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This Will Scare The Hell Out of You if You Sell Debt Relief Services

During the Debt Relief Master Class I held in Raleigh, NC in July 2011 we had the pleasure to meet with Michael Dye, Esq. who pursues legal action against debt relief companies.

Now your initial reaction after watching the video will be intense. You will want to vilify Mr. Dye for the statements he makes and actions he takes against debt relief companies. But wait…

I ask you to consider this, attorneys like Mr. Dye exist all over the country and pursue actions against debt relief companies on a regular basis. The reason I invited Mr. Dye to speak to the class was so people could be aware of what litigators are looking for and from that we can learn what to avoid.

What you won’t see in the video was that by 15 minutes into his presentation all of the faces in the room were pale realizing the liability and exposure they may have.

Mike Croxon, from Care One had left before this presentation so about halfway through the presentation, Howard Dvorkin from Consolidated Credit Counseling reached over and grabbed Croxon’s name card and put it in front of him. Smart, and funny.

The key lessons learned are the most obvious ones:

  • Make sure your company is fully compliant with the laws of the states you operate in.
  • The exposure for a litigator to catch you not being compliant with the law can cost you at least three times the amount of money the debtor has paid plus legal fees.
  • He has not lost a case yet and has a return is $7-$13 for ever $1 the consumer paid the debt relief company.
  • Attorney model debt settlement companies are not outside the litigator radar.
  • Mr. Dye explains how turnkey debt relief programs expose the not only the company but the affiliates and sales people as well.
  • On top of that the litigator will name directors personally in actions against the debt relief companies.
  • He talks about how the debt relief world is infiltrated by organized crime and pornography money to fund some debt relief companies.
  • He advises companies should avoid offshore entities if you are running a debt relief company.
  • Later in the video he talks about defensible positions that companies can have if they have provided a good service for value.
  • He states he has never sued a debt settlement company that does not charge an advanced fee.

http://www.youtube.com/watch?v=lmaM0NW2grM

Mr. Dye has made a very profitable business of pursuing litigation against debt relief companies when people come to him for assistance filing bankruptcy.

For years now I’ve been saying that the key to moving forward is to start local, focus on your local market and explained slowly as long as you can be legally compliant.

After you watch the video above, I’d be interested in your comments which you can post below.

By the way, if you have a client in North Carolina that has an FDCPA claim, you can reach him to pass it on through his website here.

This Will Scare The Hell Out of You if You Sell Debt Relief Services
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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.
  • gerkey

    Steve, knowing how Oak View Law Groups model worked before and when they were a member of the
    AACC, Steve did you and do you continue to support Oak Views business
    model as a debt adjuster?

    • Bulb

      Debt adjuster laws in most states exempt attorneys.
      If an attorney is providing settlement service while exempt and while also honoroing the advance fee ban, I am not sure where the bones of contention are coming from.

      Yes, I am assuming that Persels does honor the TSR advance fee provision.

      • gerkey

        The majority of the states that have an Attorney exemption to those attorneys who are NOT principally engaged as a debt adjuster.  We all know the Attorney models that exist are “principally engaged as a debt adjuster”.

        Here is New Jersey’s as an example:

         http://www.state.nj.us/dobi/banklicensing/debtadjusterfaq.html

        Here is Kentucky’s example:

        http://www.lrc.ky.gov/KRS/380-00/030.PDF

    • http://GetOutOfDebt.org Steve Rhode

      At the time, Oak View was operating as a law firm with no advanced fee. I don’t know what they are doing since then.

  • larson

    gerkey makes valid points.  If Care One uses Persels which it seems that they do, we know that the attorney model has been and continues to be challenged as a non compliant model.  So in a sense, because persels is not licensed as a debt adjuster in specific states that require it, then it could be implied that they are in fact engaged in deceptive and unfair trade practices.

    Since Steve was the founder or co founder of the AACC group, he directly supports its members and by doing so he technically is a supporter of businesses that are engaged in deceptive and unfair trade practices. 

    Which 3 states is Croxson referring to?

    • http://GetOutOfDebt.org Steve Rhode

      I don’t know. Feel free to contact him directly and ask him.

      His email can be found on the AACC site.

  • gerkey

    no, the AACC members are not licensed.  Not even Care One’s debt settlement law firm they use, it is either Persels and Associates or Ruther and Associates.  I believe they are the same, whatever the case they are definitely not licensed.  And from what I understand many state attorney generals and class action lawyers feel that attorney models are not exempt from state licensing requirements.

    Just look at the recent case that was filed by the Scott Law Group against Persels and Care One.  There is another lawsuit in Florida against Care One also.

    Here is what the Washington Class Action says:

    “1.1 Defendents engaged in a uniform conspirational and predatory scheme to enrich themselves at the expense of financially-strapped Washington families by violating Washington statutes designed to protect consumers from wrongful debt adjuster business practices.”

    no wonder why Mike Croxson was moving his name tag around because Michael Dye could actually go after Persels and Associates and Care One for the same reason the Scott Law Group did, which would obviously pay off big time.

    Rhode, how come you have not posted this information about your best friends yet?  Why do you support businesses that engage in deceptive and unfair trade practices?

    • gerkey

      wow and persels even has 163 complaints within the last 3 years 49 in the past year. oh and Ruther and Associates is the illegal attorney model that EFA Processing uses.

    • http://GetOutOfDebt.org Steve Rhode

      You mean this list that I posted in March? Or how about this list. Seriously, the site search feature works pretty good.

      Not licensed? You might want to take the time to compare the states they operate in and the licenses they hold. If you find a specific example, rather than a broad statement, please post it and I’ll bring your comment to their attention.

      • gerkey

        Taking the back seat on this huh?  not surprising, but you still didn’t answer my question “Why do you support businesses that engage in deceptive and unfair trade practices?”

        Here is the information that you requested.

        Here is an example state:  NJ

        type in Persels and Associates or even Care One, no records are found.

        https://www16.state.nj.us/DOBI_LicSearch/bnkSearch.jsp

        Care One advertises that they “offer Debt Settlement Plans across all 50 states”.  Come on Steve, aren’t you suppose to be the debt expert?  You know it is impossible to do debt settlement in all 50 states without violating state laws.  So, how are they able to offer DS services in all 50 states?

        http://newaacc.org/member/care-one

        10. What states do you provide services in?

        CareOne service providers and technology partners offer Debt Management
        Plans (DMP) and Debt Settlement Plans (DSP) across all 50 states.

      • gerkey

        looks like everyone of your best friends are also operating illegally in Oklahoma.  Oklahoma statute title 24 section 24-15 to 18 specifically 24-15 states: 

        Debt pooling -
        Prohibition.

        No person, firm, company or corporation shall
        engage in or operate a business known as debt pooling.

         Laws
        1957, p. 161, § 1.

        http://www.ok.gov/redirect.php?link_id=99

        looks like CESI, Care One, Consumer Recovery, Cambridge and any other debt management or debt settlement company that operates in Oklahoma are all operating illegally.Steve, your run in with the state of California when they shut you down would make some think that you would stay up to date on state laws and would only associate yourself with companies that are on the up and up with those  laws.  Obviously you are not.

      • http://GetOutOfDebt.org Steve Rhode

        Did you already check with the state on their licenses or are you just posting the link to the code?

      • gerkey

        I will provide detailed steps on the Oklahoma statute.

         Go to:  http://www.ok.gov/redirect.php?link_id=99   Click on Oklahoma statutes Title 1-85.  Next click on title 24 Debtor and Creditor (153KB) this will open a word doc.  Last step, scroll down to 24-15 to Debt Pooling-Prohibition and 24-16 Debt Pooling Definition.

      • http://GetOutOfDebt.org Steve Rhode

        Are you talking about the credit counseling folks? I am told there is an exemption letter on file for the non-profits.

      • Guest

        Gerkey,
        You did not copy the whole section of code that applies to DMP’s or settlements, just the part that suits your message. That is intelectually dishonest.
        Why?
        You have an axe, of that I am sure.
        What specific knowledge and background do you have in the industry that would put you in an athoratative light? In other words, what measure and weight should be attached to yoru comments?

      • http://GetOutOfDebt.org Steve Rhode

        Tom,

        I know we have traded emails but for the sake of the record I’m going to respond here as well.

        Thank you for sending me those two suits against CareOne. As I mentioned they were old and I encouraged you to keep me posted of any new suits that might arise. I don’t have any reason now to go back and cover old news. I asked you to email me new information when you discovered it.

        In fact, much of the stuff people send me is never published because there is no current context for it or I have more pressing things to cover at the time. I’d say 20% of the tips I get hit the site, the rest get filed away.

        Are you saying there is nothing on the site for Persels or CareOne. I’m not sure I clearly understand your statement. It looks like there are a number of stories on the two.

        To my understanding CareOne offers services in all 50 states but that might be a combination of debt management and/or settlement. If you can direct me to an example of where they offer settlement in all 50 states I’d like to see that.

        Steve

      • gerkey

        Steve, you obviously missed what I had previously posted.

        on the AACC site http://newaacc.org/member/care-one, when asked

        10. What states do you provide services in?

        CareOne service providers and technology partners offer Debt Management
        Plans (DMP) and Debt Settlement Plans (DSP) across all 50 states.

        it clearly states “…debt settlement plans across all 50 states.  This means they provide DS services in all 50 states.  If they are not, then that statement is deceptive and misleading itself.

        So again, knowing that Care One uses Persels and Associates in an attempt to evade state regulations on debt adjusting-Why do you support businesses that engage in deceptive and unfair trade practices?

      • Errick

        Steve asked Mike Croxson a question.  Then he published the answer.  It’s not Steve’s fault that the answer is artfully crafted to give a false impression.  In fact, it’s great that we can get a glimpse of what kind of person runs these operations.

        I don’t see why you or I should care whether this AACC is full of pure-hearted boy scouts or not.  That’s all misdirection anyway.  I believe Steve will someday regret having any association with this scam artist, but it’s none of my business really.

      • http://GetOutOfDebt.org Steve Rhode

        I reached out to Mike Croxson to validate your question with the quote from the AACC interview.

        Mike responded that “CareOne is committed to transparency with our services and the relationship with our service providers. The details for each of the Providers of CareOne services are listed on our website very clearly. I would like to thank you for drawing our attention to the AACC interview. At the time of this interview, between CareOne Services, Inc. and Persels & Associates (P&A), settlement services were available in all 50 states.

        Since that time, P&A is no longer accepting new clients for legal services in 3 states.” We remain committed to our customer service goals; providing real solutions and resources for people with financial needs. Misleading or misrepresenting our services is not consistent with these goals.”

        I hope that helps answer your question.

      • Errick

        The truth is, both of you are correct because you both have fallen for a misleading statement.  CareOne does provide EITHER debt management AND/OR debt settlement in every state.  Sometimes they do it covered by a crispy lawyer shell, sometimes they do it covered by a creamy non-profit coating.  Sometimes they do it straight up, whatever approach is easier from a regulatory standpoint.

        Compliance with regulatory requirements provides a good cover to run the 50+15=55 scam, which is why I bet you’ll find they are pretty compliant.  That is why I am not impressed with your AACC.  The most basic problem with debt settlement, that no one can prove that it has ever worked, is not being addressed.  Mr. Croxson is not likely to be back with any comment, because it can be used against him in his deposition.

      • gerkey

        Not only will Croxson not comment but Steve Rhode will still not answer my question:  “Why do you support businesses that engage in deceptive and unfair trade practices?”

        What is also interesting is that Oak View Law Group, another illegal business model was once an AACC member and recently disappeared from the member list.  Why is that?  Did Steve find out that they were not operating compliantly?  Or did they not pay their dues to his club?

      • http://GetOutOfDebt.org Steve Rhode

        Oak View felt their attorney model was compliant. They elected to withdraw for personal reasons.

      • gerkey

        do you feel that their attorney model is compliant?

      • http://GetOutOfDebt.org Steve Rhode

        I don’t know what their model is now. What specifically do you feel was not complaint about it back then?

      • Guest

        It works Errick. It has been shown to you on this site in other posts. It is well documented elsewhere.

        If it is not too much trouble, could you come up with different phraseology other than “it doesnt work”?

        Settling debts for less than the total balance has been around for longer than you and I have been breathing.

      • Errick

        You have a point that my statement lacks precision.  But it is essentially true.  One company gets results mainly by charging only 2-4 percent of the enrolled debt, but they did not actually have an example of someone completing their plan and settling all of the debts in the program.  Another person pointed me to a testimonial that if true, represented someone who clearly had sufficient funds to pay their debts anyway.  Helping someone do that is not legal, not difficult, and not relevant.

        I actually made two assertions.  The other is that no former consumer has come forward themselves to bask in the glow of their debt settlement success.  Of all the hundreds of thousands, not one willing to share their experience or recommend their provider.  Can’t argue with a perfect record like that.

      • Bulb

        Lets play you might be an idiot.
         
        If you think people suffocating with debt cannot successfully settle for less than what they owe…you might be an idiot.

        If you think people using funds that are remote from creditors in a bankruptcy proceeding to settle debts for less than what they owe is illegal…you might be an idiot.

        If you think the 24 hour negative news cycle does not equally apply to people who have something good to say…you might be an idiot.

        If you think all consumers should shut up and pay up no matter the circumstance…you might be an idiot.

      • Errick

        Wow, okay, is everyone getting enough fiber?  I believe in the principle of debt settlement, and I know it has been around for some time.

        But it is increasingly clear that most people making money settling other people’s debts are running a scam.  They take somewhere between 50-65 cents from the customer for every dollar of debt, then they take 15-25 cents for themselves.  Then they can’t, or won’t, settle the debts with the 35-45 cents that are left, but they forget to tell the customer that it is mathematically impossible to get to the finish line.  The settlements they do make at 45-55 cents actually put the customer closer to their inevitable ruin.  The customer gets harassed and sued and has to quit and often file bankruptcy.  Some customers are actually driven into bankruptcy by debt settlement companies.

        This is more than my belief.  Go ask the collection manager at your bank or your local bankruptcy trustee.  They are coming around to this view.

        Look up the tort of intentional interference with economic advantage.  If someone can pay their credit card bill, and you tell them not to, you may be liable.  If debt settlement companies were really successful, you would see such lawsuits.  But you don’t, because debt settlement companies present no significant threat, they are so ineffective.

      • Cupid

        Errick – nonprofit DMP-ers enroll consumers left, right and upside down who can qualify for chapter 7 bankruptcy. Do the DMP-ers encourage or instruct the consumer to consult with a bankruptcy attorney to learn more about chapter 7 before proceeding forward in a DMP?

        Bet Not!

        That pretty much is a breach of trust. That pretty much makes the nonprofit single solution DMP-ers about as bad as you say settlement companies are. Couple that with the fact that nonprofit DMP-ers get paid to represent banks payment programs that have to be complied with at the threat of pulled support and I think I would rather talk to someone who is not representing the creditors I might be struggling with. Banks that, need I remind
        you, have and will continue to pay out BILLIONS of dollars for their wrong
        doing. That’s what you support Errick. A system that brought this nation to its
        worst economic condition since the great depression.

        CareOne provides debt management plans and does not get paid by creditors to do it. That alone breeds trust.

        “Now get in the pit and try to love someone.”

        P.S. I don’t work for CareOne or any company related to them. I
        am not related to anyone who does work for them nor any contractor for them
        etc. I am just kinda sick of the Erricks and the holier than thou attitude they
        have about debt management plans that are mostly offered by nonprofits. CareOne
        is an exception and a good one for the DMP.

  • Guest

    Are all the of the AACC members licensed and compliant in the states they work in?

    • Michael

      Who is the AACC?

      • http://GetOutOfDebt.org Steve Rhode

        American Association of Credit Counselors

  • Question

    So is this guy willing to go after a company like LHDR who charges upfront fees and does BK? That could get interesting, I want front row to watch all that action on the big screen.

    • http://GetOutOfDebt.org Steve Rhode

      Yes.

      • Michael

        Hey Steve, I didn’t see your response before I posted below.  I would add an emphatic “yes WE would” if the facts and circumsances were correct. I just don’t know exactly what they are doing.

        I really need to introduce you to Jane.  See my comments about her above.  All true. 

        Also, check out the post I made below.  I really don’t know how they run their business model.  I’ve heard various things, but nobody has ever walked in our door.  That might say great things about them.  Might not.  Anybody that has any info they want to pass along, feel free to email it to me.

    • Michael

      I don’t know LHDR’s business model.  So this is based only on what you described right there.  It would seem to me to be a giagantic conflict of interest to take money from an individual for “debt settlement” and then when the client washes out of your debt settlement program to send them to your bankruptcy attorney.  Here is why.  Again I don’t know their business model so this is a hypo.  If they are operating in NC, which I know that they were, they take money in order to perform debt settlment services.  I do know that they did things a tad differently in order to at least attempt to comply with State law.  I didn’t look into it too much so I don’t know if it did.  I do lean strongly in a certain direction.  So let’s say that hypothetically that the debt settlement aspect of their firm is in violation of the law sending the debtor to “their own” bankruptcy attorney eliminates their risk of getting sued.  I haven’t seen any of their petitions, but in order to preserve the clients right to sue, they would have to list a potentional lawsuit against themselves on the schedule B, exempt it on the schedule C, reject the executory contract if the contract falls into that definition (which I am reasonably certain most would) and list the amount paid for the debt settlement services on the Statement of Financial Affairs.  Like I said, I have had no dealings with them and if I never do, I don’t care.  Nevertheless, what you described above MAY be a very creative way to run an illegal debt settlement operation and make sure that you never get sued for it.  The only thing that I could see happening which would blow that out of the water is if the trustee in a Chapter 13 decided to pursue an avoidable preference or fraudulent transfer claim under 11 USC 544.  (I think that is the number.   It is late.)  However, the trustee more than likely won’t touch it because the amount recovered would more than likely be too small and simply be “administratively burdensome.”

      Again, we haven’t had to deal with them so I really haven’t researched them and how their operation works.  As for the “would we go after a company like LHDR?”  If they broke the law, we’d do it everyday of the week and twice on Sunday.  There is absolutely no intimidation factor there.  We’ve beaten banks who can throw more money, attorneys and paperwork at us than LHDR could imagine having.  However, based on the model you described, if that is in fact the way it works, it is not very likely that we would see a case.  Remember, that once you file a bankruptcy and you don’t list that cause of action on your schedule B, it goes bye-bye forever.  You waived it.  Of course that would open up another can of worms like legal malpractice, UDAP, self-dealing, other stuff like that.  Ok, my brain is now fried.  I’ll worry about them when we see them. 

  • Robert Stevenson

    @Steve.. any more videos from your conference? Very interesting information

    • http://GetOutOfDebt.org Steve Rhode

      We have a bunch more and are at work editing them. As they are completed, I’ll post them. All good stuff.

  • http://www.NewEraDebtSolutions.com Alex Viecco

     Steve,
     This was an interesting part of the weekend class.  Michael was a new twist I had not really looked at closely.  It makes absolute sense that some attorneys would want to go after the bad actors for several reasons including the fact that consumers were ripped off but also because many of the bad actors lined their wallets with the funds from hard working people that were simply asking for help.
    I am actually glad people like Michael will be helping consumers get some of their money back and even up to “treble “the damages!
    Advance Fee companies look out!  It is more than the FTC and the AG’s offices you need to look out for.
    Alex

    • Michael

      Hey Alex, this is Michael.  I really enjoyed meeting all of you guys this weekend.  It was finally good to see some companies in the debt relief industry that take compliance and regulation seriously. Like I said, I hadn’t seen that side before and it was why I jumped on the opportunity to speak.  When i first started preping for this I was preping like it was a law school class and then I realized that I wanted to give you guys some pointers that you could take home & put into action right away.  There really is no secret.  I can tell you how I get clients, where they come from and you can tell all your friends and they can tell all their friends.  Speaking to people that legitimately want to help and do right by clients will not harm our bottom line whatsoever.  Where there is money, there will always be a thief.  So speaking to indiviudals who are taking regulatory compliance seriously in order to avoid our “wrath” was my pleasure and I’m more than willing to do so again.  The one thing that needs to be differnt next time, Steve needs to invite my partner Jane Weatherly to speak.  I can’t take all the credit here and it might have come off that way.  Hell, I  can’t even take 1/2 of the credit.  I talk tough & I think I do a great job, but all kidding aside, the 1.000 batting average is all Jane.  She is hands down the best attorney that I’ve ever met. 

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

    Ok, so now I’m nervous. Just when I thought those movies I starred in were in my past. I now learn they can come back to haunt me.

    The title to this post could be, “How To Get Out of a Debt Relief Program and Triple Your Money”

    All kidding aside… this is a very interesting perspective.

  • Angelo

    It’s about freaking time!  At this stage of the game, anyone still charging upfront fees should be prosecuted. AG’s simply dont have the manpower to enforce debt settlement laws and loopholers are conducting business as usual.  If there are more attorneys like Michael doing the same thing in other states this would not only protect consumers by clearing out the scam artists but would create a level playing field for the honest performance based companies that are actually trying to do the right thing for the consumers. 

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