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Debt Settlement Employee Sends in a Question and Comments About Companies Going Broke

A debt settlement employee sent in the following observations using this form:

Its true that no CID’s were sent out. But there is a lot of talk about the FTC requesting information on settlements being paid by [an escrow company]. (this is first hand from a company I work for regarding a settlement I negotiated.)

I have been in the industry for over 5 years, and to see the amount of companies in Arizona running and going broke is alarming.

The said part is after reading your article on the CID’s and finding out that between GCS and Noteworld there are over 700,000 customers. I will be the first to say they better brace themselves. No regulation or oversite of the industry has lead to this point – implosion.

I guess that’s what happens when you allow mortgage brokers to open DSA.

Keep up the good work!!!!

Thanks for contacting me. I’d love to hear from more employees of companies in the debt relief world.

Civil Investigative Demand letters have gone out to some debt settlement companies. I talk here about one I saw.

The whole CID issue got sidetracked by long discussions over if NoteWorld or Global Client Solutions received them. And while I’d love to know the exact number of consumers those companies serve, it would only be academically interesting, it doesn’t matter and it’s not important. I think we can safely say they probably serve the majority of debt settlement clients.

This is a time of great uncertainty in the debt relief world for debt settlement companies and consumers. In fact for those of us in or who watch the industry, this isn’t a surprise at all. Back in November 2009 I published “85% of Debt Settlement Companies May Be Closing Soon and Taking Your Money With Them” where I talked about a debt settlement trade association saying way back then the majority of companies would close. So part of what you are observing in Arizona today is exactly what was predicted to happen way back then.

Debt Settlement Employee Sends in a Question and Comments About Companies Going BrokeThe “implosion” facing the debt settlement industry today is not caused by charges planted by external forces. They are all the result of a weak and sandy foundation built of poor business models, profiteering, shortcuts, lies and greed.

Good companies are disheartened they are being punished for the actions of bad companies around them. Regulations protecting consumers are impacting all companies and proposed state legislation seems unpalatable to the remanning companies. This is a critical time of upheaval in the debt settlement world.

It’s not NoteWorld or Global Client Solution that is the heart of the story. And while those two companies probably do handle the majority of third-party accounts on debt settlement programs, they are going to suffer just as consumers and employees of debt settlement companies are as the inevitable unfortunate outcomes happen.

You can only imagine the financial impact both NoteWorld and Global Client Solutions are going to face as the number of consumers they assist begins to drop when debt settlement companies fail. Consumers that are cast out by debt settlement companies that fail, probably don’t need a third-party escrow company anymore. And each consumer that seeks a different solution takes income away from NoteWorld and Global Client Solutions.

This entire developing situation needs to be refocused back to the real culprit, the fundamental failure of the advanced fee debt settlement company business models and the untrue deceptive marketing that was flowing like a cold Seattle rain.

The reality in the consumer protection world is if consumers are not feeling ripped off, get refunds for services not rendered and don’t have a reason to complain, then there is no need for regulations and legislation. But that’s not what happened here. Is it?

Fast and loose companies paid marketers big bucks to basically tell people lies to sucker them in and seal the deal. Those companies then took big fees early from those disadvantaged clients and spent the cash before providing the services consumers paid for. The companies relied on new advanced fee sales to keep the ball rolling and grow the operation. As Michael Bovee of Consumer Recovery Network said in my 2009 article, “The current debt settlement industry is a massive Ponzi scheme.” That was the underlying problem, not NoteWorld or Global Client Solutions.

Based on previous investigations, the industry as a collective would be hard pressed to show that any more than 10%-20% of all enrolled debt settlement accounts were actually settled. But let’s say that number was higher, say 30%. That still means that 70% or so of enrolled accounts were never resolved for whatever reason, even though consumers may have paid advanced fees for them to be taken care of and did not get refunds for services not delivered.

It was the advanced fee model that always a house of cards. It was always going to tumble down.

And the sad fact is none of the failures and debt settlement job losses had to ever happen. If debt settlement companies had focused on doing the right thing and earning their fees when they actually provided the service, there probably would not be any recent state or federal legislation and employees of debt settlement companies would not be losing their jobs. Even if they had taken advanced fees, if they had just escrowed those fees and taken them when earned they could have refunded consumers who did not receive the promised service. The irony is that it was the very service the advanced fee debt settlement companies needed was to be clients themselves of NoteWorld and Global Client Solutions.

I wish this situation could be a lesson for future opportunists to learn from but it won’t be. In fact the very same greed, exaggeration, and profit over people mentality is surging right now in the new field of mass joinder mortgage litigation marketing. If you take an early seat in the bleachers and watch that mess grow and then collapse, it will look fundamentally familiar to you.

Both Global Client Solutions and NoteWorld deny they received a CID, and like I said before, it really does not matter if they did, do or don’t. It is simply not material at all to the implosion of the industry.

In the end, in a way, they will most likely both be victims of this huge mess as well.

Debt Settlement Employee Sends in a Question and Comments About Companies Going Broke
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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.
  • Steve Rhode

    I’d be happy to and that’s what I’m trying to do. What did you feel was inflammatory?

  • confused

    Sorry We have to table that analysis, as I am rushing out to a meeting ( I am late).

    I STILL BEG YOU TO ANSWER (Respond) TO WHAT I THOUGHT WAS A FAIR QUESTION , of GENERAL INTEREST TO EVERYONE

  • Steve Rhode

    Yes, I was upgrading the server.

  • Steve Rhode

    What was inflammatory?

  • Confused

    Steve, I totally respect your journalistic professionalism, credentials and your sense of personal ethics.

    I think that this website could easily be cited as one of the commercial success stories that end up included as a case study in some college’s curriculum.

    The inflammatory language in your latest post confuses me. I have reread it several times.

    I first considered the possibility that some of your readers may be something akin to Debt Settlement Pyromaniacs that love to see fires. This lead me to consider the possibility that you are writing (what I perceive as inflammatory) stories with a strategic goal in mind. Which is to liven up the discussion through the combination of a calculated and politically charged tone and your own blend of heated rhetoric?

    Then again, I also considered the possibility that your inflammatory attack’s may actually be derive from some deep seated satisfaction and inner pride that comes from proactively creating stories that are crafted in such a way as to attract regulators and stir them to action.

    I don’t begrudge you either way, and I think that a lot of information outlets struggle with maintaining balance between creating news and reporting it.

    I COULD BE SEEING THIS TOTALLY WRONG and if so please accept my sincere apology in advance. I would love to know if either possible scenario I have put forth has any merit.

  • Mike Reilly

    Nice, good size operation!

  • Jolsen

    Mike,

    No, the number Chris stated is just be for Silverleaf.

  • Mike Reilly

    meaning Lloyd Ward and Associates or Silverleaf?

  • Chris Garrison

    Michael,

    I’m not sure how big all the rest of the companies on the list are, but we currently have 73 employees here at Silverleaf Debt Solutions. Only 10 of these employees are in our front end, the rest reside in Customer Service and Settlement Departments. So we will do our best to help as well.

    Thanks,

    Christopher Garrison
    Silverleaf Debt Solutions

  • Mike Reilly

    Impossible to estimate, what I can tell you is, on the small portfolio we recently rescued, the company that went out of business was indirectly an affiliate of a larger operation (an affiliate of an affiliate) that was providing sub-par service to the consumer. This affiliate (once removed) was in the business for about 16 months, the average client in their front loaded program had about enough savings to settle 1 to 2 debts.

  • Steve Rhode

    Depends. How many consumers do you estimate have the full funds on hand to settle. My bet us it will be relatively small.

    What’s your estimate?

  • Steve Rhode

    Success of a rescue plan depends on the willingness of those willing to participate.

    The offer and opportunity to help is open to all.

  • confused

    You are a good sport.

    Were you aware that GetOutOfDebt.org went off the air on Sunday??

    (I know that those pesky squirrels down in North Carolina like to chew on wires and I noticed that your web-servers went off line on Sunday March 20th around 12:30 pm for about a half an hour).

  • Steve Rhode

    You might want to pull out the measuring tape yourself. The second story you referred to by “300″ never said 300 CIDs went out.

    Shall we call it even? ;-)

  • Mike Reilly

    I’m sorry make that 6 companies, you added Anisa when she said it was ok.

  • Mike Reilly

    Does anyone have a quality count on the number of full service debt settlement companies vs. affiliates? Clearly the affiliates outnumber the companies and I think the implosion referenced is that of the affiliate. Certainly we have seen a handful if full service operators close shop but nothing of epidemic proportion…yet

    Steve if you’re right the five companies that make up the rescue boat will not cut the mustard. Last week you mentioned in a post you had received a number of emails from companies willing to participate and that you were working through them, yet I have not seen any additions to the list. Of the companies on the list clearly New Era is the largest, the rest of us, relativily small.

    Also you never responded to my question about the DIY programs? If the folks in trouble have the funds on hand to settle and so many here are in favor of DIY, have you reached out to that group for a heavy discount, have you reached out to the coach’s as well who can better determine after a deeply discounted coaching session what the best strategy is for the consumer? Is there a real effort behind the rescue plan or are we rowing up _ _ _ _ _ creek without a paddle?

    I would hate for this plan to become nothing more than a rubber dingy with plastic paddles.

    Michael Reilly
    Emerge America

  • Mike Reilly

    Does anyone have a quality count on the number of full service debt settlement companies vs. affiliates? Clearly the affiliates outnumber the companies and I think the implosion referenced is that of the affiliate. Certainly we have seen a handful if full service operators close shop but nothing of epidemic proportion…yet

    Steve if you’re right the five companies that make up the rescue boat will not cut the mustard. Last week you mentioned in a post you had received a number of emails from companies willing to participate and that you were working through them, yet I have not seen any additions to the list. Of the companies on the list clearly New Era is the largest, the rest of us, relativily small.

    Also you never responded to my question about the DIY programs? If the folks in trouble have the funds on hand to settle and so many here are in favor of DIY, have you reached out to that group for a heavy discount, have you reached out to the coach’s as well who can better determine after a deeply discounted coaching session what the best strategy is for the consumer? Is there a real effort behind the rescue plan or are we rowing up _ _ _ _ _ creek without a paddle?

    I would hate for this plan to become nothing more than a rubber dingy with plastic paddles.

    Michael Reilly
    Emerge America

    • Mike Reilly

      I’m sorry make that 6 companies, you added Anisa when she said it was ok.

      • http://GetOutOfDebt.org Steve Rhode

        Depends. How many consumers do you estimate have the full funds on hand to settle. My bet us it will be relatively small.

        What’s your estimate?

      • Mike Reilly

        Impossible to estimate, what I can tell you is, on the small portfolio we recently rescued, the company that went out of business was indirectly an affiliate of a larger operation (an affiliate of an affiliate) that was providing sub-par service to the consumer. This affiliate (once removed) was in the business for about 16 months, the average client in their front loaded program had about enough savings to settle 1 to 2 debts.

    • http://GetOutOfDebt.org Steve Rhode

      Success of a rescue plan depends on the willingness of those willing to participate.

      The offer and opportunity to help is open to all.

    • Chris Garrison

      Michael,

      I’m not sure how big all the rest of the companies on the list are, but we currently have 73 employees here at Silverleaf Debt Solutions. Only 10 of these employees are in our front end, the rest reside in Customer Service and Settlement Departments. So we will do our best to help as well.

      Thanks,

      Christopher Garrison
      Silverleaf Debt Solutions

      • Mike Reilly

        meaning Lloyd Ward and Associates or Silverleaf?

      • Jolsen

        Mike,

        No, the number Chris stated is just be for Silverleaf.

      • Mike Reilly

        Nice, good size operation!

  • confused

    You talk about ….”Fast and loose companies”…

    Seems like your story went downhill pretty quick; from 500 to 300 and then to what might possibly be just a few but, it still including the biggies Noteworld and Global and now it sounds like to me that you’re saying that the purported CID’s that Noteworld and Global supposedly got may have evaporated too?

    You might want to consider taking up carpentry or something where your BUILDING something up instead of TEARING OTHERS DOWN.

    …if you do decide to try your hand at carpentry try to remember to MEASURE TWICE and CUT ONCE

  • confused

    You talk about ….”Fast and loose companies”…

    Seems like your story went downhill pretty quick; from 500 to 300 and then to what might possibly be just a few but, it still including the biggies Noteworld and Global and now it sounds like to me that you’re saying that the purported CID’s that Noteworld and Global supposedly got may have evaporated too?

    You might want to consider taking up carpentry or something where your BUILDING something up instead of TEARING OTHERS DOWN.

    …if you do decide to try your hand at carpentry try to remember to MEASURE TWICE and CUT ONCE

    • http://GetOutOfDebt.org Steve Rhode

      You might want to pull out the measuring tape yourself. The second story you referred to by “300″ never said 300 CIDs went out.

      Shall we call it even? ;-)

      • confused

        You are a good sport.

        Were you aware that GetOutOfDebt.org went off the air on Sunday??

        (I know that those pesky squirrels down in North Carolina like to chew on wires and I noticed that your web-servers went off line on Sunday March 20th around 12:30 pm for about a half an hour).

      • http://GetOutOfDebt.org Steve Rhode

        Yes, I was upgrading the server.

      • Confused

        Steve, I totally respect your journalistic professionalism, credentials and your sense of personal ethics.

        I think that this website could easily be cited as one of the commercial success stories that end up included as a case study in some college’s curriculum.

        The inflammatory language in your latest post confuses me. I have reread it several times.

        I first considered the possibility that some of your readers may be something akin to Debt Settlement Pyromaniacs that love to see fires. This lead me to consider the possibility that you are writing (what I perceive as inflammatory) stories with a strategic goal in mind. Which is to liven up the discussion through the combination of a calculated and politically charged tone and your own blend of heated rhetoric?

        Then again, I also considered the possibility that your inflammatory attack’s may actually be derive from some deep seated satisfaction and inner pride that comes from proactively creating stories that are crafted in such a way as to attract regulators and stir them to action.

        I don’t begrudge you either way, and I think that a lot of information outlets struggle with maintaining balance between creating news and reporting it.

        I COULD BE SEEING THIS TOTALLY WRONG and if so please accept my sincere apology in advance. I would love to know if either possible scenario I have put forth has any merit.

      • http://GetOutOfDebt.org Steve Rhode

        What was inflammatory?

      • confused

        Sorry We have to table that analysis, as I am rushing out to a meeting ( I am late).

        I STILL BEG YOU TO ANSWER (Respond) TO WHAT I THOUGHT WAS A FAIR QUESTION , of GENERAL INTEREST TO EVERYONE

      • http://GetOutOfDebt.org Steve Rhode

        I’d be happy to and that’s what I’m trying to do. What did you feel was inflammatory?

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