My name is Jeff Meek and until Aug 2009 I was Vice President of Recovery Operations for WaMu Card Services. During my almost five year tenure at the bank I had the opportunity to review the Debt Settlement industry through the critical eyes of an issuer. When we began looking at Debt Settlement as a option for our customers in late 2006, our first goal was to understand the processes used by and the numbers derived from debt settlement. To say the least, there was, and is, a deplorable lack of knowledge regarding banking and credit card processes on the part of debt settlement company operators. Indeed the lack of understanding extends to the difference between even simple concepts like revenue and income. Nonetheless we undertook to educate and inform the debt settlement industry on the best way to report their performance numbers (settlements) to a banking recovery operation. We felt at the time that by educating the industry we and they could come to a better understanding of what the market was telling us.
Based on the data we were tracking, it was apparent that some debt settlement companies did indeed settle debt, but the vast majority did not. In an attempt to sort through those who did from those who didn’t, we began a minor certification program. The purpose of the program was to better understand how DSC’s were functioning and why recovery rates weren’t significantly better. As part of the program, we solicited input from DSC’s to help us improve the program and “work with them”, as they claimed they wanted us to do. I’m sorry to report that the program was a complete failure. Fewer than a dozen companies, out of hundreds, responded to our call for input or completed the process. In fact, I was asked to speak at The Association of Settlement Companies (TASC) conference in February 2008, which is did. At that conference I was informed by representatives of TASC that they had instructed their members not to cooperate with our program or give us any data whatsoever; so much for wanting to work with us.
Since that time I have not observed any change in that policy, and indeed a review of the material submitted by TASC to the recent FTC request indicates to me they recognize no authority or institution with a legitimate need to ensure consumers are protected from fraud. As best as can be determined, it seems the attitude is one of “take it on faith that we’re doing what we say we’re doing.” As anecdotal information, I have had numerous DSC’s admit they have no intention of settling debt and in fact it is counter productive to their purpose to do so; their main purpose being to enroll consumers, collect fees, and provide such poor customer service and results that most consumers drop from the program and thereby leave the DSC with thousands of dollars in unearned benefit.
I have had numerous DSC’s admit they have no intention of settling debt and in fact it is counter productive to their purpose to do so; their main purpose being to enroll consumers, collect fees, and provide such poor customer service and results that most consumers drop from the program and thereby leave the DSC with thousands of dollars in unearned benefit.
If any of this is in doubt…ask for their performance numbers. Ask for the number of clients enrolled, the number of accounts enrolled, the batch track figures (it’s doubtful they will know what a “batch-track” is), drop out rate, completion rate, liquidation rate, settlement average, etc…During my tenure at WaMu I asked for these numbers and even explained, in depth, how DSC’s should gather and report the data…they almost universally ignored me. Why?
The primary reason they ignore any request for data is because they do not see any benefit to running a legitimate business and see no marketing benefit from such standard business practices. The one thing DSC operators do understand is marketing…much like a ponzi scheme. The constant inflow of new customers provides revenue to keep the marketing engine running, provide immediate refunds for customers who complain too much and provide extremely handsome incomes for DSC operators. When the debt settlement industry says they want to “work with banks”, what they mean is they want banks to recognize them officially and give them unrestricted license to wrangle in as many distressed customers as possible without actually having to settle debt. In effect, they want to borrow the credibility of banks without having to perform. From my understanding this is the way Mr. Madoff ran his organization.
Remember, they will try ANY tactic whatsoever to deflect the argument from the numbers, but that is where the answer to the debt settlement question lay. It’s all about the numbers. Do they settle debt or not and if so, how much?
Having been at the forefront of attempting to work with the debt settlement industry I now largely regret doing so and encourage banks and other financial institutions not to give official recognition to debt settlement companies unless under strict guidelines. Debt settlement can work, but not under the current methods being employed.
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