I’ve had the opportunity to talk to a number of people in the debt relief space since the Consumer Financial Protection Bureau filed suit against Freedom Debt Relief and Andrew Houser.
Those in the debt relief industry know Houser to be a smart and friendly guy who has created the largest debt settlement company.
The conversations I’ve had with people all seem to fall into the same bucket, the suit is nothing, a nuisance, and regulators were pissed at Robby Birnbaum at the AFCC conference with his bragging of his power over regulators. Ultimately, who knows.
I completely understand why Freedom would look at this as a nuisance suit. The suit seems to focus on nitpicking over some administrative issues. Others in the industry dismiss the suit as the CFPB just trying to take down the biggest player a bit. Attorneys of many firms will dismiss the suit because that’s what they normally due. “Let’s fight this!” will be the cry of the day.
Did the CFPB overreach on this suit, maybe. Is the debt relief industry staring right past this suit, absolutely.
What people are missing here is the regulator view the debt relief industry which has a much wider field of view. Their impression of the industry is one where bad actors screw consumers and the industry lets that stuff happen.
Good debt relief companies will continue to suffer with a trail of no refund abandoned consumers left by out of business debt relief companies who sold and ran without providing either good service or good advice.
What eventually happens is good guy or bad guy, everyone will get painted with the same broad brush. It would be a mistake to dismiss the importance of this suit or to same anything like “it’s still game on.”
Will the suit be eventually dismissed, doubtful, a settlement is more likely. Rather than laughing off the CFPB action all debt relief companies should be looking at the issues raised and making sure they are not doing the same thing, which they know they are to some extent. And if frontline sales people were honest with the CEO of any debt relief operation, they’d have to confess the issues raised in the CFPB lawsuit happen across the industry.
The Issues Faced by Freedom Debt Relief
Ultimately I see the Andrew Houser and Freedom Debt Relief suit as a collection of some, but not all, of the technicalities the company and others face. What nearly everyone in the industry will miss about the suit as they are writing it off, is this suit is about scaling and sales.
When you talk to people who jump into debt relief they seem to constantly want to “scale their operation” and magnify sales. That is a perfectly legitimate goal if you want to expand your sale of Sham WoW.
But here is the single most critical point every business consultant, attorney, and smart debt relief executive should be telling you – you can’t sell a debt relief widget to deal with a custom problem.
The debt relief industry, both for-profit and non-profit companies are selling the wrong damn product. The product is solutions and advice and not a widget to make it magically go away.
Consumers with debt problems are like fingerprints, no two are the same. Yet debt relief companies try to sell a fixed widget solution and then commission sales people to force that square widget into every round hole that calls.
In doing that what happens is as an organization scales the number of consumers that are sold a solution that was never right for them. These people sold into the wrong solution will eventually become unhappy, complain, and get on the regulator radar.
Debt Relief Companies Should be Financial Emergency Rooms
If you were in a car accident, has a compound fracture of your leg and internal bleeding it would be malpractice if the ambulance transported you to the emergency room and the only solution the emergency room could sell you was a colonoscopy. Commissioned sales agents at the entrance of the emergency room would be selling colonoscopies as a magic solution to all your traumatic injuries.
When consumers with difficult financial problems arrive on the phone at a debt relief company that is trying to sell the wrong solution to a unique problem, that is just like trying to sell a colonoscopy to the accident patient.
Companies are focused on selling the wrong product and then pissed when consumers complain and regulators react. Until the industry realizes it needs to get out of the gutter and become financial professionals that solve big problems that are 80 percent behavioral economic issues, 10 percent technical, and 10 percent math then nothing is going to change and more Freedom’s will wind up in the barrell.
Why is the Industry Protecting Itself?
From an outside observer point of view I see the modern debt relief industry continuing the same approaches that worked yesterday. But did they really work? How many companies have to fall to regulators and how many consumers have to get screwed before the next convention is about providing sound financial advice and helping consumers to implement unique solutions to individualized problems.
Instead what is being delivered today is very similar to 1934 sales messages.
At the 2017 Revolution Conference I talked about these issues and what did I walk away with, some threat against me an escort out for my safety.
So from my point of view the Freedom Debt Relief lawsuit isn’t as much an attack on Freedom but rather a continued attack on an industry that does not focus on providing best advice, does not act in a fiduciary capacity for their clients, relies on agents and commissioned sales people to force the sale rather than make the best sale, and an industry that sells against other solutions instead of crafting custom solutions using a lot of tools, and not just the one they are pushing.