My name is [redacted], and I worked for a debt settlement company in California known as [redacted] in 2010 and 2011. I was hired as a sales consultant, but was later moved into the negotiations department after most of our sales force was laid off as a resulting slowdown in our business due to the after effects of new government regulation. Having worked in the front and back ends of this debt settlement company, I’ve gained extensive knowledge of the inner workings of the debt settlement industry and it’s not pretty.
Our company adopted a “legal model” (attorney driven program) in July of 2010 to be in proactive compliance with federal guidelines requiring clients to be represented by attorneys. At that time, clients were paying projected settlement fees and a retainer fee in advance. As a salesman for the company, I was told that we were to explain to each client that we were an “enrollment company” for [redacted].
I later discovered , in my dealings with law offices representing creditors, that even though all clients signed a “power of attorney” and paid a retainer fee of $500 per contract, they were actually not legally represented at all.
Furthermore, if a client was sued, they had to pay extra fees to have a separate attorney service file a response to the creditor’s legal complaint. If the client needed representation in court, they would either have to represent themselves, or pay additional attorney fees for representation or legal advice.
Before I joined the company, clients were enrolled for a debt settlement program by a California attorney named [redacted], but he was disbarred from practicing law long before I joined the company. It was a common joke in our department, that none of the negotiators had any encounters with attorney’s at all, and in fact, we didn’t even know who they were or where their offices were, although we were contacting creditor attorneys claiming to be representatives of [redacted].
We did have an in-house attorney, but her role was primarily business affairs and to provide counsel to the company and its owner in the event of litigation. As far as I’m aware our in-house attorney never had a hand in settling any debt for any of our clients, and certainly was never got involved in the affairs of our negotiations department so far as settling accounts. Also, she was NOT counsel for [redacted] as she was an express employee of [redacted].
Clients in debt settlement programs must keep in mind that these companies are in business to make a profit, even if it means making decisions that can potentially put their clients in harm’s way to benefit the company.
I dealt with creditors, law offices and debt buyers on a daily basis, and it was my job to negotiate the best deal for our clients. I became the top negotiator in our department, but each month management made it more and more difficult to complete settlements, and many times the settlements offers were not presented to our clients because management put internal mechanisms in place to maximize profitability.
In other words, if our company could not collect enough fees from the client for settling an account based on a percentage of the amount saved on debt forgiveness (or if the settlement would require a partial client refund), management could and would reject the settlement offer without the client’s prior consent.
I recall a Wells Fargo account that I had negotiated and received a settlement letter for that was rejected by management even though I advised them on two separate occasions that Wells has a policy to increase settlements by 5% if we fail to execute a given settlement within the calendar month. Again, the client was never even made aware that there was an offer on the table, let alone that it would default to a settlement that would be increased by 5%.
Some of our contracts guaranteed that the client would see a 35% reduction of debt or they would be entitled to a partial refund of the amounts charged in advance to settle that account. I can’t tell you how many times management shot down settlement offers that would have forced refunds under this policy.
As a result, many of our clients were placed in danger of legal action because we did not act in their best interests. In many cases, our clients were not aware of the impending danger until they were served with a lawsuit from the creditor. If it was certain that a debtor was dragged to court by the creditor and the debt was not settled, clients were often told that they would have to remove the credit account from the program and face the creditor in court on their own. There were other clients that closed their accounts without settling any accounts and were never refunded the fees that they paid in advance.
The American Bar association publishes the Model Rules of Professional Conduct on their website. These rules state that attorneys are responsible for “full disclosure” and “reasonable attempts at communication” when dealing with clients, but since our program seemed to not really have any true association with [redacted], these rules did not apply.
Clients are signing contracts in good faith that attorney programs are beholden to the same code of ethical conduct as actual attorney representation, and, in many cases, the contract has a lot of language reminiscent of such including a “power of attorney” form.
It has crossed my mind to advise the California State Attorney General about the fraudulent business practices at [redacted]. I would even be willing to provide testimony as a states witness. Do you have any suggestions? Contacting the Better Business Bureau won’t do any good because the company already has an “F” rating which might explain why the company operates under two different names.
The scary part is that the management team for [redacted] has since moved into providing mortgages and other financial services in the same building. Someone has to speak up. I think that we’ve seen enough mortgage fraud lately.
Many of your readers might still be in debt settlement programs and might therefore be financially committed to completing their programs. I could certainly give them some words of wisdom when it comes to protecting their own interests. Each creditor, attorney service and debt buyer is vastly different in how they deal with debtors and debt settlement companies. They shouldn’t trust a debt settlement company to always do the right thing on their behalf.Attorney Model Debt Settlement Employee Speaks Out On How It Really Works by Guest Post