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Hutton & Dougherty. An Interesting Approach.

A tipster (send in your tips here) brought a company called Hutton & Dougherty to my attention.The company is actually Hutton-Dougherty, Inc, a California corporation. Douglas Scott Hutton is an officer and Gerard M Dougherty is the registered agent. – Source. Gerard Dougherty is a lawyer in California. – Source. It does not appear that Hutton is a lawyer. He is not registered with the sate Bar.

Hutton & Dougherty. An Interesting Approach.

Hutton-Doughtery is promoting the following debt settlement package deals which appears to solicit payment in advance of settling debt for those that select the package to pay down the settlement fee.

Hutton & Dougherty. An Interesting Approach.

What I found interesting is the agreement says the company providing the services is “The Offices of Hutton & Dougherty” but that is not the name of the corporation in California. It is Hutton-Dougherty, Inc.

The full client agreement can be viewed here.

Hutton & Dougherty. An Interesting Approach.
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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.
  • Anon

    Has Doug answered you?

  • Steve Rhode

    DOUG!!!!!

    CAN YOU PLEASE ANSWER THE COMMENTERS QUESTION ABOUT YOU BEING A CONVICTED FELON. I DON’T WANT THAT HANGING OUT THERE IF IT IS NOT TRUE. THIS IS THE THIRD TIME I’VE ASKED AND IN CASE YOU MISSED THE OTHER TWO REQUESTS I’M PUTTING THIS ONE IN CAPS SO HOPEFULLY YOU SEE IT.

  • Steve Rhode

    Doug,

    Can you please address the commenters that are saying you are a convicted felon. If that is not true I’d like to make sure you set the record straight.

  • Anon

    I’ve been following the blog comments regarding Hutton-Dougherty, Inc. I’ve noticed several recent comments regarding Douglas Hutton being a convicted felon. Through sources, I confirmed Hutton has an extensive criminal record in the State of California. He has been arrested for weapons charges, drug possessions, forgery/fraud, and kidnapping. On the blogs, he seems to comment to you and others defending his company, but he doesn’t comment on his past/present situations. Does the FTC regulate people like Hutton? Is there any binding laws, regulations, or disclaimers you are aware of that would exclude Hutton from his current line of work? I feel his customers need to know about this. Sounds like bad business to me. He preaches “integrity and ethical standards” in his website and honestly, I don’t see anything ethical about this “Con” playing the role of a businessman. Feel free to check out http://www.intelius.com for information pertaining to Hutton. Thank you for your time and research into this matter.

  • Anon

    I’ve been following the blog comments regarding Hutton-Dougherty, Inc. I’ve noticed several recent comments regarding Douglas Hutton being a convicted felon. Through sources, I confirmed Hutton has an extensive criminal record in the State of California. He has been arrested for weapons charges, drug possessions, forgery/fraud, and kidnapping. On the blogs, he seems to comment to you and others defending his company, but he doesn’t comment on his past/present situations. Does the FTC regulate people like Hutton? Is there any binding laws, regulations, or disclaimers you are aware of that would exclude Hutton from his current line of work? I feel his customers need to know about this. Sounds like bad business to me. He preaches “integrity and ethical standards” in his website and honestly, I don’t see anything ethical about this “Con” playing the role of a businessman. Feel free to check out http://www.intelius.com for information pertaining to Hutton. Thank you for your time and research into this matter.

  • Darren H.

    Not saying you made any claims Steve, however, several other people did on these comment boards. I too researched Douglas Scott Hutton (Hutton-Dougherty Inc.) on http://www.intelius.com and located a “Douglas Hutton” residing in Thousand Oaks, CA. The website listed his birthday as January 17, 1981 (30 years old). In one of Douglas’ blogs, he mentioned he grew up in Thousand Oaks/Westlake. This has to be the same guy. The background check revealed he was arrested on forgery, kidnapping, drugs, and weapons related charges. The background check confirmed he was a convicted felon who was incarcerated in our California Prison System. Look it up if you so desire.

  • Steve Rhode

    I never made any claims that Doug Hutton is a felon and have not researched that issue. Those claims rest on the commenter that made them. I have not seen any proof that Douglas Hutton of Hutton & Dougherty is the felon in question. Do you have any information to support your claim that it is the same guy?

  • Darren H.

    Steve, does the FTC do their homework? Do they know Douglas Hutton is a convicted “FELON?” Who knows! .. He may still be on State Parole!!! I need to find out if the State of California is aware of this “said” businessman. He should be flagged if you ask me. I would never trust this “scumbag” with any of my financial situation, especially with my SS#. How about yourself? YELP needs to hear about this guy! Good job bringing this company to light.

  • Joseph Blakely

    Unbelievable Daniel. Excellent job on your research. You are absolutely right! Doing my own Internet research I found out Douglas Hutton is a convicted “FELON” and has a “Rap Sheet” over a mile long!!! I saw numerous weapon, drug, identity theft, and forgery charges to say the least. How can he claim on his website that: “Hutton and Dougherty INC is a performance based Debt Settlement company that prides itself off our ethical values.” Ethical values??? Douglas Hutton is a joke! He’s probably STEALING clients money as we speak! Cons are in the game forever, and he is a reported con. Has anyone placed these findings on YELP yet?

  • Daniel Young

    Good afternoon Steve. Interesting comments about Douglas Hutton not being a lawyer. I too was unable to locate any State Bar information, which qualifies Mr. Hutton as an attorney. Pretty misleading for the business name. My online search did reveal some interesting information/facts about Mr. Hutton. Records show he has an extensive criminal history in the State of California and has been incarcerated in the state prison system. Is there anyone out there who has also located this information? Maybe the attorney in his practice attempted to defend him in court and that is how they met. Very interesting …….

  • Daniel Young

    Good afternoon Steve. Interesting comments about Douglas Hutton not being a lawyer. I too was unable to locate any State Bar information, which qualifies Mr. Hutton as an attorney. Pretty misleading for the business name. My online search did reveal some interesting information/facts about Mr. Hutton. Records show he has an extensive criminal history in the State of California and has been incarcerated in the state prison system. Is there anyone out there who has also located this information? Maybe the attorney in his practice attempted to defend him in court and that is how they met. Very interesting …….

    • Joseph Blakely

      Unbelievable Daniel. Excellent job on your research. You are absolutely right! Doing my own Internet research I found out Douglas Hutton is a convicted “FELON” and has a “Rap Sheet” over a mile long!!! I saw numerous weapon, drug, identity theft, and forgery charges to say the least. How can he claim on his website that: “Hutton and Dougherty INC is a performance based Debt Settlement company that prides itself off our ethical values.” Ethical values??? Douglas Hutton is a joke! He’s probably STEALING clients money as we speak! Cons are in the game forever, and he is a reported con. Has anyone placed these findings on YELP yet?

  • Joe Lorenson

    SCAM, SCAM, SCAM!! Stay far far away! I’ve heard nothing but problems with this company!!!!

  • Joe Lorenson

    SCAM, SCAM, SCAM!! Stay far far away! I’ve heard nothing but problems with this company!!!!

  • Steve Rhode

    I’ve noticed that the IP address’ you are posting from are also posting under a wide variety of monikers. It has also been responsible for posting inappropriate language and threats.

    While I invite a robust discussion I feel a need to provide a warning that to continue to participate on this site in conversations you will need to pick one identity, stop making threats, and tone down some of your language that has been included from other names this IP address, and the other one used, uses such as Forewarned, The Truth, Fines for Steve, Get It Right, and others.

    I don’t want to blacklist you on the site but will if this continues. This is the only warning I will give since I’ve been so lenient up to this point.

    I’m not saying you can’t disagree, have a different opinion or have a factual discussion. But keep it civil and appropriate.

  • Doug

    Actually Apex is a whole seperate entity and company owned and operated by completely different parties. The point of cleaning up your credit at the same time as settlements are being done will give the client the maximum chance to have next to a clear credit report at the time of completion. This also enables clients to possibly get a car since they couldn’t or wouldn’t have qualified for the loan and potentially get a home loan quicker to replace the house they loss or to supply a homeowner as a renter a credit report they will say yes to INSTEAD of NO. They may even get the job that the employer didn’t hire them for because of their situation. I’m sorry just use common sense and if you want to join our program our company will give you 2 free pencils.

  • Doug

    I WILL SAY NO ONE HAS BEEN SOLD ANY PACKAGE DEALS AND NO ONE WILL UNLESS THIS GETS APPROVED BY THE FTC. NOT ONE CENT HAS BEEN COLLECTED ON ANY CLIENT WHO SIGNED UP AFTER OCTOBER 27th unless the first payment was made to the creditor on a term settlement or if paid in full. This was an internal error and has been fixed. Below is my feelings about this and how i came up with this.
    As our industry changed I had a lot of nightmares of how it could put potentially any settlement company out of business. New Era, a former employer of mine has many family members on staff. All of which I adored and grew close too. I thought of their families and kids as well as my own family and kids and was hoping to change the industry and keep good companies around. If any client chooses HuttonandDougherty Inc. or New Era (as we know in this industry there is never a guarantee and lots of bad companies out there) I guarantee you will get out of debt and get excellent service done properly and promptly. Dan Smith and Alex Viecco (owners)are very good people with a lot of business experience, knowledge, and Howard (their attorney and settlement department manager)run a tight ship. I will never mind losing a potential client to them because of their length in the industry, how much debt they have settled as a company, and they will do the work(at a higher price).They got a lot of negativeness from their F rating issue with the BBB because in ths industry, unless you buy your rating it can be tough to not be labelled because of dishonest companies and the industry label as a whole. I will also say their negative remarks were mostly about clients paying less to the creditor for settements costing them less than their high fee structure, and some people are just never happy. 90% of the junk said was the way clients percieved things because they don’t pay attention at the beginning, they just want the financial distress to be lifted. New Era gave me the tools to be their top negotiator for years running and the skills for client retention. It’s amazing after 3 years of being gone they still use all my testimonials and audio testimonials. They also helped me see that I needed to create a program for clients at a lot less cost, which before the no upfront fee regulation, our contracts varied at a 10-12% fee structure, in turn giving them their lives back sooner and making their journey towards financial freedom quicker than any other company. So back to the nightmares. On October 28th I realized my nightmares(I had to raise my backend fee to upwards of 15-20% to survive)were turning into a dream when I found a solution that didn’t force any client to pay an upfront fee but merely gave them an option to purchase a package that would save them thousands more than before and give us as companies more rope to provide clients an excellent service and keep our businesses a float. I will say that when this contract got out it was a mistake and I’m sure the tipster (which i pretty much have an idea who it was) got a lower percentage than any other company they shopped out there. I guarantee not any other clients or potential clients will or have recieved this until our attorney looks further into it. We will make sure also that any contract disputes of the contract posted are to code as well as potentially re written if neccessary. I have nothing to hide, I think all companies should have a contract online for people to view. Especially IF YOU ARE HIDING NOTHIN! We also have not crossed any lines or have taken any upfron fees since the closing on October 27 2010. We plan to contact the FTC as well to get the actual legality behind percentage package buy downs, which i must add is genius if it complies to the ftc. then hopefully the entire debt settlement industry will adapt to it. I didn’t think I would create such a stir but GOOD BUSINESS IS FAIR BUSINESS and that is why we are only word of mouth and do no advertising. If that doesn’t show that we are a good company then you will just have to go with your opinions or experience.

  • Doug

    I WILL SAY NO ONE HAS BEEN SOLD ANY PACKAGE DEALS AND NO ONE WILL UNLESS THIS GETS APPROVED BY THE FTC. NOT ONE CENT HAS BEEN COLLECTED ON ANY CLIENT WHO SIGNED UP AFTER OCTOBER 27th unless the first payment was made to the creditor on a term settlement or if paid in full. This was an internal error and has been fixed. Below is my feelings about this and how i came up with this.
    As our industry changed I had a lot of nightmares of how it could put potentially any settlement company out of business. New Era, a former employer of mine has many family members on staff. All of which I adored and grew close too. I thought of their families and kids as well as my own family and kids and was hoping to change the industry and keep good companies around. If any client chooses HuttonandDougherty Inc. or New Era (as we know in this industry there is never a guarantee and lots of bad companies out there) I guarantee you will get out of debt and get excellent service done properly and promptly. Dan Smith and Alex Viecco (owners)are very good people with a lot of business experience, knowledge, and Howard (their attorney and settlement department manager)run a tight ship. I will never mind losing a potential client to them because of their length in the industry, how much debt they have settled as a company, and they will do the work(at a higher price).They got a lot of negativeness from their F rating issue with the BBB because in ths industry, unless you buy your rating it can be tough to not be labelled because of dishonest companies and the industry label as a whole. I will also say their negative remarks were mostly about clients paying less to the creditor for settements costing them less than their high fee structure, and some people are just never happy. 90% of the junk said was the way clients percieved things because they don’t pay attention at the beginning, they just want the financial distress to be lifted. New Era gave me the tools to be their top negotiator for years running and the skills for client retention. It’s amazing after 3 years of being gone they still use all my testimonials and audio testimonials. They also helped me see that I needed to create a program for clients at a lot less cost, which before the no upfront fee regulation, our contracts varied at a 10-12% fee structure, in turn giving them their lives back sooner and making their journey towards financial freedom quicker than any other company. So back to the nightmares. On October 28th I realized my nightmares(I had to raise my backend fee to upwards of 15-20% to survive)were turning into a dream when I found a solution that didn’t force any client to pay an upfront fee but merely gave them an option to purchase a package that would save them thousands more than before and give us as companies more rope to provide clients an excellent service and keep our businesses a float. I will say that when this contract got out it was a mistake and I’m sure the tipster (which i pretty much have an idea who it was) got a lower percentage than any other company they shopped out there. I guarantee not any other clients or potential clients will or have recieved this until our attorney looks further into it. We will make sure also that any contract disputes of the contract posted are to code as well as potentially re written if neccessary. I have nothing to hide, I think all companies should have a contract online for people to view. Especially IF YOU ARE HIDING NOTHIN! We also have not crossed any lines or have taken any upfron fees since the closing on October 27 2010. We plan to contact the FTC as well to get the actual legality behind percentage package buy downs, which i must add is genius if it complies to the ftc. then hopefully the entire debt settlement industry will adapt to it. I didn’t think I would create such a stir but GOOD BUSINESS IS FAIR BUSINESS and that is why we are only word of mouth and do no advertising. If that doesn’t show that we are a good company then you will just have to go with your opinions or experience.

    • http://GetOutOfDebt.org Steve Rhode

      Doug,

      Can you please address the commenters that are saying you are a convicted felon. If that is not true I’d like to make sure you set the record straight.

    • http://GetOutOfDebt.org Steve Rhode

      DOUG!!!!!

      CAN YOU PLEASE ANSWER THE COMMENTERS QUESTION ABOUT YOU BEING A CONVICTED FELON. I DON’T WANT THAT HANGING OUT THERE IF IT IS NOT TRUE. THIS IS THE THIRD TIME I’VE ASKED AND IN CASE YOU MISSED THE OTHER TWO REQUESTS I’M PUTTING THIS ONE IN CAPS SO HOPEFULLY YOU SEE IT.

      • Anon

        Has Doug answered you?

  • Bulb

    Your a switch hitting troll who probably just wants to suck face. I don’t do peg legged gnomes.

    Your inanities are way fun. What now el supremo TARD!

  • Bulb

    Your a switch hitting troll who probably just wants to suck face. I don’t do peg legged gnomes.

    Your inanities are way fun. What now el supremo TARD!

  • Just a matter of time

    I want to come to your room to throw my tantrum! Bulb you are a loser period! I want to pay you a visit for some good face to face debate!!

  • Bulb

    Hi there Jamot,

    First of all, your a dick and an idiot.

    Having said that, most companies converting to a compliant model did so because it is required. Most of their fee structures, in aggregate, did not change. Those who have changed the aggregate to a larger amount can and should be shopped by consumers looking for the best service and fee.

    Please post in reply any loophole company charging either 10% of savings or 10% of total debt.

    People like Mike are engaged in intelligent dialogue while operating their company in full observance of the law.

    You on the other hand are a whining little brat who does not get his way and is throwing a tantrum.

    Go to your room!

  • Just a matter of time

    All of you guys are blowing each other & all of you are making money doing the exact same thing! People like Mike point out valid issues & all you idiots can do is try to bash it so people pay you upwards of 30% for a worse service than a loophole company charging 10%! We rape you later! Hilarious!

  • Just a matter of time

    That’s because you’re an idot who ripps people off!

  • Just a matter of time

    Awesome Mike!! There will soon be hundreds of people pointing out that these clowns on this site are ripping off ALL of their clients!! They don’t charge you upfront, they charge you 3 times more because they charge you later! They have no interest in creative thinking, all they want to do is use fear & half truths to steal other businesses clients so they can rip them off later!! Hilarious!!

  • Just a matter of time

    You openly admit to owning a debt settlement company don’t you? If someon doesn’t do it like you do even if they provide a better service these idiots blindly bash it! Andy, Sean, Alex are all “friends” who ripoff consumers by bashing anyone & everyone who doesn’t do business their way! This is America! The land of the free! Not the land of do as I say or you are a loser & a liar! All these idiots are low life bottom feeders feeding off of other businesses clients by using fear tactics & half truths! Buyer beware!

  • Joe_debt_jr

    I am going to charge a fee to be someone’s friend and help them settle any debt they would like me to help them settle once they pay me to be their friend. :)

  • Anonymous

    I am going to charge a fee to be someone’s friend and help them settle any debt they would like me to help them settle once they pay me to be their friend. :)

  • Jason Taylor

    Are clients paying for advance fees with companies like LHDR because they don’t know there are programs that do not charge them or because they do not care….. or because they feel more comfortable with the attorney representation?

    I have a feeling we are quickly headed down the direction of non-advance fee companies not being able to compete with high CPAs for too much longer and if there is no enforcement action by mid year, more companies will throw in the the towel. Maybe two or three big compaines like Care One will try to own the market?

  • Mike Reilly

    Where does this say this is illegal, I love the last sentence…is charging a fee for setting the fee of a contract a debt relief service… I’m playing with you guys don’t freak out….hahahah

  • AlexV

    Hi Steve,
    Did ANYONE really doubt this? Really? How can this NOT fall into the category of advance fee. How does it differ from “consultation Fee”, “Kit” Fee, “Marketing Fee” or “BS Fee”.
    Do I wish they would have given us a little room to recuperate the high cost of marketing?…YES, but that is not the case so if you want to be in compliance, the message is pretty clear.
    NO UP-FRONT FEES.
    Simple not too complicated.
    Thanks
    Alex Viecco

    BTW Steve, I heard the exact same thing from the FTC. Thanks for posting it.

  • Damon Day

    Umm, I think the legal term I am searching for is. “Well Duh” :-)

  • Steve Rhode

    I heard back from the FTC on this and here is what they said:

    “We would look to the prohibtion on “requesting or receiving payment of any fee or consideration” before settling a debt in determining this. It doesn’t matter what a service provider calls a fee – it is still a “fee or consideration.” We look to whether the payment is in fact consideration for a service, not the name an entity has for it.”

  • http://GetOutOfDebt.org Steve Rhode

    I heard back from the FTC on this and here is what they said:

    “We would look to the prohibtion on “requesting or receiving payment of any fee or consideration” before settling a debt in determining this. It doesn’t matter what a service provider calls a fee – it is still a “fee or consideration.” We look to whether the payment is in fact consideration for a service, not the name an entity has for it.”

    • http://DamonDay.com Damon Day

      Umm, I think the legal term I am searching for is. “Well Duh” :-)

    • AlexV

      Hi Steve,
      Did ANYONE really doubt this? Really? How can this NOT fall into the category of advance fee. How does it differ from “consultation Fee”, “Kit” Fee, “Marketing Fee” or “BS Fee”.
      Do I wish they would have given us a little room to recuperate the high cost of marketing?…YES, but that is not the case so if you want to be in compliance, the message is pretty clear.
      NO UP-FRONT FEES.
      Simple not too complicated.
      Thanks
      Alex Viecco

      BTW Steve, I heard the exact same thing from the FTC. Thanks for posting it.

    • Mike Reilly

      Where does this say this is illegal, I love the last sentence…is charging a fee for setting the fee of a contract a debt relief service… I’m playing with you guys don’t freak out….hahahah

      • Jason Taylor

        Are clients paying for advance fees with companies like LHDR because they don’t know there are programs that do not charge them or because they do not care….. or because they feel more comfortable with the attorney representation?

        I have a feeling we are quickly headed down the direction of non-advance fee companies not being able to compete with high CPAs for too much longer and if there is no enforcement action by mid year, more companies will throw in the the towel. Maybe two or three big compaines like Care One will try to own the market?

    • Darren H.

      Steve, does the FTC do their homework? Do they know Douglas Hutton is a convicted “FELON?” Who knows! .. He may still be on State Parole!!! I need to find out if the State of California is aware of this “said” businessman. He should be flagged if you ask me. I would never trust this “scumbag” with any of my financial situation, especially with my SS#. How about yourself? YELP needs to hear about this guy! Good job bringing this company to light.

      • http://GetOutOfDebt.org Steve Rhode

        I never made any claims that Doug Hutton is a felon and have not researched that issue. Those claims rest on the commenter that made them. I have not seen any proof that Douglas Hutton of Hutton & Dougherty is the felon in question. Do you have any information to support your claim that it is the same guy?

      • Darren H.

        Not saying you made any claims Steve, however, several other people did on these comment boards. I too researched Douglas Scott Hutton (Hutton-Dougherty Inc.) on http://www.intelius.com and located a “Douglas Hutton” residing in Thousand Oaks, CA. The website listed his birthday as January 17, 1981 (30 years old). In one of Douglas’ blogs, he mentioned he grew up in Thousand Oaks/Westlake. This has to be the same guy. The background check revealed he was arrested on forgery, kidnapping, drugs, and weapons related charges. The background check confirmed he was a convicted felon who was incarcerated in our California Prison System. Look it up if you so desire.

  • Damon Day

    Hey Robert,

    I have seen companies charging upwards of 25% to 30% of a clients total debt by the time all of the fees are added up. The equation gets way out of whack when you start looking at the fees paid and the results obtained with most of these advance fee programs. The point was, that as illogical as many of these programs operate, the market was not able to effectively correct itself because a super majority of the programs within the market were participating in the wrong doing.

    Consumers were rarely presented with a good option simply because they were not able to find one. If you wanted to compete, you had to pay the rates that the scammers and scumbags where more than willing to pay. They weren’t really offering much of a service anyway so they could afford to pay 80 to 90 percent of their revenues for client acquisition. If that was just a small handful of companies then, consumers would easily be able to avoid that, however, if that was a large majority then that would price out the small number of companies that were actually providing a service and like most legitimate businesses, not afford to pay that much for marketing. Any companies that are struggling, feel free to blame the parties that were largely responsible for the situation you are in now. TASC and USOBA did this to you. If they actually did the job they pretended to do, the amendment to the TSR likely would never have been an issue.

    Imagine a world where TASC and USOBA with 400 members between them would have done the logical thing and required members to be on a performance based fee structure. Sure a reasonable retainer upfront is fine to help offset marketing costs and make the client have some skin in the game, but the bulk of the fees paid out on results and performance. Imagine how different the industry would look now if the people running TASC and USOBA actually cared about consumers and their members. The question you should ask yourself is, were they simply greedy, just not that bright or perhaps both? Things that make you go hmmmm.

    The passage of the amendment to the TSR will help to push these scammers and scumbags on to other vehicles to rip consumers off (they don’t go away, just go to something else) but until the FTC actually starts to heavily enforce this amendment, you will not see the advertising costs move down much to where the fair market dictates they should be.

    You could of course point out, that the regulation doesn’t make it a fair market and you would be right, but collusion doesn’t make for a fair market either. However the regulation does break the collusion and makes it a safer market for consumers, and that was the goal of the TSR. Unfortunately, if the FTC doesn’t quickly stomp these guys out, one of the unintended consequences will be that many good programs will not be able to survive and compete against companies that are still charging upfront and providing mediocre services that allow them to throw all of their resources into marketing.

  • Robert S

    Damon,

    A lot of this makes sense, but I can see this done responsibility (of course, we run a No Advanced fee company so probably why we see it this way) and absolutely there is truth to the “slippery slop” of opening a loophole.

    What is an “extreme” price when you said –> “companies been charging extreme prices and getting away with it?”

    “The FTC cannot move as quickly as they need to move. Regulation without quick enforcement only hurts the ones who are trying to comply.”

    –> Believe me, we know. Our office is giving our employees multiple hats so we can get through this. It’s difficult competing on Google/Yahoo with companies who charge up front fees. They are bidding higher than we can afford to pay since we are only getting paid on performance.

  • SeanDSLegalPlan

    “Like”

  • Damon Day

    oh, I am really shocked.

  • Damon Day

    Hello Robert,

    I respectfully disagree that the market will price itself accordingly. How many years before the TSR have companies been charging extreme prices and getting away with it? They had a de facto monopoly on the advertising space simply because of the amount of money they could afford to throw at people to sucker them in. If some companies are allowed to charge upfront fees and some companies are not, you simply have an unfair playing field and the market will not operate as it should.

    When I say good chunk of money I am not talking about this specific company. If as some are arguing here, this marketing gimmick could pass muster, than the sky is the limit on what a company could charge to “buy down the rate.”

    This would make the TSR obsolete as it would allow any company including LHDR, to change the words in the contract and continue to charge upfront. What if LHDR simply said the 500 upfront is to “buy down” our rate. They could run the exact fee structure that everyone is in an uproar about and change the words in the contract to do what this company is doing and charge the same thing. I am not sure why some people fail to see how this would happen, but it doesn’t really matter.

    Further, I want to be clear. I actually think a settlement company should be able to charge a reasonable retainer that is credited toward the back end settlement fees. I don’t fully agree with the TSR, but that is what you get when the industry fails to self regulate and the majority of players are ripping off consumers. So now we have a law that makes it very difficult to run a business. It is what it is.

    Until the loopholers are run out of town, anyone trying to comply fully with the law is going to have a really hard time making money. If the FTC allows LHDR to play by different rules for to long, many well intentioned companies will go out of business simply because companies like LHDR are able to keep the advertising rates at an unattainable level. Unless you have deep pockets, you cannot compete with a company that does not have to play by the rules.

    The FTC cannot move as quickly as they need to move. Regulation without quick enforcement only hurts the ones who are trying to comply. My suggestion is for any company that is trying to comply with the law, to band together and run these guys out of town by exposing them. If you chose to simply ignore this problem, you might as well swing the hammer and drive the nail in your company’s coffin yourself. Supporting this sort of marketing gimmick to loop hole the law (which is all this is) is pretty foolish in my opinion

  • Observer

    I think the point Damon was making is that this rate buy down method will quickly get out of hand. Not by all who would seek to implement, but by enough to create a new crop of concerns. Those concerns will be addressed later this year by a new cop on the beat; the CFPB.

    There have been enough position and white papers written by consumer groups and others to get a decent grasp on where the industry will be 12 months from now with a new regulator possessing major rule making and enforcement powers.

    Innovation in debt relief is needed and should be encouraged, but innovating fees at this stage in the game is not where I would expend time and energy.

  • Robert S

    I see, I should clarify… LHDR model collecting fees *in the same type of way as before*…

  • Mike Reilly

    10-4 brother

  • SeanDSLegalPlan

    For the record, LHDR’s fees are nearly double now……….

  • SeanDSLegalPlan

    Indeed it is, however, since my company has “skin in the game” here & our average settlement is 30%, a $20,000 debt load at 30% settlement costs the client a total of $10,200 vs Option A at 40% (since they get paid regardless of the settlement % and are likely to accept that) totals the client $11,100.

    As per my example, while it may indicate a dropout, it is not our drop out rate. When the client’s financial situation worsens, we have the ability to offer months of less or no payments to see if they can get back on track or continue- If we allow the up front fee & they have this situation, the company can potentially cancel the client & keep the “buy down fee”.

    Again, I go back to the question- If that model is allowed, what stops them from offering a 1% settlement rate bought down for $3000?

    And I see your point Mike. I’m completely in the debate for the debate’s sake- Big respect to you & your company. Further, I agree it is creative but I still see the potential for going back to that old abusive system.

    Best Regards!

    -Sean

  • Robert S

    “If I was a debt settlement company charging 15% of debt as a fee, and learned I could allow customers to “buy down” my rate. Why don’t I just raise my fee to 25% of debt and then charge a fee to allow them to buy it down to 15% of debt?”

    –> A company could raise there fee as you mention, but they would still have to compete with companies who have not raised there fee. The market will price itself accordingly. This example works well in a “bubble” where if ALL or a huge majority of companies used this model.

    “I can now collect a good chunk of money upfront and still make the money I was planning on making for the settlement just by raising my price and then creating a marketing gimmick to make consumers think they are getting a better deal for giving me money upfront.”

    –> A good chunk of money? This is subjective as a 1% “buydown” on a $25k client (which is probably average, maybe lower now as credit has become tighter) is $250. Of course, if you use the argument of “well when you enroll X amount of clients” and yes, if the buy down is much higher than 1-3% it can/may get steep.

    “TSR then becomes obsolete and nothing has changed except for making it even harder for the guys trying to comply with the law.”

    –> I think this is a bit exagerrated. The TSR isn’t “obsolete”…. An LHDR type model collecting the same fees as before make the TSR obsolete as it destroy’s the settlement performance. However, in this type of model a company isn’t making profit on a small buydown. To make a profit or BREAK EVEN, they need to settle accounts for the client, which is the most critical part of the TSR. I’m not sure if this structure allows the $250 to be credited towards the settlement fee, if it does this is a huge plus. However, if we say the average client is $25k in debt — 15% fee = $3,750…. these buy downs aren’t a debt in the overall fee which requires the company to still put a great effort towards settling the debt.

  • Mike Reilly

    Sean, let’s call a spade a spade, of the consumers you enroll in your program, aside for those (and this is just an assumption) that fall out before you have the opportunity to perform, would you say the majority stick around giving you the ability to perform?

    My apologies for the 50% assumption but you did say the following;

    because I may get my job back & no longer need to engage (this indicates a dropout) the settlement company, my wife may lose her job & I may need to file (this indicates a dropout) bankruptcy. The probability of my situation changing over three years is nearly 50% (I guess I don’t know what you mean here) (based on our company’s experiences- 30% worse, 20% better).

    I just looked at your GFE and discovered your fee of 30% of the savings, so in my example yesterday of a consumer with 20k settled at 40% your fee would be $3600 compared to $3100 with company B, if the consumer made it to the finish line. Correct me if I’m wrong, this is all about getting the committed consumer, the well educated consumer and the financially capable consumer to the finish line, fair statement?

    We can go back and forth on this all day and not get very far. Again my goal is not to move down this path, it’s the creative thinking that intrigues me.

  • SeanDSLegalPlan

    Andy- I define it as a % of amount saved. We defined it that way before the TSR. The TSR however considers it a trigger, not a model.
    The amount we earn is based on our performance of % of settlement, not whether we perform at all. Seems the FTC demagoged the term. At least, I’d never heard it used that way before reading it.

  • SeanDSLegalPlan

    The model they sell is 20% of the debt total- flat. And, for the record, i said 50% of the time the financial situation changes, not the client falls out.

    I wouldnt own a company selling option A or B, instead, Id open up a company selling Option C and compete directly with the other 2.

    The choice provided may not be designed to rip the consumer off but it allows that possibility- If Hutton said 20% Flat or 1% of the debt flat, at settlement, for a buy down fee of $3000, what’s the difference? Now, whether or not they perform, the client pays.

  • Andy Faria

    Not to change the subject but…

    When Sean just mentioned “option c” it made me think of something that I’ve always wondered. What is the true definition of a “performance based model”? One that charges a fee based on total debt? or one that charges based on saved debt?

    The model that charges based on total enrolled debt will make the same exact amount of money, whether the debt settles at 40% or 60%. Yes, the performance triggers the fee, but the fee is never really based on performance, only the timing of the fee.

    What do you guys think?

  • Mike Reilly

    There’s a man with a well thought out answer. Two problems, 1st, your assuming the client will leave you one way or the other, or at least 50% of them. That’s not a good statistic at all. 2nd, and maybe you missed this…both companies offer the same service, only one of them offers the buy down should you choose it. I like providing consumers choices, it’s like when we educate them about their choices before we help select a program or turn them away.

    Again you’re assuming the debt relief service to be provided is not performance based which is not the case. The only time a fee is earned and recorded for settling a debt (providing a debt relief service) is when a debt is settled, of course the term dictates how the fee is collected.

    The problem is you can’t see your way through this. How does providing a consumer a choice of which fee they pay for a particular service have anything to do with the execution and performance of the service..listen, i could understand your point if the option was designed to rip the consumer off or in the end cost the consumer more but that clearly is not the case. If I thought that for even a mille-second I wouldn’t waste my time here. I’ll have a legal opinion on this soon enough, but I also realize that not one attorney from what I can see has joined this thread to put this to bed.

    On a 20K account 12.5% of the debt amt at time of enrollment for $600 + 20k settled = $3100

    On a 20K account settled at 40% saves a consumer 12,000 x 28% = $3360 @ 25% its 3k
    and that’s assuming the fee is based on the debt at the time it was enrolled, some base it on the time of settlement.

    I face this very issue, as I mentioned on another thread, my best client is a shopper. In my opinion the percentage of savings model is nothing more than a sales tool because, the individual’s circumstances, the status of the debt and good old averages dictate! I don’t blame ya…it’s an easier sell but, one we love to come up against. In the model we run, the consumer knows the fee to the penny before to contract is executed.

  • Damon Day

    I am not sure why there is even a discussion about this. This is nothing but a marketing gimmick. If this could fly with the FTC, then every single debt settlement company would have an instant loop hole around the TSR.

    Think about this. If I was a debt settlement company charging 15% of debt as a fee, and learned I could allow customers to “buy down” my rate. Why don’t I just raise my fee to 25% of debt and then charge a fee to allow them to buy it down to 15% of debt? Presto, instant loophole. I can now collect a good chunk of money upfront and still make the money I was planning on making for the settlement just by raising my price and then creating a marketing gimmick to make consumers think they are getting a better deal for giving me money upfront. TSR then becomes obsolete and nothing has changed except for making it even harder for the guys trying to comply with the law.

  • http://DamonDay.com Damon Day

    I am not sure why there is even a discussion about this. This is nothing but a marketing gimmick. If this could fly with the FTC, then every single debt settlement company would have an instant loop hole around the TSR.

    Think about this. If I was a debt settlement company charging 15% of debt as a fee, and learned I could allow customers to “buy down” my rate. Why don’t I just raise my fee to 25% of debt and then charge a fee to allow them to buy it down to 15% of debt? Presto, instant loophole. I can now collect a good chunk of money upfront and still make the money I was planning on making for the settlement just by raising my price and then creating a marketing gimmick to make consumers think they are getting a better deal for giving me money upfront. TSR then becomes obsolete and nothing has changed except for making it even harder for the guys trying to comply with the law.

    • Robert S

      “If I was a debt settlement company charging 15% of debt as a fee, and learned I could allow customers to “buy down” my rate. Why don’t I just raise my fee to 25% of debt and then charge a fee to allow them to buy it down to 15% of debt?”

      –> A company could raise there fee as you mention, but they would still have to compete with companies who have not raised there fee. The market will price itself accordingly. This example works well in a “bubble” where if ALL or a huge majority of companies used this model.

      “I can now collect a good chunk of money upfront and still make the money I was planning on making for the settlement just by raising my price and then creating a marketing gimmick to make consumers think they are getting a better deal for giving me money upfront.”

      –> A good chunk of money? This is subjective as a 1% “buydown” on a $25k client (which is probably average, maybe lower now as credit has become tighter) is $250. Of course, if you use the argument of “well when you enroll X amount of clients” and yes, if the buy down is much higher than 1-3% it can/may get steep.

      “TSR then becomes obsolete and nothing has changed except for making it even harder for the guys trying to comply with the law.”

      –> I think this is a bit exagerrated. The TSR isn’t “obsolete”…. An LHDR type model collecting the same fees as before make the TSR obsolete as it destroy’s the settlement performance. However, in this type of model a company isn’t making profit on a small buydown. To make a profit or BREAK EVEN, they need to settle accounts for the client, which is the most critical part of the TSR. I’m not sure if this structure allows the $250 to be credited towards the settlement fee, if it does this is a huge plus. However, if we say the average client is $25k in debt — 15% fee = $3,750…. these buy downs aren’t a debt in the overall fee which requires the company to still put a great effort towards settling the debt.

      • Anonymous

        For the record, LHDR’s fees are nearly double now……….

      • Robert S

        I see, I should clarify… LHDR model collecting fees *in the same type of way as before*…

      • http://DamonDay.com Damon Day

        oh, I am really shocked.

      • Observer

        I think the point Damon was making is that this rate buy down method will quickly get out of hand. Not by all who would seek to implement, but by enough to create a new crop of concerns. Those concerns will be addressed later this year by a new cop on the beat; the CFPB.

        There have been enough position and white papers written by consumer groups and others to get a decent grasp on where the industry will be 12 months from now with a new regulator possessing major rule making and enforcement powers.

        Innovation in debt relief is needed and should be encouraged, but innovating fees at this stage in the game is not where I would expend time and energy.

      • http://DamonDay.com Damon Day

        Hello Robert,

        I respectfully disagree that the market will price itself accordingly. How many years before the TSR have companies been charging extreme prices and getting away with it? They had a de facto monopoly on the advertising space simply because of the amount of money they could afford to throw at people to sucker them in. If some companies are allowed to charge upfront fees and some companies are not, you simply have an unfair playing field and the market will not operate as it should.

        When I say good chunk of money I am not talking about this specific company. If as some are arguing here, this marketing gimmick could pass muster, than the sky is the limit on what a company could charge to “buy down the rate.”

        This would make the TSR obsolete as it would allow any company including LHDR, to change the words in the contract and continue to charge upfront. What if LHDR simply said the 500 upfront is to “buy down” our rate. They could run the exact fee structure that everyone is in an uproar about and change the words in the contract to do what this company is doing and charge the same thing. I am not sure why some people fail to see how this would happen, but it doesn’t really matter.

        Further, I want to be clear. I actually think a settlement company should be able to charge a reasonable retainer that is credited toward the back end settlement fees. I don’t fully agree with the TSR, but that is what you get when the industry fails to self regulate and the majority of players are ripping off consumers. So now we have a law that makes it very difficult to run a business. It is what it is.

        Until the loopholers are run out of town, anyone trying to comply fully with the law is going to have a really hard time making money. If the FTC allows LHDR to play by different rules for to long, many well intentioned companies will go out of business simply because companies like LHDR are able to keep the advertising rates at an unattainable level. Unless you have deep pockets, you cannot compete with a company that does not have to play by the rules.

        The FTC cannot move as quickly as they need to move. Regulation without quick enforcement only hurts the ones who are trying to comply. My suggestion is for any company that is trying to comply with the law, to band together and run these guys out of town by exposing them. If you chose to simply ignore this problem, you might as well swing the hammer and drive the nail in your company’s coffin yourself. Supporting this sort of marketing gimmick to loop hole the law (which is all this is) is pretty foolish in my opinion

      • Robert S

        Damon,

        A lot of this makes sense, but I can see this done responsibility (of course, we run a No Advanced fee company so probably why we see it this way) and absolutely there is truth to the “slippery slop” of opening a loophole.

        What is an “extreme” price when you said –> “companies been charging extreme prices and getting away with it?”

        “The FTC cannot move as quickly as they need to move. Regulation without quick enforcement only hurts the ones who are trying to comply.”

        –> Believe me, we know. Our office is giving our employees multiple hats so we can get through this. It’s difficult competing on Google/Yahoo with companies who charge up front fees. They are bidding higher than we can afford to pay since we are only getting paid on performance.

      • http://DamonDay.com Damon Day

        Hey Robert,

        I have seen companies charging upwards of 25% to 30% of a clients total debt by the time all of the fees are added up. The equation gets way out of whack when you start looking at the fees paid and the results obtained with most of these advance fee programs. The point was, that as illogical as many of these programs operate, the market was not able to effectively correct itself because a super majority of the programs within the market were participating in the wrong doing.

        Consumers were rarely presented with a good option simply because they were not able to find one. If you wanted to compete, you had to pay the rates that the scammers and scumbags where more than willing to pay. They weren’t really offering much of a service anyway so they could afford to pay 80 to 90 percent of their revenues for client acquisition. If that was just a small handful of companies then, consumers would easily be able to avoid that, however, if that was a large majority then that would price out the small number of companies that were actually providing a service and like most legitimate businesses, not afford to pay that much for marketing. Any companies that are struggling, feel free to blame the parties that were largely responsible for the situation you are in now. TASC and USOBA did this to you. If they actually did the job they pretended to do, the amendment to the TSR likely would never have been an issue.

        Imagine a world where TASC and USOBA with 400 members between them would have done the logical thing and required members to be on a performance based fee structure. Sure a reasonable retainer upfront is fine to help offset marketing costs and make the client have some skin in the game, but the bulk of the fees paid out on results and performance. Imagine how different the industry would look now if the people running TASC and USOBA actually cared about consumers and their members. The question you should ask yourself is, were they simply greedy, just not that bright or perhaps both? Things that make you go hmmmm.

        The passage of the amendment to the TSR will help to push these scammers and scumbags on to other vehicles to rip consumers off (they don’t go away, just go to something else) but until the FTC actually starts to heavily enforce this amendment, you will not see the advertising costs move down much to where the fair market dictates they should be.

        You could of course point out, that the regulation doesn’t make it a fair market and you would be right, but collusion doesn’t make for a fair market either. However the regulation does break the collusion and makes it a safer market for consumers, and that was the goal of the TSR. Unfortunately, if the FTC doesn’t quickly stomp these guys out, one of the unintended consequences will be that many good programs will not be able to survive and compete against companies that are still charging upfront and providing mediocre services that allow them to throw all of their resources into marketing.

  • SeanDSLegalPlan

    If those were my only two options, I would enroll in A. I would enroll in A because I may get my job back & no longer need to engage the settlement company, my wife may lose her job & I may need to file bankruptcy. The probability of my situation changing over three years is nearly 50% (based on our companies experiences- 30% worse, 20% better). There is no telling when my situation will change- But if it happens, I’m better off with A.

    Either way, my monthly will remain the same- But in A, I am able to begin saving sooner as well.

    If I miss a month or two on my draft, will I be cancelled? I know I wont in a purely performance based program. If I change my mind in 35 days of signing & never get any settlement service, will I get my Rate Buy Down Fee returned?

    I would really rather choose option C- A settlement program that charged me a % of my savings. That way, I know the settlement company must negotiate an excellent rate in order to make more $ themselves.

  • Mike Reilly

    So basically what I’m hearing is, for the cost conscious consumer, the only choice is to shop companies for the lowest fees or find those willing to haggle? Only Andy answered the question I posed below about Company A & B and the qualified consumer with 20K in debt.

    Are you all telling me that the better deal for the consumer is company A; the 20% take it or leave it?

    As a consumer who would you enroll with and why?

  • Bobl

    There are two issues. One, this is a creative approach to a fee structure and the fact that it is debatable from the standpoint of the consumer, makes it more compelling. Pre-TSR, this model would have been fine.

    But two, it is my opinion that this is a clear violation of the TSR. The TSR is not vague about what is considered the service that is rendered and what triggers the ability to charge a fee. If the outcome of your business model is to alter the debt, the only acceptable trigger for fees is that outcome. Anything else is considered an advanced fee.

    Frankly, the TSR sucks for the industry and is probably unfair, but is the reality. Business models that don’t adhere to the TSR are dangerous for the industry. It will lead to more enforcement and in my view, broader regulations. The FTC would have gone further if they could have but they were limited by their decision to attach this to a telemarketing rule. If the industry doesn’t show some constraint, I think you will see laws like the Schumer bill spoken about again.

  • SeanDSLegalPlan

    Hahaha

  • SeanDSLegalPlan

    Mike -

    I respect your opinion. But I disagree.

    Take the stock option example- Whether youre buying the option or the stock, youre still vested in the results of that stock. If the law said, you must offer a prospectus to the purchaser of a stock- would it not apply to the seller of options as well?

    Look at Superbowl tickets on Ebay; “Buy this pencil for $5000 and get this Superbowl ticket FREE”. That may be creative, but in the end, the buyer is buying the tickets & the pencil gets the seller around the rules.

    I might be more inclined to believe the company but last night I noticed they seem to be the same company charging $100 per month for CREDIT MONITORING & REPAIR during their debt settlement process! What is the point of credit score monitoring oR repair until youre out of debt?

    It doesnt seem too flagrant, but what if they offered this?: For $3000 We will give you a settlement fee of $10 per settled debt. Would it seem flagrant then?

  • Mreilly

    —Synonyms of intangible
    vague, elusive, fleeting.

    Does this remind you of a DS fee structure?

  • Mike Reilly

    Have you guys ever purchased an option to buy a stock? You’re not buying the stock in and of itself but, what you are buying is the right to purchase the stock at a predetermined price in the future. The thought here is similar; the consumer is purchasing an option to enter a debt relief program under a separate agreement at a pre defined price. This by no means is a mandatory purchase but what is does provide is a potential for additional savings to the consumer.

    Guys I’m content with the way my program works today and by no means am I looking for a loophole, I just love the creative thinking here and I do think that it could pass muster with the TSR given a little work, however, only the feds know for sure.

    Here’s some thinking, it may be creative, maybe not!

    Think about this: how about creating an index, a settlement index if you will, that let’s say was derived by the transparent data (settlements only) of 50-100 DS companies (“The DS 100″) using a total of the most recent of 2500-5000 settlements to pull an average. Let’s say that average is 37% and of the 50-100 companies the % fees for settlements range from 12-25% with an average of 17%, the settlement index might be 57% however, as settlements varied and companies adjust fees this number could move around quite a bit day by day. First off, how cool would it be to publish a settlement index for all the creditors and collectors to see? Secondly, could this eliminate the need to provide consumers with quotes other than the index %? Would there really be a case for buying down the settlement fee, lowering the index? Could something like this push the big boys in-line seeing the industry come together?

    Creative thinking is what makes this country great, don’t be so quick to beat down an idea or thought without really giving it some of your own thinking.

    Michael Reilly
    Emerge America

  • Bobl

    I agree with Sean and Alex. This is an attempt to do an end around the TSR and it doesn’t hold muster. It’s simply another fee structure that includes an up-front fee.

    This cannot be compared to buying down a mortgage interest rate. An interest rate is a tangible product. This is just a contractual variation of a fee structure.

    Getting around the TSR should only be this easy. It’s a pipe dream.

  • http://www.bknetmarketing.com Bobl

    I agree with Sean and Alex. This is an attempt to do an end around the TSR and it doesn’t hold muster. It’s simply another fee structure that includes an up-front fee.

    This cannot be compared to buying down a mortgage interest rate. An interest rate is a tangible product. This is just a contractual variation of a fee structure.

    Getting around the TSR should only be this easy. It’s a pipe dream.

    • Mreilly

      —Synonyms of intangible
      vague, elusive, fleeting.

      Does this remind you of a DS fee structure?

      • Anonymous

        Hahaha

  • Alexv

    Hi Sean,
    I absolutely agree with your VALUABLE two cents.
    Alex Viecco

  • SeanDSLegalPlan

    Alex-

    I go back to my comment (may be beneath this) that I don’t see how buying down the fee for a defined (TSR) Debt Relief Service is NOT included in the TSR-

    The Final Rule defines “debt relief service” as “any service or program represented, directly or by implication, to renegotiate, settle, or in any way alter the terms of payment or other terms of the debt between a person and one or more unsecured creditors or debt collectors, including, but not limited to, a reduction in the balance, interest rate, or fees owed by a person to an unsecured creditor or debt collector.”

    By “buying down the fee” for a debt relief service, isn’t that simply changing the fee of the debt relief service by PAYING PART OF IT UP FRONT? Since they are not offering a “coupon” for a better debt settlement rate, then aren’t they saying “For this up front fee for our service, we will give you THIS back end fee for our service”? What other service is being provided for that $?

    In other words, by buying a lower rate, in essence, haven’t they simply pre-paid the fee? JUST like a mortgage? And IF THEY ARE SIMPLY PRE-PAYING THE FEE, ISN’T IT A FEE FOR DEBT RELIEF SERVICES?….

    It is brilliant, but I don’t see how it is NOT pre paying specifically FOR debt relief services.

    Just my two cents.

  • AlexV

    Hi Mike, Andy, Sean, and others.
    I would like to ask, what part of collecting money prior to settling debt from a debt settlement company makes this a valid or even thought provoking approach?
    I could see with the viewpoint from a Real Estate transaction, but if this is not proof that mortgage people coming into this industry are looking for alternative ways to find “Loopholes” I don’t know what is. This is not a Real Estate Transaction and therefore I would venture to say that the next similarity would be a “Processing Fee” of say….. $600 or $800? Pretty familiar to Mortgage Transactions. Bottom line would that not be in violation of the TSR?
    This is no different than the companies that charge the hundreds or thousands for a “Financial Kit” so they can collect moneys up-front.
    We all know that the consumer having skin in the game would be better but the TSR is pretty darn clear about “advance fee ban”. I believe that the FTC would look at this like an attempt to avoid the rule. Of course the only way to make it fly is if you only collect that fee after the first settlement was achieved and in proportion to the debt enrolled.
    My take on this is pretty clear that it would be interpreted as a clear Violation of the TSR.
    Alex Viecco
    New Era Debt Solutions

  • Mike Reilly

    Jason, look at it this way, have you ever enrolled someone who had the ability to lump in some funds? It’s not that they are looking for a free lunch it’s just a case of “they see a freight train coming” for whatever reason and have some funds to put up. My company is a young company and I have graduates because of this very reason. I also have many clients that have enrolled with my service that have been enrolled with others that have gone OB or BK, and the client has a few thousand in their savings/trust account. For those in this category it would be a huge benefit.

    With regards to those who feel they deserve “entitlements” I have yet to run into one and I do a lot of marketing but, my marketing is very specific and filtered, so maybe that’s a good thing.

    Question for you Jason, what in your model is the formula that determines if one is better suited for DS or DM? It can’t be based solely on what one can afford, right? It’s certainly a factor but not the end-all be-all, right?

    Mike

  • Jason Taylor

    I get what your saying and it is a good idea, but at the top of the scale, if a client with 20K in debt can truly afford a $403 to $568 payment, where is the financial hardship to warrant debt settlement? That’s DMP payment territory.

    A huge reason the industry is where it is now is because DS companies jammed people into DS programs that both couldn’t afford them, and people who clearly could afford to pay their debts back in full. American consumers, many with “entitlement” attitudes are to blame too because DS is not a free lunch like many people just wanted.

    There will always be a small degree of overlap to people who could swing either DS of DMP and DS and BK, but DS is the most narrow category as it sits between DMP and BK, if administered to the right candidates.

  • Mike Reilly

    Joe debt jr, the TSR is very clear, perform your service and its ok to get paid, the question is what is your service? If it’s DS or DM, no fee until you alter/settle and it’s agreed by all parties and first payments have been made, case closed, unless there was a bonaified face to face.

    If you’re a debt consultant or coach you can in fact perform the service (provide a consultation) and get paid. If that consultation leads to the consumer enrolling in a DS or DM program administered by you as the debt relief service provider that’s a different story.

    Understand I’m not looking for a work around, my work around is complete already with a capital raise to weather the storm. I look at this as enhancing the consumer’s commitment to the program.

  • Mike Reilly

    Well, I think in the event of a pull back by the consumer, the average would take over in determining the appropriate fee to be charged. If I were going to look at this possible structure I would setup a scale starting with the creditor’s minimum requirements and back my way in.

    For example; client has 20k unsecured and qualifies

    Current minimum required by creditors 2.7% or $540… in my program that equates to a 23 month program, so I guess if someone had the ability and willingness to make that contribution I/we as a company would be willing to discount our fee. If I were to put a range in place to make sense of this it might look like this;

    Fee is based on debt amount at time of enrollment

    Category 1 = 1-25 months….. Contribution range = $568-$500… Fee = 12.5%… = $2500
    Category 2 = 26-30 months… Contribution range = $481-$417… Fee = 15.0%… = $3000
    Category 3 = 31-36 months… Contribution range = $403-$347… Fee = 17.5%… = $3500
    Category 4 = 37-44 months… Contribution range = $338-$284… Fee = 20.0%… = $4000
    The average contribution at time of settlement determines the fee or % charged for the settlement.
    So, 5 months on cat 1 at min payment = $2500 then a drop back for 2 months under cat 2 at min = $834
    Total in after 7 months = $3334/7 = 476.29 puts client in cat 2 @ 15.0% for this particular settlement

  • Joe_debt_jr

    I can see both yours Andy and Mike’s angle on this matter. If these guys came up with this concept years ago they make would make a killing. $20k debt enrolled and total fees starts at 20% buy down rate 1% for $300. This eliminate the consumer slamming the company for charging high settlement fees because consumer has an option to buy down the rate take it or leave it. I likes. However in my opinion, it’s kind of late now in the game to do this and the TSR is written pretty clear “No Advance Fee Ban” for debt relief service providers. I rather play it safe and settle the first account as fast as I can and collect that fee. If it’s okay to use this as a to secure advance fees by allowing the consumer to buy down their settlement fees, than how would that be different from telling the consumer, I will charge you per hour for this consultation before I enroll you into my performance model debt settlement?

  • Andy Faria

    Michael, I’ve never heard of it until just now, but that’s a marination-worthy idea.

    It’s incentivizing the consumer to get out of debt asap. It’s a win-win as long as they can afford it.

    The questions arise when 6 months in, their hours are cut at work and they need to reduce the contribution for a while. How to handle that?

  • Mike Reilly

    By the way, as a company owner, I like it when the consumer has some skin in the game. In many cases it keeps their commitment firm. Is there anyone in the industry you can think of that adjusts the fees based on the consumer’s monthly contribution? How about lowering the fee if the contribution is higher. More money each month leads to settlements early on, right?

  • Andy Faria

    Who would I enroll with? As a consumer, I would go with the option. It’s a good deal. I can’t deny that.

    I also think that if this company does the right thing by people and they avoid complaints, they will fly under the radar and it may never become an issue. However, if they ever find themselves in hot water, investigators will surely view this option fee as an advanced fee, especially when based on a percentage of the debt enrolled.

    There are a couple ways I can think of that could help to make this fee model more ‘defendable’ in court.

    1. Instead of the option fee being a percentage of the debt, why not make it a flat $250, $500, or $750 to pay down the points. It’s essentially the same thing, however it can now never be tied directly to an account that may not get settled, for whatever reason.

    2. Like Steve mentioned, why not offer the option at the time of 1st settlement? Use the $600 they would have used on the option fee upfront, and use it to get that first debt settled faster. Yes the DSC has to wait to offer the option, but they still get it and they should now have some peace of mind that the ‘lettered windbreakers’ won’t be busting down their doors at any moment.

    Andy

  • Mike Reilly

    Andy, you make good points and for the record, I like to make money too!
    Let’s talk this through for a minute…what are most companies settlement fees (the percentages charged) based on? Debt amount, client cost of acquisition, service costs, drop- out rate, etc…etc..etc.. I don’t know that debt amount per client plays a part but contracted revenue is certainly a factor and statistic I keep an eye on.

    How many companies do you know that haggle (negotiate) when it comes to fees? I’ve run into many.

    There are two clients both with 20,000 in debt and both with 4 major creditors reaching charge off status, the collection calls are coming in hot and heavy and financial analysis has been complete and they both are qualified candidates for DS.

    Company A is a 5 year old performance based company with a fee structure of 20% of the debt amount, calculated at the time of enrollment. Take it or leave it.

    Company B is also a 5 year old performance based company with a fee structure of 20% of the debt amount, calculated at the time of enrollment, however, prior to enrollment they offer the consumer a option to buy down the settlement fee % to as low as 12.5% for $600

    Who do you enroll with and why? Remember, company B will do it for 20% also! As the consumer you have an option, you can take it or leave it. If you take it and pay the $600 and then decide against enrolling you get it back, other than that, once enrolled you have exercised the option and the $600 is earned because the option is granted.

    Michael Reilly
    Emerge America

  • Andy Faria

    At first glance I also thought this to be a creative fee structure that could fly. It appears as if the option fee is to simply buy down the rate, it’s been common practice with home loans for years. The fee isn’t outrageous and if clearly disclosed and agreed on by the consumer, why not? Seems fair to me and could possibly fly with regulators.

    After I let it marinate a bit, I’m not so sure.

    The problem lies in the fact that the option fee is based on the debt load. What happens if someone drops out of the program, files bankruptcy, or simply doesn’t settle one of the accounts? They have now paid in advance for an option on a service they will never receive.

    When paying points on a home loan, it is paid at closing when the loan is funded and the goods delivered. Can you imagine the uproar if people had to pay points on home loans in advance, whether the loan closes or not? People would be getting screwed left and right. Mortgage brokers would have a field day, in fact many would set up phone rooms designed to do nothing more than sell ‘points’. Maybe the loan actually closes and maybe it doesn’t, doesn’t matter though, they still get paid. If this fee structure were common place in DS, that’s what it would turn into. Sell as many ‘options’ as possible, whether they’re qualified or not, doesn’t matter.

    When considering whether any idea is legal or not I’ve always asked myself the question, ” Would I feel comfortable arguing my position in front of a judge?” In this case I can hear myself already, “No Your Honor, this is not an advance fee I’ve been charging, it’s a $1000 coupon” With fines of $16k per violation, I would need more ammunition than that to go into court with.

    Don’t get me wrong here, I’m all for making money. In fact, I love making money. I would love it if this type of fee structure was allowed in the final rule, but I don’t think it sticks to the wall. The fee is too closely related to the debt relief services they are contracting to provide. No matter how they slice it, they’re saying “if you pay us X in advance, we will settle your debt for Y later”.

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

    At first glance I also thought this to be a creative fee structure that could fly. It appears as if the option fee is to simply buy down the rate, it’s been common practice with home loans for years. The fee isn’t outrageous and if clearly disclosed and agreed on by the consumer, why not? Seems fair to me and could possibly fly with regulators.

    After I let it marinate a bit, I’m not so sure.

    The problem lies in the fact that the option fee is based on the debt load. What happens if someone drops out of the program, files bankruptcy, or simply doesn’t settle one of the accounts? They have now paid in advance for an option on a service they will never receive.

    When paying points on a home loan, it is paid at closing when the loan is funded and the goods delivered. Can you imagine the uproar if people had to pay points on home loans in advance, whether the loan closes or not? People would be getting screwed left and right. Mortgage brokers would have a field day, in fact many would set up phone rooms designed to do nothing more than sell ‘points’. Maybe the loan actually closes and maybe it doesn’t, doesn’t matter though, they still get paid. If this fee structure were common place in DS, that’s what it would turn into. Sell as many ‘options’ as possible, whether they’re qualified or not, doesn’t matter.

    When considering whether any idea is legal or not I’ve always asked myself the question, ” Would I feel comfortable arguing my position in front of a judge?” In this case I can hear myself already, “No Your Honor, this is not an advance fee I’ve been charging, it’s a $1000 coupon” With fines of $16k per violation, I would need more ammunition than that to go into court with.

    Don’t get me wrong here, I’m all for making money. In fact, I love making money. I would love it if this type of fee structure was allowed in the final rule, but I don’t think it sticks to the wall. The fee is too closely related to the debt relief services they are contracting to provide. No matter how they slice it, they’re saying “if you pay us X in advance, we will settle your debt for Y later”.

    • Mike Reilly

      Andy, you make good points and for the record, I like to make money too!
      Let’s talk this through for a minute…what are most companies settlement fees (the percentages charged) based on? Debt amount, client cost of acquisition, service costs, drop- out rate, etc…etc..etc.. I don’t know that debt amount per client plays a part but contracted revenue is certainly a factor and statistic I keep an eye on.

      How many companies do you know that haggle (negotiate) when it comes to fees? I’ve run into many.

      There are two clients both with 20,000 in debt and both with 4 major creditors reaching charge off status, the collection calls are coming in hot and heavy and financial analysis has been complete and they both are qualified candidates for DS.

      Company A is a 5 year old performance based company with a fee structure of 20% of the debt amount, calculated at the time of enrollment. Take it or leave it.

      Company B is also a 5 year old performance based company with a fee structure of 20% of the debt amount, calculated at the time of enrollment, however, prior to enrollment they offer the consumer a option to buy down the settlement fee % to as low as 12.5% for $600

      Who do you enroll with and why? Remember, company B will do it for 20% also! As the consumer you have an option, you can take it or leave it. If you take it and pay the $600 and then decide against enrolling you get it back, other than that, once enrolled you have exercised the option and the $600 is earned because the option is granted.

      Michael Reilly
      Emerge America

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

        Who would I enroll with? As a consumer, I would go with the option. It’s a good deal. I can’t deny that.

        I also think that if this company does the right thing by people and they avoid complaints, they will fly under the radar and it may never become an issue. However, if they ever find themselves in hot water, investigators will surely view this option fee as an advanced fee, especially when based on a percentage of the debt enrolled.

        There are a couple ways I can think of that could help to make this fee model more ‘defendable’ in court.

        1. Instead of the option fee being a percentage of the debt, why not make it a flat $250, $500, or $750 to pay down the points. It’s essentially the same thing, however it can now never be tied directly to an account that may not get settled, for whatever reason.

        2. Like Steve mentioned, why not offer the option at the time of 1st settlement? Use the $600 they would have used on the option fee upfront, and use it to get that first debt settled faster. Yes the DSC has to wait to offer the option, but they still get it and they should now have some peace of mind that the ‘lettered windbreakers’ won’t be busting down their doors at any moment.

        Andy

      • Mike Reilly

        By the way, as a company owner, I like it when the consumer has some skin in the game. In many cases it keeps their commitment firm. Is there anyone in the industry you can think of that adjusts the fees based on the consumer’s monthly contribution? How about lowering the fee if the contribution is higher. More money each month leads to settlements early on, right?

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

        Michael, I’ve never heard of it until just now, but that’s a marination-worthy idea.

        It’s incentivizing the consumer to get out of debt asap. It’s a win-win as long as they can afford it.

        The questions arise when 6 months in, their hours are cut at work and they need to reduce the contribution for a while. How to handle that?

      • Anonymous

        I can see both yours Andy and Mike’s angle on this matter. If these guys came up with this concept years ago they make would make a killing. $20k debt enrolled and total fees starts at 20% buy down rate 1% for $300. This eliminate the consumer slamming the company for charging high settlement fees because consumer has an option to buy down the rate take it or leave it. I likes. However in my opinion, it’s kind of late now in the game to do this and the TSR is written pretty clear “No Advance Fee Ban” for debt relief service providers. I rather play it safe and settle the first account as fast as I can and collect that fee. If it’s okay to use this as a to secure advance fees by allowing the consumer to buy down their settlement fees, than how would that be different from telling the consumer, I will charge you per hour for this consultation before I enroll you into my performance model debt settlement?

      • Mike Reilly

        Joe debt jr, the TSR is very clear, perform your service and its ok to get paid, the question is what is your service? If it’s DS or DM, no fee until you alter/settle and it’s agreed by all parties and first payments have been made, case closed, unless there was a bonaified face to face.

        If you’re a debt consultant or coach you can in fact perform the service (provide a consultation) and get paid. If that consultation leads to the consumer enrolling in a DS or DM program administered by you as the debt relief service provider that’s a different story.

        Understand I’m not looking for a work around, my work around is complete already with a capital raise to weather the storm. I look at this as enhancing the consumer’s commitment to the program.

      • Mike Reilly

        Well, I think in the event of a pull back by the consumer, the average would take over in determining the appropriate fee to be charged. If I were going to look at this possible structure I would setup a scale starting with the creditor’s minimum requirements and back my way in.

        For example; client has 20k unsecured and qualifies

        Current minimum required by creditors 2.7% or $540… in my program that equates to a 23 month program, so I guess if someone had the ability and willingness to make that contribution I/we as a company would be willing to discount our fee. If I were to put a range in place to make sense of this it might look like this;

        Fee is based on debt amount at time of enrollment

        Category 1 = 1-25 months….. Contribution range = $568-$500… Fee = 12.5%… = $2500
        Category 2 = 26-30 months… Contribution range = $481-$417… Fee = 15.0%… = $3000
        Category 3 = 31-36 months… Contribution range = $403-$347… Fee = 17.5%… = $3500
        Category 4 = 37-44 months… Contribution range = $338-$284… Fee = 20.0%… = $4000
        The average contribution at time of settlement determines the fee or % charged for the settlement.
        So, 5 months on cat 1 at min payment = $2500 then a drop back for 2 months under cat 2 at min = $834
        Total in after 7 months = $3334/7 = 476.29 puts client in cat 2 @ 15.0% for this particular settlement

      • Jason Taylor

        I get what your saying and it is a good idea, but at the top of the scale, if a client with 20K in debt can truly afford a $403 to $568 payment, where is the financial hardship to warrant debt settlement? That’s DMP payment territory.

        A huge reason the industry is where it is now is because DS companies jammed people into DS programs that both couldn’t afford them, and people who clearly could afford to pay their debts back in full. American consumers, many with “entitlement” attitudes are to blame too because DS is not a free lunch like many people just wanted.

        There will always be a small degree of overlap to people who could swing either DS of DMP and DS and BK, but DS is the most narrow category as it sits between DMP and BK, if administered to the right candidates.

      • Mike Reilly

        Jason, look at it this way, have you ever enrolled someone who had the ability to lump in some funds? It’s not that they are looking for a free lunch it’s just a case of “they see a freight train coming” for whatever reason and have some funds to put up. My company is a young company and I have graduates because of this very reason. I also have many clients that have enrolled with my service that have been enrolled with others that have gone OB or BK, and the client has a few thousand in their savings/trust account. For those in this category it would be a huge benefit.

        With regards to those who feel they deserve “entitlements” I have yet to run into one and I do a lot of marketing but, my marketing is very specific and filtered, so maybe that’s a good thing.

        Question for you Jason, what in your model is the formula that determines if one is better suited for DS or DM? It can’t be based solely on what one can afford, right? It’s certainly a factor but not the end-all be-all, right?

        Mike

  • Mike Reilly

    Steve, I’m going to reach out to Alison Brown on Monday to get her take on it, clearly I will run this by counsel as well. At first glance I like it, and if done right it should have nothing to do with the performance of or engagement in (the consumer is securing a rate only) any debt relief services, in fact, it should only trigger or identify the appropriate contract to be executed. I realize that’s not exactly how they are doing it here, but I think that’s the thought behind it. If a consumer has no issue with paying the higher settlement fee than no big deal, pay a higher fee, however, if they want a lower fee (which could possibly save them more money over the term of the program) they can “lock the rate” and buy the option. Are we going to take that option away from the consumer? Better yet is the federal government going to take that option from consumers?

    Let’s look at this through the eyes of the lending industry and for a moment think adjustable rates. Why was the adjustable rate created? The short answer is Supply, Demand, Turnover and the Cost of money. Is it reasonable to think that when business is strong (lots of enrollments and a steady flow of settlements) service rates (which is settlement fees)can be adjusted to attract more business and conversely, increased to offset the revenue when business drops off? Supply and demand are the rulers! The TSR basically states that if you engage a consumer in a debt relief service you Can Not (under most circumstances) charge fees in advance of performing the service. Locking in a settlement rate (giving the consumer a choice) in advance of engaging a consumer in a service contract (that is performance based) sounds like a win-win in my book.

    I will let you know what I find out.

    Michael Reilly
    Emerge America

  • Steve Rhode

    Michael,

    It is an interesting approach. What is yet to be determined is if the advance charge to “buy down” the settlement fee is an advanced fee in itself. If the fee was paid at the time the first debt was settled maybe that would be less problematic. But when it is paid at the time the contract is entered into, well.

    But it is not the fee alone that caught my eye. The tipster that sent this to me came away with the company, when they were talking to them, was a law firm and appeared to be a law firm. In fact it appears that they share office with a law firm but are not a law firm.

    So do the individual parts begin to paint a bigger picture that will catch the eye of regulators?

  • Mreilly

    All the consumer is purchasing is a specific agreement with a pre defined settlement fee. It’s like buying down a mortgage rate, if the par interest rate on a 30 yr fixed is 4.75 and you want a lower rate a consumer can buy it down to a floor rate. Same thing here, apparently the floor is 12% and the cost is $300. If you don’t want to pay the fee the settlement fee is 20%. This in my opinion has nothing to do with the TSR.

    Very creative thinking, however, there are competitors at that level already that don’t charge a fee for a consumer to get there.

    Michael Reilly
    Emerge America

  • SeanDSLegalPlan

    Im not sure I get it- The debt load load doesnt really change, so arent they buying down the fee? And if the fee cannot be charged until settlement, how do we know there will be a fee to be bought down? And if they are buying down the probable fee, Im not certain that doesnt violate the TSR. Seems a bit complicated to the average client on the surface. Certainly creative though.
    Interested to hear any thoughts.

  • Anonymous

    Im not sure I get it- The debt load load doesnt really change, so arent they buying down the fee? And if the fee cannot be charged until settlement, how do we know there will be a fee to be bought down? And if they are buying down the probable fee, Im not certain that doesnt violate the TSR. Seems a bit complicated to the average client on the surface. Certainly creative though.
    Interested to hear any thoughts.

    • Mreilly

      All the consumer is purchasing is a specific agreement with a pre defined settlement fee. It’s like buying down a mortgage rate, if the par interest rate on a 30 yr fixed is 4.75 and you want a lower rate a consumer can buy it down to a floor rate. Same thing here, apparently the floor is 12% and the cost is $300. If you don’t want to pay the fee the settlement fee is 20%. This in my opinion has nothing to do with the TSR.

      Very creative thinking, however, there are competitors at that level already that don’t charge a fee for a consumer to get there.

      Michael Reilly
      Emerge America

      • http://GetOutOfDebt.org Steve Rhode

        Michael,

        It is an interesting approach. What is yet to be determined is if the advance charge to “buy down” the settlement fee is an advanced fee in itself. If the fee was paid at the time the first debt was settled maybe that would be less problematic. But when it is paid at the time the contract is entered into, well.

        But it is not the fee alone that caught my eye. The tipster that sent this to me came away with the company, when they were talking to them, was a law firm and appeared to be a law firm. In fact it appears that they share office with a law firm but are not a law firm.

        So do the individual parts begin to paint a bigger picture that will catch the eye of regulators?

      • Mike Reilly

        Steve, I’m going to reach out to Alison Brown on Monday to get her take on it, clearly I will run this by counsel as well. At first glance I like it, and if done right it should have nothing to do with the performance of or engagement in (the consumer is securing a rate only) any debt relief services, in fact, it should only trigger or identify the appropriate contract to be executed. I realize that’s not exactly how they are doing it here, but I think that’s the thought behind it. If a consumer has no issue with paying the higher settlement fee than no big deal, pay a higher fee, however, if they want a lower fee (which could possibly save them more money over the term of the program) they can “lock the rate” and buy the option. Are we going to take that option away from the consumer? Better yet is the federal government going to take that option from consumers?

        Let’s look at this through the eyes of the lending industry and for a moment think adjustable rates. Why was the adjustable rate created? The short answer is Supply, Demand, Turnover and the Cost of money. Is it reasonable to think that when business is strong (lots of enrollments and a steady flow of settlements) service rates (which is settlement fees)can be adjusted to attract more business and conversely, increased to offset the revenue when business drops off? Supply and demand are the rulers! The TSR basically states that if you engage a consumer in a debt relief service you Can Not (under most circumstances) charge fees in advance of performing the service. Locking in a settlement rate (giving the consumer a choice) in advance of engaging a consumer in a service contract (that is performance based) sounds like a win-win in my book.

        I will let you know what I find out.

        Michael Reilly
        Emerge America

    • Just a matter of time

      That’s because you’re an idot who ripps people off!

  • Mike Reilly

    That’s like buying down the rate on a mortgage…very interesting! I don’t think from a legal standpoint there’s a problem with this as it really has nothing to do with the core service of altering the debt. Who wouldn’t by the rate down to 12% for $300? For the record, I did not read their client agreement, my comment is based purely on what is displayed and nothing more but, I must say, these guys are thinkers.

    Michael Reilly
    Emerge America

  • Mike Reilly

    That’s like buying down the rate on a mortgage…very interesting! I don’t think from a legal standpoint there’s a problem with this as it really has nothing to do with the core service of altering the debt. Who wouldn’t by the rate down to 12% for $300? For the record, I did not read their client agreement, my comment is based purely on what is displayed and nothing more but, I must say, these guys are thinkers.

    Michael Reilly
    Emerge America

    • AlexV

      Hi Mike, Andy, Sean, and others.
      I would like to ask, what part of collecting money prior to settling debt from a debt settlement company makes this a valid or even thought provoking approach?
      I could see with the viewpoint from a Real Estate transaction, but if this is not proof that mortgage people coming into this industry are looking for alternative ways to find “Loopholes” I don’t know what is. This is not a Real Estate Transaction and therefore I would venture to say that the next similarity would be a “Processing Fee” of say….. $600 or $800? Pretty familiar to Mortgage Transactions. Bottom line would that not be in violation of the TSR?
      This is no different than the companies that charge the hundreds or thousands for a “Financial Kit” so they can collect moneys up-front.
      We all know that the consumer having skin in the game would be better but the TSR is pretty darn clear about “advance fee ban”. I believe that the FTC would look at this like an attempt to avoid the rule. Of course the only way to make it fly is if you only collect that fee after the first settlement was achieved and in proportion to the debt enrolled.
      My take on this is pretty clear that it would be interpreted as a clear Violation of the TSR.
      Alex Viecco
      New Era Debt Solutions

      • Anonymous

        Alex-

        I go back to my comment (may be beneath this) that I don’t see how buying down the fee for a defined (TSR) Debt Relief Service is NOT included in the TSR-

        The Final Rule defines “debt relief service” as “any service or program represented, directly or by implication, to renegotiate, settle, or in any way alter the terms of payment or other terms of the debt between a person and one or more unsecured creditors or debt collectors, including, but not limited to, a reduction in the balance, interest rate, or fees owed by a person to an unsecured creditor or debt collector.”

        By “buying down the fee” for a debt relief service, isn’t that simply changing the fee of the debt relief service by PAYING PART OF IT UP FRONT? Since they are not offering a “coupon” for a better debt settlement rate, then aren’t they saying “For this up front fee for our service, we will give you THIS back end fee for our service”? What other service is being provided for that $?

        In other words, by buying a lower rate, in essence, haven’t they simply pre-paid the fee? JUST like a mortgage? And IF THEY ARE SIMPLY PRE-PAYING THE FEE, ISN’T IT A FEE FOR DEBT RELIEF SERVICES?….

        It is brilliant, but I don’t see how it is NOT pre paying specifically FOR debt relief services.

        Just my two cents.

      • Alexv

        Hi Sean,
        I absolutely agree with your VALUABLE two cents.
        Alex Viecco

      • Mike Reilly

        Have you guys ever purchased an option to buy a stock? You’re not buying the stock in and of itself but, what you are buying is the right to purchase the stock at a predetermined price in the future. The thought here is similar; the consumer is purchasing an option to enter a debt relief program under a separate agreement at a pre defined price. This by no means is a mandatory purchase but what is does provide is a potential for additional savings to the consumer.

        Guys I’m content with the way my program works today and by no means am I looking for a loophole, I just love the creative thinking here and I do think that it could pass muster with the TSR given a little work, however, only the feds know for sure.

        Here’s some thinking, it may be creative, maybe not!

        Think about this: how about creating an index, a settlement index if you will, that let’s say was derived by the transparent data (settlements only) of 50-100 DS companies (“The DS 100″) using a total of the most recent of 2500-5000 settlements to pull an average. Let’s say that average is 37% and of the 50-100 companies the % fees for settlements range from 12-25% with an average of 17%, the settlement index might be 57% however, as settlements varied and companies adjust fees this number could move around quite a bit day by day. First off, how cool would it be to publish a settlement index for all the creditors and collectors to see? Secondly, could this eliminate the need to provide consumers with quotes other than the index %? Would there really be a case for buying down the settlement fee, lowering the index? Could something like this push the big boys in-line seeing the industry come together?

        Creative thinking is what makes this country great, don’t be so quick to beat down an idea or thought without really giving it some of your own thinking.

        Michael Reilly
        Emerge America

      • Anonymous

        Mike -

        I respect your opinion. But I disagree.

        Take the stock option example- Whether youre buying the option or the stock, youre still vested in the results of that stock. If the law said, you must offer a prospectus to the purchaser of a stock- would it not apply to the seller of options as well?

        Look at Superbowl tickets on Ebay; “Buy this pencil for $5000 and get this Superbowl ticket FREE”. That may be creative, but in the end, the buyer is buying the tickets & the pencil gets the seller around the rules.

        I might be more inclined to believe the company but last night I noticed they seem to be the same company charging $100 per month for CREDIT MONITORING & REPAIR during their debt settlement process! What is the point of credit score monitoring oR repair until youre out of debt?

        It doesnt seem too flagrant, but what if they offered this?: For $3000 We will give you a settlement fee of $10 per settled debt. Would it seem flagrant then?

      • http://www.bknetmarketing.com Bobl

        There are two issues. One, this is a creative approach to a fee structure and the fact that it is debatable from the standpoint of the consumer, makes it more compelling. Pre-TSR, this model would have been fine.

        But two, it is my opinion that this is a clear violation of the TSR. The TSR is not vague about what is considered the service that is rendered and what triggers the ability to charge a fee. If the outcome of your business model is to alter the debt, the only acceptable trigger for fees is that outcome. Anything else is considered an advanced fee.

        Frankly, the TSR sucks for the industry and is probably unfair, but is the reality. Business models that don’t adhere to the TSR are dangerous for the industry. It will lead to more enforcement and in my view, broader regulations. The FTC would have gone further if they could have but they were limited by their decision to attach this to a telemarketing rule. If the industry doesn’t show some constraint, I think you will see laws like the Schumer bill spoken about again.

      • Mike Reilly

        So basically what I’m hearing is, for the cost conscious consumer, the only choice is to shop companies for the lowest fees or find those willing to haggle? Only Andy answered the question I posed below about Company A & B and the qualified consumer with 20K in debt.

        Are you all telling me that the better deal for the consumer is company A; the 20% take it or leave it?

        As a consumer who would you enroll with and why?

      • Anonymous

        If those were my only two options, I would enroll in A. I would enroll in A because I may get my job back & no longer need to engage the settlement company, my wife may lose her job & I may need to file bankruptcy. The probability of my situation changing over three years is nearly 50% (based on our companies experiences- 30% worse, 20% better). There is no telling when my situation will change- But if it happens, I’m better off with A.

        Either way, my monthly will remain the same- But in A, I am able to begin saving sooner as well.

        If I miss a month or two on my draft, will I be cancelled? I know I wont in a purely performance based program. If I change my mind in 35 days of signing & never get any settlement service, will I get my Rate Buy Down Fee returned?

        I would really rather choose option C- A settlement program that charged me a % of my savings. That way, I know the settlement company must negotiate an excellent rate in order to make more $ themselves.

      • Mike Reilly

        There’s a man with a well thought out answer. Two problems, 1st, your assuming the client will leave you one way or the other, or at least 50% of them. That’s not a good statistic at all. 2nd, and maybe you missed this…both companies offer the same service, only one of them offers the buy down should you choose it. I like providing consumers choices, it’s like when we educate them about their choices before we help select a program or turn them away.

        Again you’re assuming the debt relief service to be provided is not performance based which is not the case. The only time a fee is earned and recorded for settling a debt (providing a debt relief service) is when a debt is settled, of course the term dictates how the fee is collected.

        The problem is you can’t see your way through this. How does providing a consumer a choice of which fee they pay for a particular service have anything to do with the execution and performance of the service..listen, i could understand your point if the option was designed to rip the consumer off or in the end cost the consumer more but that clearly is not the case. If I thought that for even a mille-second I wouldn’t waste my time here. I’ll have a legal opinion on this soon enough, but I also realize that not one attorney from what I can see has joined this thread to put this to bed.

        On a 20K account 12.5% of the debt amt at time of enrollment for $600 + 20k settled = $3100

        On a 20K account settled at 40% saves a consumer 12,000 x 28% = $3360 @ 25% its 3k
        and that’s assuming the fee is based on the debt at the time it was enrolled, some base it on the time of settlement.

        I face this very issue, as I mentioned on another thread, my best client is a shopper. In my opinion the percentage of savings model is nothing more than a sales tool because, the individual’s circumstances, the status of the debt and good old averages dictate! I don’t blame ya…it’s an easier sell but, one we love to come up against. In the model we run, the consumer knows the fee to the penny before to contract is executed.

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

        Not to change the subject but…

        When Sean just mentioned “option c” it made me think of something that I’ve always wondered. What is the true definition of a “performance based model”? One that charges a fee based on total debt? or one that charges based on saved debt?

        The model that charges based on total enrolled debt will make the same exact amount of money, whether the debt settles at 40% or 60%. Yes, the performance triggers the fee, but the fee is never really based on performance, only the timing of the fee.

        What do you guys think?

      • Anonymous

        The model they sell is 20% of the debt total- flat. And, for the record, i said 50% of the time the financial situation changes, not the client falls out.

        I wouldnt own a company selling option A or B, instead, Id open up a company selling Option C and compete directly with the other 2.

        The choice provided may not be designed to rip the consumer off but it allows that possibility- If Hutton said 20% Flat or 1% of the debt flat, at settlement, for a buy down fee of $3000, what’s the difference? Now, whether or not they perform, the client pays.

      • Mike Reilly

        Sean, let’s call a spade a spade, of the consumers you enroll in your program, aside for those (and this is just an assumption) that fall out before you have the opportunity to perform, would you say the majority stick around giving you the ability to perform?

        My apologies for the 50% assumption but you did say the following;

        because I may get my job back & no longer need to engage (this indicates a dropout) the settlement company, my wife may lose her job & I may need to file (this indicates a dropout) bankruptcy. The probability of my situation changing over three years is nearly 50% (I guess I don’t know what you mean here) (based on our company’s experiences- 30% worse, 20% better).

        I just looked at your GFE and discovered your fee of 30% of the savings, so in my example yesterday of a consumer with 20k settled at 40% your fee would be $3600 compared to $3100 with company B, if the consumer made it to the finish line. Correct me if I’m wrong, this is all about getting the committed consumer, the well educated consumer and the financially capable consumer to the finish line, fair statement?

        We can go back and forth on this all day and not get very far. Again my goal is not to move down this path, it’s the creative thinking that intrigues me.

      • Anonymous

        Indeed it is, however, since my company has “skin in the game” here & our average settlement is 30%, a $20,000 debt load at 30% settlement costs the client a total of $10,200 vs Option A at 40% (since they get paid regardless of the settlement % and are likely to accept that) totals the client $11,100.

        As per my example, while it may indicate a dropout, it is not our drop out rate. When the client’s financial situation worsens, we have the ability to offer months of less or no payments to see if they can get back on track or continue- If we allow the up front fee & they have this situation, the company can potentially cancel the client & keep the “buy down fee”.

        Again, I go back to the question- If that model is allowed, what stops them from offering a 1% settlement rate bought down for $3000?

        And I see your point Mike. I’m completely in the debate for the debate’s sake- Big respect to you & your company. Further, I agree it is creative but I still see the potential for going back to that old abusive system.

        Best Regards!

        -Sean

      • Mike Reilly

        10-4 brother

      • Anonymous

        “Like”

      • Just a matter of time

        Awesome Mike!! There will soon be hundreds of people pointing out that these clowns on this site are ripping off ALL of their clients!! They don’t charge you upfront, they charge you 3 times more because they charge you later! They have no interest in creative thinking, all they want to do is use fear & half truths to steal other businesses clients so they can rip them off later!! Hilarious!!

      • Anonymous

        Andy- I define it as a % of amount saved. We defined it that way before the TSR. The TSR however considers it a trigger, not a model.
        The amount we earn is based on our performance of % of settlement, not whether we perform at all. Seems the FTC demagoged the term. At least, I’d never heard it used that way before reading it.

      • Doug

        Actually Apex is a whole seperate entity and company owned and operated by completely different parties. The point of cleaning up your credit at the same time as settlements are being done will give the client the maximum chance to have next to a clear credit report at the time of completion. This also enables clients to possibly get a car since they couldn’t or wouldn’t have qualified for the loan and potentially get a home loan quicker to replace the house they loss or to supply a homeowner as a renter a credit report they will say yes to INSTEAD of NO. They may even get the job that the employer didn’t hire them for because of their situation. I’m sorry just use common sense and if you want to join our program our company will give you 2 free pencils.

      • Just a matter of time

        All of you guys are blowing each other & all of you are making money doing the exact same thing! People like Mike point out valid issues & all you idiots can do is try to bash it so people pay you upwards of 30% for a worse service than a loophole company charging 10%! We rape you later! Hilarious!

      • Bulb

        Hi there Jamot,

        First of all, your a dick and an idiot.

        Having said that, most companies converting to a compliant model did so because it is required. Most of their fee structures, in aggregate, did not change. Those who have changed the aggregate to a larger amount can and should be shopped by consumers looking for the best service and fee.

        Please post in reply any loophole company charging either 10% of savings or 10% of total debt.

        People like Mike are engaged in intelligent dialogue while operating their company in full observance of the law.

        You on the other hand are a whining little brat who does not get his way and is throwing a tantrum.

        Go to your room!

      • http://GetOutOfDebt.org Steve Rhode

        I’ve noticed that the IP address’ you are posting from are also posting under a wide variety of monikers. It has also been responsible for posting inappropriate language and threats.

        While I invite a robust discussion I feel a need to provide a warning that to continue to participate on this site in conversations you will need to pick one identity, stop making threats, and tone down some of your language that has been included from other names this IP address, and the other one used, uses such as Forewarned, The Truth, Fines for Steve, Get It Right, and others.

        I don’t want to blacklist you on the site but will if this continues. This is the only warning I will give since I’ve been so lenient up to this point.

        I’m not saying you can’t disagree, have a different opinion or have a factual discussion. But keep it civil and appropriate.

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