that not a pure conflict of interest or what?

  • Jason Taylor

    Awsome letter from CareOne! The FTC needs to have a pow wow with Mr. Croxson and consult with the Attorneys from this lawsuit- http://getoutofdebt.org/24410/… in addition to many other sources of information about how non-profit credit counselors operate, if they don’t already know.

    Either the 60/60 plan or debt settlement without prearranged settlements, it is debt settlement and the credit counselors need to be held to the same standards, in fact they should be even higher standards as they obvioulsy want to continue to claim non-profit.

    I could see a smaller second credit counseling shakedown not much unlike the one from 10 years ago. I guess it really depends if regulators think fair share is a conflict of interest. I also still see a lot of credit counselors claiming their programs do not hurt your credit even though the NFCC’s own website says it does.

  • Jason Taylor

    Awsome letter from CareOne! The FTC needs to have a pow wow with Mr. Croxson and consult with the Attorneys from this lawsuit- http://getoutofdebt.org/24410/credit-counseling-groups-in-the-crosshairs-with-pay-for-performance-history in addition to many other sources of information about how non-profit credit counselors operate, if they don’t already know.

    Either the 60/60 plan or debt settlement without prearranged settlements, it is debt settlement and the credit counselors need to be held to the same standards, in fact they should be even higher standards as they obvioulsy want to continue to claim non-profit.

    I could see a smaller second credit counseling shakedown not much unlike the one from 10 years ago. I guess it really depends if regulators think fair share is a conflict of interest. I also still see a lot of credit counselors claiming their programs do not hurt your credit even though the NFCC’s own website says it does.

  • http://www.ftc.gov ComplianceSlave

    Well Put- Well said

  • ComplianceSlave

    Well Put- Well said

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