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Center for Responsible Lending Says 15% Success Fee for Debt Settlement Should Be the Norm

The Center for Responsible Lending submitted testimony last month to the Uniform Law Commission asking them to reconsider 30% success fee caps for debt settlement services under the soon to be modified Uniform Debt Management Services Act (UDMSA)

Currently the fee allowed to be charged is 30% of the amount saved by the consumer, between the original enrolled balance and the balance at the time of the debt settlement.

At the heart of the position by CRL is their assertion that in order for a consumer to receive an economic benefit. It is important to note that CRL’s cost-benefit analysis does not account for the other significant costs of debt settlement such as credit impairment, tax obligations from forgiven debt, collection activity, lawsuits and wage garnishments, all of which would be unlikely if the borrower works directly with his or he creditors.

Center for Responsible Lending Says 15% Success Fee for Debt Settlement Should Be the Norm

The Center for Responsible Lender stated that the data supplied by TASC during the FTC hearings did not support consumers would receive a significant benefit from most accounts enrolled in a debt settlement program, 40% have no debts settled at all. CRL pulled this from the letter from the Association of Settlement Companies (TASC) to the Federal Trade Commission, commenting on the FTC’s proposed amendments to the Telemarketing Sales Rule on the marketing of debt relief services. – Source.

Testimony provided stated that only a fee based on savings could be beneficial for consumers. CRL felt that a fee based on enrolled debt presented incentives for the provider of the debt settlement service to not act in the best interest of the consumer. CRL stated such fees would create:

  • Low Quality/Value Settlements. With a percentage-of-enrolled-debt fee, the provider is guaranteed a set fee regardless of the quality of the settlement, thereby incentivizing quick, low savings settlements so that the company can get paid quickly.
  • Enrolling Debt Unlikely To Be Settled. A percentage-of-enrolled-debt fee provides an incentive for providers to include as much debt as possible in the program (even if they know through experience that the creditor will not engage with debt settlement providers) because doing so would increase the fees paid for other settlements.
  • Fees Higher Than Savings. Under a percentage-of-enrolled-debt fee structure, a
    provider may be paid a fee that is larger than the savings to the consumer from the settlement.

The conclusion of the testimony provided to the Uniform Law Commission was that there was no evidence to support charging a 30% settlement fee.

As I’ve been saying, debt settlement companies should prepare to operate under a 15% success fee moving forward. It appears to be a trend that is happening and with California considering enacting the 15% fee cap and Illinois already operating under such a cap (source) it is probable more states will adopt it as well. – Source

Center for Responsible Lending Says 15% Success Fee for Debt Settlement Should Be the Norm
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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.
  • www.donaldsonwilliams.com

    As the owner of a debt settlement company, I can honestly tell you that if a company can’t figure out how to operate at a 15% rate, they should simply close their doors. Those who charge more than 15% are simply looking to line their own pockets. Cut down on overhead, and learn to live within your means, which is probably what these CEO’s preach to their clients.

  • http://www.donaldsonwilliams.com www.donaldsonwilliams.com

    As the owner of a debt settlement company, I can honestly tell you that if a company can’t figure out how to operate at a 15% rate, they should simply close their doors. Those who charge more than 15% are simply looking to line their own pockets. Cut down on overhead, and learn to live within your means, which is probably what these CEO’s preach to their clients.

  • Steve Rhode

    I just got the data from CRL and will look over the first of the upcoming week.

  • Mike Reilly

    will provide…

  • Mike Reilly

    Steve, should I assume no response from CRL on the formulas? Based on the assumptions provided the math simply does not work. Not sure what the calculations with provide, but the chart remains a mystery and proves nothing, to all intents and purposes it’s worthless, unless of course someone can clear this up.

  • Steve Rhode

    You know…I added a new expert here on the site yesterday that would love to answer any questions for debt settlement companies on how to tune the business model to succeed moving forward. Please feel free to post you question for Scott, here.

    If you decide to post a question I think it is a great learning opportunity for others as well.

    Steve

  • Robert Stevenson

    sounds good… And my free market argument was made to you. I understand lawmakers won’t simply buy that. However, I was directing it towards you because from your writing I got that you were in favor of the 15% savings… not just reporting that it was possible.

    Let me get my data together and submit through the site. The up-front data isn’t pretty, but it’s around 35-45% of total clients (9/10 settled)… (30-40% of cancellations was due to people being “spooked” about the program and not giving us a chance to settle.)

    Performance model looks very promising. It has some deep challenges and I’d hate to enter this market brand new without any small enrollment fee to help with cost.

  • Angelo

    If all that existed were DS companies that dont charge fees until settlement, consumers would dictate fees and there would be no need for any fee caps. If a consumer comes to us with 100k in debt and is talking with a competitor as well, I know that I may have to discount my fees if that competitor’s fees are lower than mine or if my competitor offers legal services.

    I know my CPA charges me more than most to do my taxes. Sure, I can go to H&R Block and pay much much less but I chose to pay him because I know that I am getting exceptional service…get it? It should be up to the consumer to compare programs and chose if they want to pay more for the bells and whistles or pay less for the automated giants. Also, what happens in 5-10 years when the cost of living and cost of doing business increases and the 15% fee caps remains? Even the most efficient companies will not be able to survive.

    While it seems that engaging with Errick has proven time and time again to be a waste of time, the real benefit is that the rest of the industry sees that there are a handful of companies out there that are doing DS the right way, prior to FTC changes and that DS in fact works when done correctly. Keep up the rhetoric Errick, this may be the best way to get the word out for us!!

  • Steve Rhode

    You say you know my opinion but you state it incorrectly. I’ve said I was in favor of the old UDMSA that allowed for a $400 up-front fee and performance pricing. TASC and others were against that and now they have less than that.

    I understand your free market desire but standing by that argument is great philosophically but it’s not going to get you anything with lawmakers and regulators. So if that’s not going to work then what can you be for?

    Credit counseling went down this exact same path. Debt settlement is not alone in these same issues.

    The importance of the data is to first get companies to report on it and then eventually if that data was independently audited to provide evidence that it is accurate then it would carry more weight and influence.

    Robert, I’d love to hear what your game plan is to alter the course of things other than just complaining about me and wanting a free market economy in the debt settlement world.

    Tell me what the game plan is you think will alter the path DS is on now and I’ll gladly do an interview with you and report on it so you can share it with others and rally them around you.

  • Errick

    I like them apples very much. They show that debt settlement can be very helpful (most of these people are not quite debt-free, but there’s no denying you are doing good work) in cases where the fees are 2 to 5 percent of the enrolled debt. This shows that debt settlement fees should be capped at 5 percent of enrolled debt.

  • Robert Stevenson

    “Data to support the performance numbers of debt settlement as an effective…..”
    –> This data can be presented and it is assumed by knowing our numbers are similar to that of the data that New Era presents. Granted, we’ve only been doing a peformance model since end of summer before the official change, we knew our previous numbers of clients settling 9/10 debts was in the 40-50% range… it will be safe to assume with performance we can attain about 55%.. I hope 65% but this would be a bold claim.

    Now, the data would need to be compiled and organized… However, I have a strong suspicion that even when presenting the data there would be a lot of criticisms to “self-reported” so essentially the legitimacy of the data… Much like the FTC did with TASC’s data. I can’t vouch for their data, but I know the numbers they presented are attainable, I would assume many TASC companies can’t actually produce those if they were collecting all fees up front.

    Secondly, I suspect that even a 9/10 or 7/10 debts settled wouldn’t be sufficient as I’ve heard many people state “If all debts aren’t settled than the service wasn’t delivered. Also, that a 50-60% “completion ratio” isn’t beneficial. However, a few things. 1) If you are managing a clients account effectively and negotiating difficult accounts like Citi, Discover or Chase (in certain states), you often see clients settling the “easy” accounts on their own. This is due to the client either thinking when they receive a settlement letter in the mail that it’s probably a good offer OR why didn’t the DSC settle it (when we didn’t settle to use funds for a priority account). This is more common than you think and if there are any others providing settlement services will know it brings your “accounts settled” ratio down because they are settling on their own, but usually make up a reason to the company.

    2) We deal with many hurdles for issues we have no control over. The bad media with the industry (which, us playing by the rules take the bad rap which means we lose business for others peoples actions). There are many people who enroll into a program, read a horror story here and cancel after a payment or two,. Heck, when someone search’s a DSC name this VERY OWN SITE says “COMPANY NAME, Scam, Complaint, Review, or Praise?”…. People are skepitical, they see the title “Scam”.. they start reading horror stories… Now they drop and we have to count that against our numbers.

    There are quite a few people that the program can’t help…. and normally when it’s the companies fault is because bad underwriting. But there is a huge majority that can recieve a benefit. Again, I point to New Era’s data that is public.

    Steve’s COMMENT: ~~~~”I’m not suggesting any prices. I’m reporting on what is already happening and the trend I’m seeing. ~~

    –> You are reporting, but we know your opinion. It’s to cap fees at something that is unreasonable. It’s going to be very difficult to operate with 15% savings. It’s going to put a lot of honest business people out of business and limit the options for consumers.

    ~~~”What evidence or support would you provide to the California legislature to prevent a 15% fee cap other than a free market argument?”~~~
    –> As mentioned above I can provide data similar to the stats I mentioned above. However, I feel in any case it will not be sufficient to deem the program has “meaningful” benefits. I feel like you are looking for mere perfect completion numbers that are simply unrealistic at ANY fee cap level.

    However, since when did it become necessary for other reasons for wanting and believing in a free market? A Debt settlement plan is aggressive and has risk associated with it, but how is fee caps going to limit those risks?

  • Really??

    The bitch slap heard around the world…..how do you like them apples??

  • Robert Stevenson

    wow… citations a college profession would love.

  • Michael

    Your point on TASC is not something I will argue or defend. I actually share much of your perspective there (and have publicly for years).

    Your challenge was to show the efficacy of debt settlement. You did not identify much by way of parameters.

    Steve’s response was one example I was thinking of that can be found on this site. Here is another: http://getoutofdebt.org/26211/

    The Amanda in that story was interviewed by the Amanda who regularly writes for this site.

    You did not preface your challenge with a fee parameter. You in fact said “under any fee regime”, but you are now changing your tune in what I assume is an effort to maintain your bias.

    My concern is that no matter the resource, you will argue that is not a valid example for this reason or that. If you maintain a fee argument, than my resources can only be viewed as instructional to settlement as a means to attain relief from debt, which I hope, at least in part, will address your efficacy challenge.

    Wall Street Journal interview with a successful debt settler:
    http://blogs.wsj.com/economics

    AOL – Daily Finance article with interview of a debt settler:
    http://www.dailyfinance.com/20

    All Business Article with small business owner who successfully settled his debt:
    http://www.allbusiness.com/ban
    The same small business owner referenced in the All Business piece wrote a blog type diary of his settlement experience found here: http://debtsettlementstory.com

    The Dolans article with interview of debt settlers – This Lauren one is relevant to fee concerns as CRN performed all settlements and did earn 15% of savings. All debts were settled and funded first then fees collected using manageable monthly installments afterward, those payments continue to this day (will be done this summer):http://www.dolans.com/article/

    Detroit Free Press article with interview of debt settler: http://www.freep.com/article/2
    Nicole gave me permission to write a blog complementing the Freep article with additional detail found here: http://debtbytes.org/2010/03/1

    There are many testimonies that alternate on the CRN site as well as review comments from debt settlers found here: http://debtbytes.org/2010/07/2
    In your skepticism Errick, you may be inclined to say those are not actual client words or testimonies. You would be wrong. To publish testimonies that are not real is false and misleading and would be major violations of title 5 of the FTC Act and would further violate virtually every states Unfair and Deceptive Acts & Practices laws, and further, my plainly stating I am aware of these laws, were those testimonies fabricated in any way, would be my admission of committing fraud.

    Here is a paste of case outlines from a regulatory filing I made. This is filed with a federal agency so please refrain from questioning the veracity of the content I submitted as something other than factual:

    “Consumer enrolled after having researched several companies in the debt relief service industry. His research led to the CRN web site and his subsequent request for a no cost consultation. It was determined he would be successful with a settlement approach. The consumer enrolled 3 accounts with CRN on 9/13/2009 in anticipation that CRN would do all negotiations on his behalf and he would pay a total of 15% of the savings after the settlements were complete. The fee based on results was why he chose CRN over others he had consulted with.

    Consumer received our DIY course material and consulted one on one with his assigned specialist. He determined shortly after following the details in our material, fielding a few creditor calls and subsequent consults with his specialist that he would try to accomplish the settlements through the DIY process.

    Account Results:

    1.$11,000.00 settled for $3,660.00
    2.$14,000.00 settled for $4,700.00
    3.$32,000.00 settled for $12,000.00
    Estimated fee had CRN provided full service (based on 15% of saving): $5,496.00
    Actual Total fees paid to CRN due to DIY implementation: $995.00

    Here are excerpts of an email sent to me by this consumer on 1/12/10:
    “So I was scouring the internet and I came across a company called CRN. I had a talk with them and I knew within 15 minutes of talking to Michael that this was the way to go. There are three main reasons that helped me steer me towards CRN:
    1) Their fee is based on the debt amount that was reduced;
    2) I do not have to set up a bank account thru them.
    3) They offered a DIY option as well.”

    “Their fee being the most reasonable made sense to me too. Most everybody wanted 20% of the total debt load; CRN wanted 15% of the debt reduced.

    Also, CRN sent me a whole debt settlement packet which included good information on DS as well as very infomative CD’s; count 9 of them! That information in the packet along with Michael’s acute consultation helped me settle my debt of $60K in 6 months!

    Nobody I talked to was even close. Thanks to CRN, I have settled all 3 of my accounts for 30~35% on a total balance of almost $60K! And I started this process in August of 2009! I couldn’t not have done so well in such short time had it not been for CRN.

    Their model is transparent and to the point.”

    Status: File closed 1/2010

    CRN Member Example 2:

    This consumer enrolled after having researched several companies in the debt relief service industry. His research led to the CRN web site and his subsequent request for a no cost consultation. It was determined he would be successful with a settlement approach. The consumer enrolled 4 accounts with CRN on 7/2/2009 in anticipation that CRN would do all negotiations on his behalf and he would pay a total of 15% of the savings after the settlements were complete. The fee based on results was why he chose CRN over others he had consulted with.

    Consumer received our DIY course material and consulted one on one with his assigned specialist. He determined shortly after following the details in our material, fielding a few creditor calls and subsequent consults with his specialist that he would try to accomplish the settlements through the DIY process.

    Account Results:

    1.$19,783.17 settled for $6924.11

    2.$22,563.84 Active – Not settled yet

    3.$45,468.20 settled for $10,386.67

    4.$48,711.10 settled for $14,613.33

    Estimated fee had CRN provided full service to date (based on 15% of saving): $12,305.00

    Actual Total fees paid to CRN to date due to DIY implementation: $1,195.00

    Status: Active

    CRN Member Example 3:

    This consumer enrolled after having researched several companies in the debt relief service industry. Her research led to the CRN web site and her subsequent request for a no cost consultation. It was determined she would be successful with a settlement approach. The consumer enrolled 4 accounts with CRN on 10/18/2009 in anticipation that CRN would do all negotiations on her behalf and she would pay a total of 15% of the savings after the settlements were complete. The fee based on results was why she chose CRN over others she had consulted with.

    Consumer received our DIY course material and consulted one on one with her assigned specialist. She determined shortly after following the details in our material, fielding a few creditor calls and subsequent consults with her specialist that she would try to accomplish the settlements through the DIY process.

    This member, who enrolled to have CRN provide full service settlement, contacted me via phone on 1/18/10 indicating that she is confident she can proceed with her goals without us. She requested and has been sent a refund of $300.00 which is the per account menu pricing which has a lifetime refund policy.

    1.$ 5,155.36 settled for $1546.00

    2.$7,694.97 – Inactive
    (Indicated in her 1/18/10 telephone call that she is only waiting on documentation for the 25% settlement offer already verbally agreed upon with creditor)

    3.$13,833.03 – Inactive

    4.$19,738.79 – Inactive

    Actual Total fees paid to CRN due to DIY implementation: $695.00

    Here are excerpts of an email sent to me by this consumer on 1/18/10:

    “Mr. Michael,

    I want to thank you and all members of CRN for helping me gain the knowledge to get through my debt situation. Thanks to the cds and the advice of my debt specialist I have closed one out of four accounts and now have the confidence to face the other three accounts I still have to settle. I just want to add that the service is exceptional since all my calls and emails were answered the same day as well as all the questions I had. I would definitely recommend my friends and family to obtain the cds and materials.

    I also want to remind you, as per our discussion, that I want to cancel my membership so that the $50 monthly fee will not be charged anymore and that a refund of the three accounts that have not been settled yet needs to be applied to my checking account.”

    Errick, I can produce account summaries in similar format to the one Steve linked to in his above comment for days and do nothing else. I see no point in doing so at this time. I am of the belief that you will find some way to knock what I have provided in this reply.

    If you do, it will only prove that you will not entertain any other notion than that which you have committed yourself to, which to me seems to be your opinion that “settlement sucks, never works for anyone, those who suggest it does work are liars and con men”.

    I have mostly appreciated your comments on this site until today. It is good to have a contrary view. Your assertions today however….

  • Michael

    Your point on TASC is not something I will argue or defend. I actually share much of your perspective there (and have publicly for years).

    Your challenge was to show the efficacy of debt settlement. You did not identify much by way of parameters.

    Steve’s response was one example I was thinking of that can be found on this site. Here is another: http://getoutofdebt.org/26211/debt-free-and-you-can-be-too

    The Amanda in that story was interviewed by the Amanda who regularly writes for this site.

    You did not preface your challenge with a fee parameter. You in fact said “under any fee regime”, but you are now changing your tune in what I assume is an effort to maintain your bias.

    My concern is that no matter the resource, you will argue that is not a valid example for this reason or that. If you maintain a fee argument, than my resources can only be viewed as instructional to settlement as a means to attain relief from debt, which I hope, at least in part, will address your efficacy challenge.

    Wall Street Journal interview with a successful debt settler:
    http://blogs.wsj.com/economics/2010/09/09/limiting-psychological-damage-from-debt-collections/

    AOL – Daily Finance article with interview of a debt settler:
    http://www.dailyfinance.com/2010/09/22/mired-in-debt-heres-how-to-dig-out-safely/

    All Business Article with small business owner who successfully settled his debt:
    http://www.allbusiness.com/banking-finance/personal-finance-personal-debt/14435323-1.html
    The same small business owner referenced in the All Business piece wrote a blog type diary of his settlement experience found here: http://debtsettlementstory.com/debt-settlement-the-gory-details/

    The Dolans article with interview of debt settlers – This Lauren one is relevant to fee concerns as CRN performed all settlements and did earn 15% of savings. All debts were settled and funded first then fees collected using manageable monthly installments afterward, those payments continue to this day (will be done this summer):http://www.dolans.com/article/72748/Should-You-Try-a-Debt-Settlement-Program/

    Detroit Free Press article with interview of debt settler: http://www.freep.com/article/20100325/COL07/3250467/1320/Prepare-a-plan-to-cut-debt
    Nicole gave me permission to write a blog complementing the Freep article with additional detail found here: http://debtbytes.org/2010/03/16/debt-settlement-in-michigan/

    There are many testimonies that alternate on the CRN site as well as review comments from debt settlers found here: http://debtbytes.org/2010/07/21/consumer-recovery-network-reviews/#comments
    In your skepticism Errick, you may be inclined to say those are not actual client words or testimonies. You would be wrong. To publish testimonies that are not real is false and misleading and would be major violations of title 5 of the FTC Act and would further violate virtually every states Unfair and Deceptive Acts & Practices laws, and further, my plainly stating I am aware of these laws, were those testimonies fabricated in any way, would be my admission of committing fraud.

    Here is a paste of case outlines from a regulatory filing I made. This is filed with a federal agency so please refrain from questioning the veracity of the content I submitted as something other than factual:

    “Consumer enrolled after having researched several companies in the debt relief service industry. His research led to the CRN web site and his subsequent request for a no cost consultation. It was determined he would be successful with a settlement approach. The consumer enrolled 3 accounts with CRN on 9/13/2009 in anticipation that CRN would do all negotiations on his behalf and he would pay a total of 15% of the savings after the settlements were complete. The fee based on results was why he chose CRN over others he had consulted with.

    Consumer received our DIY course material and consulted one on one with his assigned specialist. He determined shortly after following the details in our material, fielding a few creditor calls and subsequent consults with his specialist that he would try to accomplish the settlements through the DIY process.

    Account Results:

    1. $11,000.00 settled for $3,660.00
    2. $14,000.00 settled for $4,700.00
    3. $32,000.00 settled for $12,000.00
    Estimated fee had CRN provided full service (based on 15% of saving): $5,496.00
    Actual Total fees paid to CRN due to DIY implementation: $995.00

    Here are excerpts of an email sent to me by this consumer on 1/12/10:
    “So I was scouring the internet and I came across a company called CRN. I had a talk with them and I knew within 15 minutes of talking to Michael that this was the way to go. There are three main reasons that helped me steer me towards CRN:
    1) Their fee is based on the debt amount that was reduced;
    2) I do not have to set up a bank account thru them.
    3) They offered a DIY option as well.”

    “Their fee being the most reasonable made sense to me too. Most everybody wanted 20% of the total debt load; CRN wanted 15% of the debt reduced.

    Also, CRN sent me a whole debt settlement packet which included good information on DS as well as very infomative CD’s; count 9 of them! That information in the packet along with Michael’s acute consultation helped me settle my debt of $60K in 6 months!

    Nobody I talked to was even close. Thanks to CRN, I have settled all 3 of my accounts for 30~35% on a total balance of almost $60K! And I started this process in August of 2009! I couldn’t not have done so well in such short time had it not been for CRN.

    Their model is transparent and to the point.”

    Status: File closed 1/2010

    CRN Member Example 2:

    This consumer enrolled after having researched several companies in the debt relief service industry. His research led to the CRN web site and his subsequent request for a no cost consultation. It was determined he would be successful with a settlement approach. The consumer enrolled 4 accounts with CRN on 7/2/2009 in anticipation that CRN would do all negotiations on his behalf and he would pay a total of 15% of the savings after the settlements were complete. The fee based on results was why he chose CRN over others he had consulted with.

    Consumer received our DIY course material and consulted one on one with his assigned specialist. He determined shortly after following the details in our material, fielding a few creditor calls and subsequent consults with his specialist that he would try to accomplish the settlements through the DIY process.

    Account Results:

    1. $19,783.17 settled for $6924.11

    2. $22,563.84 Active – Not settled yet

    3. $45,468.20 settled for $10,386.67

    4. $48,711.10 settled for $14,613.33

    Estimated fee had CRN provided full service to date (based on 15% of saving): $12,305.00

    Actual Total fees paid to CRN to date due to DIY implementation: $1,195.00

    Status: Active

    CRN Member Example 3:

    This consumer enrolled after having researched several companies in the debt relief service industry. Her research led to the CRN web site and her subsequent request for a no cost consultation. It was determined she would be successful with a settlement approach. The consumer enrolled 4 accounts with CRN on 10/18/2009 in anticipation that CRN would do all negotiations on her behalf and she would pay a total of 15% of the savings after the settlements were complete. The fee based on results was why she chose CRN over others she had consulted with.

    Consumer received our DIY course material and consulted one on one with her assigned specialist. She determined shortly after following the details in our material, fielding a few creditor calls and subsequent consults with her specialist that she would try to accomplish the settlements through the DIY process.

    This member, who enrolled to have CRN provide full service settlement, contacted me via phone on 1/18/10 indicating that she is confident she can proceed with her goals without us. She requested and has been sent a refund of $300.00 which is the per account menu pricing which has a lifetime refund policy.

    1. $ 5,155.36 settled for $1546.00

    2. $7,694.97 – Inactive
    (Indicated in her 1/18/10 telephone call that she is only waiting on documentation for the 25% settlement offer already verbally agreed upon with creditor)

    3. $13,833.03 – Inactive

    4. $19,738.79 – Inactive

    Actual Total fees paid to CRN due to DIY implementation: $695.00

    Here are excerpts of an email sent to me by this consumer on 1/18/10:

    “Mr. Michael,

    I want to thank you and all members of CRN for helping me gain the knowledge to get through my debt situation. Thanks to the cds and the advice of my debt specialist I have closed one out of four accounts and now have the confidence to face the other three accounts I still have to settle. I just want to add that the service is exceptional since all my calls and emails were answered the same day as well as all the questions I had. I would definitely recommend my friends and family to obtain the cds and materials.

    I also want to remind you, as per our discussion, that I want to cancel my membership so that the $50 monthly fee will not be charged anymore and that a refund of the three accounts that have not been settled yet needs to be applied to my checking account.”

    Errick, I can produce account summaries in similar format to the one Steve linked to in his above comment for days and do nothing else. I see no point in doing so at this time. I am of the belief that you will find some way to knock what I have provided in this reply.

    If you do, it will only prove that you will not entertain any other notion than that which you have committed yourself to, which to me seems to be your opinion that “settlement sucks, never works for anyone, those who suggest it does work are liars and con men”.

    I have mostly appreciated your comments on this site until today. It is good to have a contrary view. Your assertions today however….

    • Robert Stevenson

      wow… citations a college profession would love.

    • Really??

      The bitch slap heard around the world…..how do you like them apples??

      • Errick

        I like them apples very much. They show that debt settlement can be very helpful (most of these people are not quite debt-free, but there’s no denying you are doing good work) in cases where the fees are 2 to 5 percent of the enrolled debt. This shows that debt settlement fees should be capped at 5 percent of enrolled debt.

      • Angelo

        If all that existed were DS companies that dont charge fees until settlement, consumers would dictate fees and there would be no need for any fee caps. If a consumer comes to us with 100k in debt and is talking with a competitor as well, I know that I may have to discount my fees if that competitor’s fees are lower than mine or if my competitor offers legal services.

        I know my CPA charges me more than most to do my taxes. Sure, I can go to H&R Block and pay much much less but I chose to pay him because I know that I am getting exceptional service…get it? It should be up to the consumer to compare programs and chose if they want to pay more for the bells and whistles or pay less for the automated giants. Also, what happens in 5-10 years when the cost of living and cost of doing business increases and the 15% fee caps remains? Even the most efficient companies will not be able to survive.

        While it seems that engaging with Errick has proven time and time again to be a waste of time, the real benefit is that the rest of the industry sees that there are a handful of companies out there that are doing DS the right way, prior to FTC changes and that DS in fact works when done correctly. Keep up the rhetoric Errick, this may be the best way to get the word out for us!!

  • Robert Stevenson

    No one said they shouldn’t regulate the debt settlement industry Mr Jump to Conclusions Guy. The people doing it right in the industry want regulation. Are you even reading?

  • Steve Rhode

    As an example you can view the data provided by these companies.

    http://www.neweradebtsolutions

    http://consumerrecoverynetwork

  • Robert Stevenson

    that’s why I don’t want to bother with the time it would take to prove this ridiculous “rational”…

  • Robert Stevenson

    Ok, I enjoyed reading this and get what Steve is wanting. I have this notion that the data will be presented in a negative light regardless of how positive it may be.

    For example, I’m confident this performance model will complete (example: settling 9/10 debts for a client) around 50-65%. To some, that’s “Half people aren’t completing!?”… and in an honest DSC’s eyes….

    It’s like “Hey guys, we are battling bad press like LHDR, horror stories like ones on this site, peoples natural tendency to listen to authority (creditors), the natural loss in consumers situation getting worse (job loss, divorce, worse economy, etc)….”

    In either case, what do people want to see in regards to data?

  • Errick

    If you go back to the topic of this thread, it is about why TASC would resist fee cap regulation in light of the CRL data. It doesn’t make sense, right? I don’t jump to the conclusion that if I can’t make sense of it, it must be irrational. I have a very rational theory for why TASC would fight a 15 percent fee cap: consumer debt settlement never works at any price worth mentioning.

    Steve’s example has a fee a little over one percent. Should that be the fee cap? I am perfectly justified in ignoring an example where the fee is one percent. And why wouldn’t you spend fifteen minutes redacting a file and posting it here? Wouldn’t that shut up a lot of critics? Where are all these people who succeeded in debt settlement? Why don’t we hear from them? Why don’t they go before the FTC or the state legislatures? Why won’t they post here? Or anywhere?

  • Michael

    Errick, your frame of reference does matter.

    What appears to not matter would be providing you with the proof that you seek, as it will be dismissed by you out of hand (as evidenced by your comment below). I could dedicate all of 15 minutes to put together resources that will satisfy your request, but it is clear that the effort will not satisfy.

    Why should I, or anyone take the time to disprove your assertion?

  • Margincompression

    What was your case about? Me being a random poster with a new found interest in consumer protection as pertains to debt settlement?

  • Errick

    I saw that one. I agree that is a good, though irrelevant, story. “They had a benefactor who assisted in funding offers as well as their selling some personal stuff.” Kudos to them, but my statement stands. Where is the flood of real success stories at typical debt levels, without asset sales or wealthy benefactors? Anyone? Bueller? This should be really easy because I am ridiculous, right?

    And keep in mind my original point. You think TASC is not being rational, but my theory explains their behavior. They have to fight because the end result is a ban on debt settlement.

  • Steve Rhode

    I would agree that those examples are probably few.

    I did recently publish this example recently of a couple that did it themselves and cleared all their debts.

    In this example, at 15% of original debt the fee would have been $78,328 but the couple wound up paying only $5,045 for help from Consumer Recovery Network to settle all the debt.

  • Steve Rhode

    Thank you. That’s what I’ve been saying. If there is no credible evidence to support debt settlement fees based on performance and the cries against legislation are all about not wanting regulation then neither of those approaches are going to hold off legislation.

    I think the CA bonding issue is now under control and will not be as onerous as originally proposed but these state licensing and regulations provide opportunity for those willing to stay close to home and capture that market.

    Illinois is just sitting there and waiting for a smart company that can control costs, to walk in and be the only player in the whole freaking state. Isn’t that a tremendous opportunity for someone to say they are the only licensed company?

    Illinois should not be avoided because the fees are low. It’s a huge opportunity for a DS company that can control fees to capture the entire market.

    The focus on controlling fees needs to be a priority if companies want to survive moving forward. It needs to be on efficiency and sucking costs out of delivery. And that begins from day one with suitability.

  • SeanDSLegalPlan

    I think the states are looking at price fixing debt settlement- I have heard Steve say that as an industry, debt settlement needs to demonstrate the value of fees which are higher than those being proposed in order to get to continue to charge them- i e CA… That it is up to us to save ourselves here.

    I think below this comment M Reilly mentions that not one license has been applied for in ILL- Great point Mike. They have a similar law to the one being proposed in CA. It also calls for a LARGE net worth, excessive bonding and a lot of other garbage that we, as a group can prove are not necessary in order to operate a business in debt settlement which actually helps our clients. We have the data to support it. If we could come together we could continue to offer good service- If we fail too, CA wont be the last.

    I understand CA’s view, looking at the data TASC presented to the FTC or the black eye the industry wears because of the previous affiliate driven model, the states still believe we are simply bad. The FTC was wise enough to allow thorough hearings and through them understood that settlement can be done well- And allowed for the industry to at least continue. Fee caps are a nasty business and have no business in the USA but it doesn’t mean it wont pass or be upheld. Look at CT- 10% of savings! and they want a $1600 license! Those laws are not meant to protect consumers through regulation, but they are meant to protect consumers for the option of debt settlement. No one will bother, therefore, no one will get hurt. If IL & CT simply demanded that DS companies get paid on performance & left it there, their residents would have more options & in turn, more opportunities. Those laws were a response to a now defunct industry. The ones being proposed are as well, it’s up to those of us still here to show CA & FL and all of the other states looking at similar reform what is excessive & why.

  • Errick

    Yes, all their debts settled under the plan they signed up for, for the money they were told they would need. Should be easy, right?

  • Steve Rhode

    Errick,

    Just to clarify, are you asking for an example where a consumer had ALL their debts settled that were included in their program when they began?

  • Errick

    How I may feel about debt settlement or what my background is does not matter. I’m simply stating an uncontroversial fact: no consumer has come before a legislature to testify about how great their debt settlement went. Then I make a reasonable inference from that fact: that TASC may not be irrational at all for fighting all “reasonable” regulation if they know that reasonable regulation would effectively be a ban. Then I just make the logically complementary statement: that in the absence of one counterexample, it is POSSIBLE that there is no one who succeeded in debt settlement.

    I did search this site. I found people who liked their debt settlement companies. I found people who have had debts settled. There is no one who has finished their whole plan on target. No one who has made it to the finish line. If there are many, and I am full of crap, it should be easy to show us just one.

  • Steve Rhode

    I’ve asked CRL for the background calculations on the chart.

  • Michael

    Errick,

    There are sources on this very site that would meet your request.

    I have read many of your posts and can see that you are jaded when it comes to debt settlement. I do not know your back story, but having skepticism that reaches to the level of what you display on this thread is usually not just happened upon.

    If you are comfortable in doing so, would you mind sharing your perspective of debt settlement and how you arrive there?

  • DD

    If the Federal and State Governments regulate banks and credit card companies TO PROTECT THE CONSUMER then they should regulate the debt settlement industry TO PROTECT THE CONSUMER!

  • Errick

    Then show us one. If I’m ridiculous it should be easy.

  • robert s

    Haha is this some college kid writing for the sake of being heard? Even some of the harvest critics of debt settlement would say your comment “possible debt settlement hasn’t helped anyone” is ridiculous.

  • Errick

    Then show us one. If there are many, you should be able to dig one out. Show us a redacted plan contract and the settlement letters for ONE customer. I won’t hold my breath.

  • robert s

    Of course… I rest my case

  • Mike Reilly

    That being said “Net Remaining Debt” is still not clear to me, if 4 of 5 are settled and you factor escalation how is it that the remaining are below 5k?

    A.) Fee based on savings:

    Enroll $5000 and for whatever reason it takes a year to get to it add 20% or $1000 for interest/penalties (escalation), now you’re dealing with $6000

    Settle the $6000 at 45% = $2700 subtract that from the original $5000 = $2300 savings

    Multiply that by your fee, let’s start with 15% (the first example) $345 x 4 debts settled all with a 20% escalation and total settlement fees on 4 cases would be $1380

    Total savings 4 out of 5 settlements $2300 x 4 = $9200 – fees $1380 = $7820 – trust acct $260 (26 months) = $7560 in client savings

    We can play with the escalation percentage but at the end of the day with $600 a month coming in, inside of 6 months 2 if not 3 term settlements should be in place with minimal escalation on half or more of the debt.

    B.) Fee based on debt amount at time of enrollment:

    Same settlements, percentages and escalation assumptions, fee = 15% of 20k enrolled and settled = $3000

    Total savings 4 out of 5 settlements $2300 x 4 = $9200 – fee $3000 = $6200 – trust acct
    $260 (26 months) = $5940 in client savings

    The point of this exercise is to question how the CRL can say that in all examples it cost the consumer more than the original debt amount. Clearly the push to a percentage of savings is cheaper but, the big questions is will it make sense from a business standpoint to hold the hand of a consumer, provide education and support over and above the services we agree to perform for what could be a 2+ year period. I think the industry will continue to thin out regardless. One final note, no one ever includes the savings to consumers in the form of interest paid to creditors, it’s assumed that most who join DS programs have completely stopped making their payments. Not always the case.

  • Mreilly

    Errick, if you participate in the industry and have any experience with performance based DS then you would have never made that statement.

    Many people have seen and/or realized the benefits of DS. If you’re a short timer and only experienced the front loaded fee model then I understand your statement.

  • Errick

    I respectfully disagree, for one simple reason. To date there has not been EVEN ONE consumer anywhere, in any state, under any fee regime, who is willing to swear an oath and show to a legislative committee that all of their enrolled, unsecured accounts were settled at meaningful discounts, after including fees. If there were, we would surely have heard from such a person by now.

    Lacking any counterexample, you must admit the possibility, and I admit it’s only a possibility, that debt settlement has never, ever really helped anyone. I suggest that the decision of TASC and others to resist regulation regardless of its “reasonableness” is just more proof that this may be true, that it NEVER works and deep down everyone knows it.

  • Bobby Zangrilli

    I think the fact that 15% of savings is the fee cap in Illinois and not a single company has even applied to become licensed there is solid evidence that this isn’t a workable fee cap.

  • Margincompression

    Intimate.

  • Steve Rhode

    No, I was looking for data to support the performance numbers of debt settlement as an effective solution.

    “Surely, those operating under the same standards can produce similar results.” Do you know this by looking at other company data or is this an assumption that all debt settlement companies provide the same level of performance.

    I’m not suggesting any prices. I’m reporting on what is already happening and the trend I’m seeing.

    What evidence or support would you provide to the California legislature to prevent a 15% fee cap other than a free market argument? What data can you provide or is it just your opinion that fees should not be lower? If you disagree with the CRL letter, what supporting argument would you make to regulators to defend the 30% cap instead?

  • Steve Rhode

    What specifically are you claiming my bias is?

  • Robert Stevenson

    “Until the debt settlement industry can deliver studies backed with data to support higher fees, there is nothing on the table to hold back the tide. The recent TASC effort in DE was pathetic. You can read about that effort here.”

    –> WOW, The TSR has not even been in effect for 1 year and you want data to support higher fees. Steve, you’re clearly not objective about this. You have data form New Era who has not been charging up front fees. Surely, those operating under the same standards can produce similar results.

    For as smart an individual as you are, I don’t buy that you think the fees should be capped that low without some other agenda or motive.

    Why do you think that price fixing the debt settlement industry will help the consumer? Is your only response “because they’ll pay less in fees”? If so, we should just do away with a free market and price everything to help consumers pay less. We could have a new government agency… Steve Rhodes could decide the prices! Doesn’t matter if the economics doesn’t make sense.

    You could help everyone pay less in fees in every sector. This could be a breakthrough.

  • Steve Rhode

    According to the letters author the assumptions are:

    Five debts of $5,000 each with 4 of 5 debts settled at 45% (the average settlement percentage reported by TASC), interest rates of 29.99% for those in debt settlement versus 9.99% for those who pay directly (under hardship program with the creditor), and fixed payments of 2.4% of the debt monthly under either.

  • Robert Stevenson

    And what is your relation to the debt industry/world?

    Or let me guess… some random person who found this blog and is interested in the industry and “consumer protection”

  • Margincompression

    I dont read Steve the way you do.

  • Margincompression

    I do not disagree with what you say here Robert.

    The states with an eye on fee caps in some instances had that eye prior to federal rule publication. Those that may now consider it are likely looking at the concept due to LHDR’s of the field.

    The current tone is not new and in some ways will probably not be muted.

  • Steve Rhode

    I think the trend I’m seeing develop goes like this, IL, probably CA soon, UDMSA potential change. Certainly there is consumer advocacy pressure to drive it to 15%.

    Until the debt settlement industry can deliver studies backed with data to support higher fees, there is nothing on the table to hold back the tide. The recent TASC effort in DE was pathetic. You can read about that effort here.

    Right now the DS lobbying approach has been to engage in efforts that do not support any legislation. Imagine if TASC and other had rallied behind UDMSA back in 2008, you’d be allowed to charge up-front fees and not have a success fee limit.

    Fighting back has only led to further reductions. The industry appears to have not learned anything from the FTC action. I see a continued downward trend.

    Of course it would be an entirely different picture if TASC had come out in support of DE legislation now and UDMSA historically. That would have effectively stopped the continued lowering of fees.

  • Robert Stevenson

    “Steve does not create the issues, he posts and comments about them after they happen.”
    –> He posts them with his bias. It’s ok to have a bias, but he attempts to be “objective” and pro free market pricing. It’s clear he isn’t and has some other agenda (whether it be the traffic increases on his site; More consumers that need help and can’t get help from Debt Settlement)

    The controversy is good for him and his affiliates. What would a blogger be without it?… just another blogger

  • Robert Stevenson

    With your reasoning might as well outlaw banking, real estate… the list could go on. Again, your rationale points to outlawing the industry at some point. You simply cannot eliminate abuse. You can limit abuse.. the current regulations (IF ENFORCED) are enough.

    You can blame lack of enforcement or resources to enforce…. You just lead down a slippery slope that ends at extinction.

    “The same players that brought about the need for regulations are not following them which no requires further regulation.”
    –> So enforce the laws…. Why punish the part of the industry that operates legally and ethically?

    “Fee caps coming to a state near you. It is an inevitability at this point.”
    –> Many are already in place that are well above the ridiculous 15% savings.

  • Margincompression

    Steve does not create the issues, he posts and comments about them after they happen. Being upset with Steve or this site is misplaced frustration. Just because the site provides a centralized location for consumers and industry to stay informed about relevant issues does not change the fact the issues are happening. The challenges with the industry existed prior to this site publishing a stitch of it.

    The trend with debt settlement is that more regulation is coming, from the states now and probably the outfit created by the Dodd Frank bill later. The trend is “not your friend” in the debt relief arena.

    It does not take Edgar Case to read and predict the tea leaves in this regard.

  • Robert Stevenson

    eek, I can see why people are upset over Mr Rhodes. There’s as many, if not more states at higher fee caps for 15% savings, so how do you say there is a “trend”?

  • Robert Stevenson

    eek, I can see why people are upset over Mr Rhodes. There’s as many, if not more states at higher fee caps for 15% savings, so how do you say there is a “trend”?

    • Margincompression

      Steve does not create the issues, he posts and comments about them after they happen. Being upset with Steve or this site is misplaced frustration. Just because the site provides a centralized location for consumers and industry to stay informed about relevant issues does not change the fact the issues are happening. The challenges with the industry existed prior to this site publishing a stitch of it.

      The trend with debt settlement is that more regulation is coming, from the states now and probably the outfit created by the Dodd Frank bill later. The trend is “not your friend” in the debt relief arena.

      It does not take Edgar Case to read and predict the tea leaves in this regard.

      • Robert Stevenson

        “Steve does not create the issues, he posts and comments about them after they happen.”
        –> He posts them with his bias. It’s ok to have a bias, but he attempts to be “objective” and pro free market pricing. It’s clear he isn’t and has some other agenda (whether it be the traffic increases on his site; More consumers that need help and can’t get help from Debt Settlement)

        The controversy is good for him and his affiliates. What would a blogger be without it?… just another blogger

      • Margincompression

        I dont read Steve the way you do.

      • Robert Stevenson

        And what is your relation to the debt industry/world?

        Or let me guess… some random person who found this blog and is interested in the industry and “consumer protection”

      • Margincompression

        Intimate.

      • robert s

        Of course… I rest my case

      • Margincompression

        What was your case about? Me being a random poster with a new found interest in consumer protection as pertains to debt settlement?

      • http://GetOutOfDebt.org Steve Rhode

        What specifically are you claiming my bias is?

    • http://GetOutOfDebt.org Steve Rhode

      I think the trend I’m seeing develop goes like this, IL, probably CA soon, UDMSA potential change. Certainly there is consumer advocacy pressure to drive it to 15%.

      Until the debt settlement industry can deliver studies backed with data to support higher fees, there is nothing on the table to hold back the tide. The recent TASC effort in DE was pathetic. You can read about that effort here.

      Right now the DS lobbying approach has been to engage in efforts that do not support any legislation. Imagine if TASC and other had rallied behind UDMSA back in 2008, you’d be allowed to charge up-front fees and not have a success fee limit.

      Fighting back has only led to further reductions. The industry appears to have not learned anything from the FTC action. I see a continued downward trend.

      Of course it would be an entirely different picture if TASC had come out in support of DE legislation now and UDMSA historically. That would have effectively stopped the continued lowering of fees.

      • Robert Stevenson

        “Until the debt settlement industry can deliver studies backed with data to support higher fees, there is nothing on the table to hold back the tide. The recent TASC effort in DE was pathetic. You can read about that effort here.”

        –> WOW, The TSR has not even been in effect for 1 year and you want data to support higher fees. Steve, you’re clearly not objective about this. You have data form New Era who has not been charging up front fees. Surely, those operating under the same standards can produce similar results.

        For as smart an individual as you are, I don’t buy that you think the fees should be capped that low without some other agenda or motive.

        Why do you think that price fixing the debt settlement industry will help the consumer? Is your only response “because they’ll pay less in fees”? If so, we should just do away with a free market and price everything to help consumers pay less. We could have a new government agency… Steve Rhodes could decide the prices! Doesn’t matter if the economics doesn’t make sense.

        You could help everyone pay less in fees in every sector. This could be a breakthrough.

      • Anonymous

        I think the states are looking at price fixing debt settlement- I have heard Steve say that as an industry, debt settlement needs to demonstrate the value of fees which are higher than those being proposed in order to get to continue to charge them- i e CA… That it is up to us to save ourselves here.

        I think below this comment M Reilly mentions that not one license has been applied for in ILL- Great point Mike. They have a similar law to the one being proposed in CA. It also calls for a LARGE net worth, excessive bonding and a lot of other garbage that we, as a group can prove are not necessary in order to operate a business in debt settlement which actually helps our clients. We have the data to support it. If we could come together we could continue to offer good service- If we fail too, CA wont be the last.

        I understand CA’s view, looking at the data TASC presented to the FTC or the black eye the industry wears because of the previous affiliate driven model, the states still believe we are simply bad. The FTC was wise enough to allow thorough hearings and through them understood that settlement can be done well- And allowed for the industry to at least continue. Fee caps are a nasty business and have no business in the USA but it doesn’t mean it wont pass or be upheld. Look at CT- 10% of savings! and they want a $1600 license! Those laws are not meant to protect consumers through regulation, but they are meant to protect consumers for the option of debt settlement. No one will bother, therefore, no one will get hurt. If IL & CT simply demanded that DS companies get paid on performance & left it there, their residents would have more options & in turn, more opportunities. Those laws were a response to a now defunct industry. The ones being proposed are as well, it’s up to those of us still here to show CA & FL and all of the other states looking at similar reform what is excessive & why.

      • http://GetOutOfDebt.org Steve Rhode

        Thank you. That’s what I’ve been saying. If there is no credible evidence to support debt settlement fees based on performance and the cries against legislation are all about not wanting regulation then neither of those approaches are going to hold off legislation.

        I think the CA bonding issue is now under control and will not be as onerous as originally proposed but these state licensing and regulations provide opportunity for those willing to stay close to home and capture that market.

        Illinois is just sitting there and waiting for a smart company that can control costs, to walk in and be the only player in the whole freaking state. Isn’t that a tremendous opportunity for someone to say they are the only licensed company?

        Illinois should not be avoided because the fees are low. It’s a huge opportunity for a DS company that can control fees to capture the entire market.

        The focus on controlling fees needs to be a priority if companies want to survive moving forward. It needs to be on efficiency and sucking costs out of delivery. And that begins from day one with suitability.

      • Robert Stevenson

        Ok, I enjoyed reading this and get what Steve is wanting. I have this notion that the data will be presented in a negative light regardless of how positive it may be.

        For example, I’m confident this performance model will complete (example: settling 9/10 debts for a client) around 50-65%. To some, that’s “Half people aren’t completing!?”… and in an honest DSC’s eyes….

        It’s like “Hey guys, we are battling bad press like LHDR, horror stories like ones on this site, peoples natural tendency to listen to authority (creditors), the natural loss in consumers situation getting worse (job loss, divorce, worse economy, etc)….”

        In either case, what do people want to see in regards to data?

      • http://GetOutOfDebt.org Steve Rhode
      • Errick

        I respectfully disagree, for one simple reason. To date there has not been EVEN ONE consumer anywhere, in any state, under any fee regime, who is willing to swear an oath and show to a legislative committee that all of their enrolled, unsecured accounts were settled at meaningful discounts, after including fees. If there were, we would surely have heard from such a person by now.

        Lacking any counterexample, you must admit the possibility, and I admit it’s only a possibility, that debt settlement has never, ever really helped anyone. I suggest that the decision of TASC and others to resist regulation regardless of its “reasonableness” is just more proof that this may be true, that it NEVER works and deep down everyone knows it.

      • Mreilly

        Errick, if you participate in the industry and have any experience with performance based DS then you would have never made that statement.

        Many people have seen and/or realized the benefits of DS. If you’re a short timer and only experienced the front loaded fee model then I understand your statement.

      • Errick

        Then show us one. If there are many, you should be able to dig one out. Show us a redacted plan contract and the settlement letters for ONE customer. I won’t hold my breath.

      • robert s

        Haha is this some college kid writing for the sake of being heard? Even some of the harvest critics of debt settlement would say your comment “possible debt settlement hasn’t helped anyone” is ridiculous.

      • Errick

        Then show us one. If I’m ridiculous it should be easy.

      • Michael

        Errick,

        There are sources on this very site that would meet your request.

        I have read many of your posts and can see that you are jaded when it comes to debt settlement. I do not know your back story, but having skepticism that reaches to the level of what you display on this thread is usually not just happened upon.

        If you are comfortable in doing so, would you mind sharing your perspective of debt settlement and how you arrive there?

      • Errick

        How I may feel about debt settlement or what my background is does not matter. I’m simply stating an uncontroversial fact: no consumer has come before a legislature to testify about how great their debt settlement went. Then I make a reasonable inference from that fact: that TASC may not be irrational at all for fighting all “reasonable” regulation if they know that reasonable regulation would effectively be a ban. Then I just make the logically complementary statement: that in the absence of one counterexample, it is POSSIBLE that there is no one who succeeded in debt settlement.

        I did search this site. I found people who liked their debt settlement companies. I found people who have had debts settled. There is no one who has finished their whole plan on target. No one who has made it to the finish line. If there are many, and I am full of crap, it should be easy to show us just one.

      • http://GetOutOfDebt.org Steve Rhode

        Errick,

        Just to clarify, are you asking for an example where a consumer had ALL their debts settled that were included in their program when they began?

      • Errick

        Yes, all their debts settled under the plan they signed up for, for the money they were told they would need. Should be easy, right?

      • http://GetOutOfDebt.org Steve Rhode

        I would agree that those examples are probably few.

        I did recently publish this example recently of a couple that did it themselves and cleared all their debts.

        In this example, at 15% of original debt the fee would have been $78,328 but the couple wound up paying only $5,045 for help from Consumer Recovery Network to settle all the debt.

      • Errick

        I saw that one. I agree that is a good, though irrelevant, story. “They had a benefactor who assisted in funding offers as well as their selling some personal stuff.” Kudos to them, but my statement stands. Where is the flood of real success stories at typical debt levels, without asset sales or wealthy benefactors? Anyone? Bueller? This should be really easy because I am ridiculous, right?

        And keep in mind my original point. You think TASC is not being rational, but my theory explains their behavior. They have to fight because the end result is a ban on debt settlement.

      • Michael

        Errick, your frame of reference does matter.

        What appears to not matter would be providing you with the proof that you seek, as it will be dismissed by you out of hand (as evidenced by your comment below). I could dedicate all of 15 minutes to put together resources that will satisfy your request, but it is clear that the effort will not satisfy.

        Why should I, or anyone take the time to disprove your assertion?

      • Errick

        If you go back to the topic of this thread, it is about why TASC would resist fee cap regulation in light of the CRL data. It doesn’t make sense, right? I don’t jump to the conclusion that if I can’t make sense of it, it must be irrational. I have a very rational theory for why TASC would fight a 15 percent fee cap: consumer debt settlement never works at any price worth mentioning.

        Steve’s example has a fee a little over one percent. Should that be the fee cap? I am perfectly justified in ignoring an example where the fee is one percent. And why wouldn’t you spend fifteen minutes redacting a file and posting it here? Wouldn’t that shut up a lot of critics? Where are all these people who succeeded in debt settlement? Why don’t we hear from them? Why don’t they go before the FTC or the state legislatures? Why won’t they post here? Or anywhere?

      • Robert Stevenson

        that’s why I don’t want to bother with the time it would take to prove this ridiculous “rational”…

      • Cupid

        I wonder if about 70% of the people who enroll in a DMP would not have been better served by going the bankruptcy route instead?

        It sure would put people in a position to spend and create jobs and help the economy. Maybe DMP’s should be outlawed until unemployment is down to say 6%.

  • Margincompression

    I think what they have at CRL is a now better regulated by federal law industry that then saw its many players partner with companies that do not follow the law and continue bad practices as if nothing happened at all. Some of those players are former founders, executive and board members of, industry associations like TASC.

    The picture this paints to the consumer protection lobby, state legislators and regulators is that after recognizing abuse, passing laws to curb abuse, the abuse continues. The same players that brought about the need for regulations are not following them which no requires further regulation.

    The debt settlement industry allowed and continues to allow this to occur.

    Fee caps coming to a state near you. It is an inevitability at this point.

  • Mike Reilly

    Genius…sorry

  • Mike Reilly

    Someone needs to explain this chart to me. Where are the settlement amounts? The original debt amount 25k is clearly marked, are the settlement amounts above that or is that the projected escalation? What are these fees based on? Explain remaining net debt?

    Did anyone actually read this?

    â–  Low Quality/Value Settlements. With a percentage-of-enrolled-debt fee, the provider is guaranteed a set fee regardless of the quality of the settlement, thereby incentivizing quick, low savings settlements so that the company can get paid quickly.

    Guaranteed a set fee…True, and the consumer knows exactly what they will pay for the service, once provided. Low savings settlement could cause a loss in clients as they can cancel at any time with no penalty. How does this serve any growth company when you factor in client acquisition cost?

    â–  Enrolling Debt Unlikely To Be Settled. A percentage-of-enrolled-debt fee provides an incentive for providers to include as much debt as possible in the program (even if they know through experience that the creditor will not engage with debt settlement providers) because doing so would increase the fees paid for other settlements.

    How does this work? Who’s the genesis behind this statement?

    I agree with the last bullet but again, how do you grow a company like this?

    Is this all they have over at the CRL?

  • Mike Reilly

    Someone needs to explain this chart to me. Where are the settlement amounts? The original debt amount 25k is clearly marked, are the settlement amounts above that or is that the projected escalation? What are these fees based on? Explain remaining net debt?

    Did anyone actually read this?

    ■ Low Quality/Value Settlements. With a percentage-of-enrolled-debt fee, the provider is guaranteed a set fee regardless of the quality of the settlement, thereby incentivizing quick, low savings settlements so that the company can get paid quickly.

    Guaranteed a set fee…True, and the consumer knows exactly what they will pay for the service, once provided. Low savings settlement could cause a loss in clients as they can cancel at any time with no penalty. How does this serve any growth company when you factor in client acquisition cost?

    ■ Enrolling Debt Unlikely To Be Settled. A percentage-of-enrolled-debt fee provides an incentive for providers to include as much debt as possible in the program (even if they know through experience that the creditor will not engage with debt settlement providers) because doing so would increase the fees paid for other settlements.

    How does this work? Who’s the genesis behind this statement?

    I agree with the last bullet but again, how do you grow a company like this?

    Is this all they have over at the CRL?

    • Mike Reilly

      Genius…sorry

    • Margincompression

      I think what they have at CRL is a now better regulated by federal law industry that then saw its many players partner with companies that do not follow the law and continue bad practices as if nothing happened at all. Some of those players are former founders, executive and board members of, industry associations like TASC.

      The picture this paints to the consumer protection lobby, state legislators and regulators is that after recognizing abuse, passing laws to curb abuse, the abuse continues. The same players that brought about the need for regulations are not following them which no requires further regulation.

      The debt settlement industry allowed and continues to allow this to occur.

      Fee caps coming to a state near you. It is an inevitability at this point.

      • Robert Stevenson

        With your reasoning might as well outlaw banking, real estate… the list could go on. Again, your rationale points to outlawing the industry at some point. You simply cannot eliminate abuse. You can limit abuse.. the current regulations (IF ENFORCED) are enough.

        You can blame lack of enforcement or resources to enforce…. You just lead down a slippery slope that ends at extinction.

        “The same players that brought about the need for regulations are not following them which no requires further regulation.”
        –> So enforce the laws…. Why punish the part of the industry that operates legally and ethically?

        “Fee caps coming to a state near you. It is an inevitability at this point.”
        –> Many are already in place that are well above the ridiculous 15% savings.

      • Margincompression

        I do not disagree with what you say here Robert.

        The states with an eye on fee caps in some instances had that eye prior to federal rule publication. Those that may now consider it are likely looking at the concept due to LHDR’s of the field.

        The current tone is not new and in some ways will probably not be muted.

      • http://GetOutOfDebt.org Steve Rhode

        No, I was looking for data to support the performance numbers of debt settlement as an effective solution.

        “Surely, those operating under the same standards can produce similar results.” Do you know this by looking at other company data or is this an assumption that all debt settlement companies provide the same level of performance.

        I’m not suggesting any prices. I’m reporting on what is already happening and the trend I’m seeing.

        What evidence or support would you provide to the California legislature to prevent a 15% fee cap other than a free market argument? What data can you provide or is it just your opinion that fees should not be lower? If you disagree with the CRL letter, what supporting argument would you make to regulators to defend the 30% cap instead?

      • http://www.franklindebtrelief.com Bobby Zangrilli

        I think the fact that 15% of savings is the fee cap in Illinois and not a single company has even applied to become licensed there is solid evidence that this isn’t a workable fee cap.

      • DD

        If the Federal and State Governments regulate banks and credit card companies TO PROTECT THE CONSUMER then they should regulate the debt settlement industry TO PROTECT THE CONSUMER!

      • Robert Stevenson

        No one said they shouldn’t regulate the debt settlement industry Mr Jump to Conclusions Guy. The people doing it right in the industry want regulation. Are you even reading?

      • Robert Stevenson

        “Data to support the performance numbers of debt settlement as an effective…..”
        –> This data can be presented and it is assumed by knowing our numbers are similar to that of the data that New Era presents. Granted, we’ve only been doing a peformance model since end of summer before the official change, we knew our previous numbers of clients settling 9/10 debts was in the 40-50% range… it will be safe to assume with performance we can attain about 55%.. I hope 65% but this would be a bold claim.

        Now, the data would need to be compiled and organized… However, I have a strong suspicion that even when presenting the data there would be a lot of criticisms to “self-reported” so essentially the legitimacy of the data… Much like the FTC did with TASC’s data. I can’t vouch for their data, but I know the numbers they presented are attainable, I would assume many TASC companies can’t actually produce those if they were collecting all fees up front.

        Secondly, I suspect that even a 9/10 or 7/10 debts settled wouldn’t be sufficient as I’ve heard many people state “If all debts aren’t settled than the service wasn’t delivered. Also, that a 50-60% “completion ratio” isn’t beneficial. However, a few things. 1) If you are managing a clients account effectively and negotiating difficult accounts like Citi, Discover or Chase (in certain states), you often see clients settling the “easy” accounts on their own. This is due to the client either thinking when they receive a settlement letter in the mail that it’s probably a good offer OR why didn’t the DSC settle it (when we didn’t settle to use funds for a priority account). This is more common than you think and if there are any others providing settlement services will know it brings your “accounts settled” ratio down because they are settling on their own, but usually make up a reason to the company.

        2) We deal with many hurdles for issues we have no control over. The bad media with the industry (which, us playing by the rules take the bad rap which means we lose business for others peoples actions). There are many people who enroll into a program, read a horror story here and cancel after a payment or two,. Heck, when someone search’s a DSC name this VERY OWN SITE says “COMPANY NAME, Scam, Complaint, Review, or Praise?”…. People are skepitical, they see the title “Scam”.. they start reading horror stories… Now they drop and we have to count that against our numbers.

        There are quite a few people that the program can’t help…. and normally when it’s the companies fault is because bad underwriting. But there is a huge majority that can recieve a benefit. Again, I point to New Era’s data that is public.

        Steve’s COMMENT: ~~~~”I’m not suggesting any prices. I’m reporting on what is already happening and the trend I’m seeing. ~~

        –> You are reporting, but we know your opinion. It’s to cap fees at something that is unreasonable. It’s going to be very difficult to operate with 15% savings. It’s going to put a lot of honest business people out of business and limit the options for consumers.

        ~~~”What evidence or support would you provide to the California legislature to prevent a 15% fee cap other than a free market argument?”~~~
        –> As mentioned above I can provide data similar to the stats I mentioned above. However, I feel in any case it will not be sufficient to deem the program has “meaningful” benefits. I feel like you are looking for mere perfect completion numbers that are simply unrealistic at ANY fee cap level.

        However, since when did it become necessary for other reasons for wanting and believing in a free market? A Debt settlement plan is aggressive and has risk associated with it, but how is fee caps going to limit those risks?

      • http://GetOutOfDebt.org Steve Rhode

        You say you know my opinion but you state it incorrectly. I’ve said I was in favor of the old UDMSA that allowed for a $400 up-front fee and performance pricing. TASC and others were against that and now they have less than that.

        I understand your free market desire but standing by that argument is great philosophically but it’s not going to get you anything with lawmakers and regulators. So if that’s not going to work then what can you be for?

        Credit counseling went down this exact same path. Debt settlement is not alone in these same issues.

        The importance of the data is to first get companies to report on it and then eventually if that data was independently audited to provide evidence that it is accurate then it would carry more weight and influence.

        Robert, I’d love to hear what your game plan is to alter the course of things other than just complaining about me and wanting a free market economy in the debt settlement world.

        Tell me what the game plan is you think will alter the path DS is on now and I’ll gladly do an interview with you and report on it so you can share it with others and rally them around you.

      • Robert Stevenson

        sounds good… And my free market argument was made to you. I understand lawmakers won’t simply buy that. However, I was directing it towards you because from your writing I got that you were in favor of the 15% savings… not just reporting that it was possible.

        Let me get my data together and submit through the site. The up-front data isn’t pretty, but it’s around 35-45% of total clients (9/10 settled)… (30-40% of cancellations was due to people being “spooked” about the program and not giving us a chance to settle.)

        Performance model looks very promising. It has some deep challenges and I’d hate to enter this market brand new without any small enrollment fee to help with cost.

      • http://GetOutOfDebt.org Steve Rhode

        You know…I added a new expert here on the site yesterday that would love to answer any questions for debt settlement companies on how to tune the business model to succeed moving forward. Please feel free to post you question for Scott, here.

        If you decide to post a question I think it is a great learning opportunity for others as well.

        Steve

    • http://GetOutOfDebt.org Steve Rhode

      According to the letters author the assumptions are:

      Five debts of $5,000 each with 4 of 5 debts settled at 45% (the average settlement percentage reported by TASC), interest rates of 29.99% for those in debt settlement versus 9.99% for those who pay directly (under hardship program with the creditor), and fixed payments of 2.4% of the debt monthly under either.

      • Mike Reilly

        That being said “Net Remaining Debt” is still not clear to me, if 4 of 5 are settled and you factor escalation how is it that the remaining are below 5k?

        A.) Fee based on savings:

        Enroll $5000 and for whatever reason it takes a year to get to it add 20% or $1000 for interest/penalties (escalation), now you’re dealing with $6000

        Settle the $6000 at 45% = $2700 subtract that from the original $5000 = $2300 savings

        Multiply that by your fee, let’s start with 15% (the first example) $345 x 4 debts settled all with a 20% escalation and total settlement fees on 4 cases would be $1380

        Total savings 4 out of 5 settlements $2300 x 4 = $9200 – fees $1380 = $7820 – trust acct $260 (26 months) = $7560 in client savings

        We can play with the escalation percentage but at the end of the day with $600 a month coming in, inside of 6 months 2 if not 3 term settlements should be in place with minimal escalation on half or more of the debt.

        B.) Fee based on debt amount at time of enrollment:

        Same settlements, percentages and escalation assumptions, fee = 15% of 20k enrolled and settled = $3000

        Total savings 4 out of 5 settlements $2300 x 4 = $9200 – fee $3000 = $6200 – trust acct
        $260 (26 months) = $5940 in client savings

        The point of this exercise is to question how the CRL can say that in all examples it cost the consumer more than the original debt amount. Clearly the push to a percentage of savings is cheaper but, the big questions is will it make sense from a business standpoint to hold the hand of a consumer, provide education and support over and above the services we agree to perform for what could be a 2+ year period. I think the industry will continue to thin out regardless. One final note, no one ever includes the savings to consumers in the form of interest paid to creditors, it’s assumed that most who join DS programs have completely stopped making their payments. Not always the case.

      • http://GetOutOfDebt.org Steve Rhode

        I’ve asked CRL for the background calculations on the chart.

      • Mike Reilly

        Steve, should I assume no response from CRL on the formulas? Based on the assumptions provided the math simply does not work. Not sure what the calculations with provide, but the chart remains a mystery and proves nothing, to all intents and purposes it’s worthless, unless of course someone can clear this up.

      • Mike Reilly

        will provide…

      • http://GetOutOfDebt.org Steve Rhode

        I just got the data from CRL and will look over the first of the upcoming week.

  • Jacob Marta

    Another fact to remember. Most SMBs that are considered successful operate on a 30-40% profit margin. For better or worse the Federal Government is forcing businesses to work on a margin half of what private business owners and investors are seeking. Larger international corporations also operate in the 15-30% range, but have significant tax advantages over the SMB to offset their operating costs. Just ask GM who hardly paid any taxes this year.

  • http://www.creditcardbailout.com Jacob Marta

    Another fact to remember. Most SMBs that are considered successful operate on a 30-40% profit margin. For better or worse the Federal Government is forcing businesses to work on a margin half of what private business owners and investors are seeking. Larger international corporations also operate in the 15-30% range, but have significant tax advantages over the SMB to offset their operating costs. Just ask GM who hardly paid any taxes this year.

  • Jacob Marta

    A 15% fee for services provided is reasonable. This may allow for a faster resolution of the debt and have less impact on the consumers finances. Many “legal model” services will still not have to abide by this 15% rule, at least for now. So consumers need to be aware if they expect a 15% fee, they should be dealing with Performance based settlement, or sometimes called Success Settlement. You can reach out to a success settlement company at creditcardbailout.com. They will provide to you a complete evaluation of your potential savings as well as an estimate of your total fee(s). Remember, in success settlement if they over promise and under deliver you may not have to pay them a dime! So they have a compelling incentive to provide to you an honest and accurate estimate.

  • http://www.creditcardbailout.com Jacob Marta

    A 15% fee for services provided is reasonable. This may allow for a faster resolution of the debt and have less impact on the consumers finances. Many “legal model” services will still not have to abide by this 15% rule, at least for now. So consumers need to be aware if they expect a 15% fee, they should be dealing with Performance based settlement, or sometimes called Success Settlement. You can reach out to a success settlement company at creditcardbailout.com. They will provide to you a complete evaluation of your potential savings as well as an estimate of your total fee(s). Remember, in success settlement if they over promise and under deliver you may not have to pay them a dime! So they have a compelling incentive to provide to you an honest and accurate estimate.

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