Right now debt settlement companies are claiming they are being unfairly targeted by regulators, the Senate Hearings on Debt Settlement, and the Debt Settlement Consumer Protection Act.
A reader sent me a mailer he just received from a debt settlement company that is part of the United States Organization of Bankruptcy Alternatives (USOBA), the trade association that testified at the Senate hearings and gave the impression their members were playing by the rules.
I have cut the personal information out of this recorded call but I’d like for you to listen to the entire sales call and then decide if this company is intentionally trying to deceive consumers with false information in order to get them to sign-up for the debt settlement program.
I think it would hard to characterize the statements the representative makes to sell debt settlement services as anything other than deceptive statements, lies, or misleading information.
The debt settlement company believed the consumer I was pretending to be lived in Hawaii where debt adjusting is illegal but they were happy to sell me debt settlement services anyway. In fact the mailer they sent went to a consumer in Hawaii.
According to the Hawaii statute “Debt adjuster” means a person who for a profit engages in the business of acting as an intermediary between a debtor and the debtor’s creditors for the purpose of settling, compromising, or in any way altering the terms of payment of any debts of the debtor.”
The statute says:
“Any person who acts or offers to act as a debt adjuster in this State shall be fined not more than $500 or imprisoned not more than six months, or both. Any contract for debt adjusting entered into with a person engaged in the business for a profit shall be void and unenforceable and the debtor may recover from the debt adjuster all sums or things deposited with the debt adjuster and not disbursed to the debtor’s creditors. [L 1967, c 3, §3; HRS §446-2; gen ch 1985]”
During the call the representative told me:
- Their headquarters was in DC.
- They got the debt information on the consumer they sent mailers to from Equifax.
- Average settlement is 28% – 36%.
- Entire process takes 24 to 36 months to be debt free.
- The fee is normally 15% to 20% of the debt load enrolled but they have a special right now where they will only charge 10% of the debt enrolled.
- Initial fee pays for an attorney in my state to communicate with my creditors and negotiate, trust account, and some online access.
- Tells me stop paying creditors for six to eight months.
- Tells me I can’t negotiate on my own because the debt settlement company gets better deals.
- They have a better relationship with creditors.
- Tells me the debt settlement program is part of the economic stimulus package and the banks got funding to forgive unsecured consumer debt.
- Creditors will only typically call for the first 90 days.
- Creditors have to communicate legally in writing with consumer so no need to talk to creditors on phone.
- Attorney will constantly be in contact with creditors.
- Only 3% of clients have had judgments against them but they were the customers that did not let the debt settlement company know the creditors were trying to contact them.
- FTC legally requires debt settlement company to quote 50% of debt can be reduced.
- If they can’t get settlement better than 85% they will refund all of my fees.
- They have been able to settle all debts enrolled.
- Bank of America and Chase settle for 20%.
- Debt Settlement will not show on the credit report.
- But once done with the debt settlement program they will help me work with credit repair company to remove any negative information from credit report.
- They are a member of USOBA.
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Sorry to be stupid… I listened to the recording, I read your comments… but I don’t know what these folks actually do (if not what they say they do). If these are the lies, what are the truths? Is any Debt Settlement real and legit? Please explain what these sales reps should have been saying about this option.
Sorry, but I gatta know what part of this is real and what part is BS to know if it’s still even a viable option.
Thanks.
Excellent question. Let me direct you to three articles you should read.
1. The Truth About The Success Rates, Failure Rates and Completion Rates of Credit Counseling, Debt Settlement, and Bankruptcy
2. My Review of the New FTC 16 CFR Part 310 Telemarketing Sales Rule for Debt Relief Services
3. CONSUMER ALERT – Do Not Enroll in Any Debt Settlement Program Before October 27, 2010 That Charges a Fee Before Debt is Settled
This is terrible. Some of the things are/could be true, but most of the things she said are flat out wrong. I have a feeling that these phone reps are being told to say this to the consumer by their upper management, or they overhear this from other people saying the same thing. I doubt that she is just making this up. Either way, someone needs to monitor these phone calls and take appropriate action.
Oh,My favorite line – “I am not a pusher, I am just here to educate you”
Classic.
.-= Damon Day´s last blog ..Credit Solutions of America sends me a Cease and Desist Letter =-.
No!!! Say it ain’t so Steve. Proof of a USOBA Member lying to a consumer. I don’t believe it! Hmm, maybe this is actually why they don’t publish their membership list? They are afraid of being exposed. If you could see my face you would see a look of shock all over it. Way to lead the charge USOBA.
.-= Damon Day´s last blog ..USOBA and TASC Set Industry Standard – Don’t Trip Over The Bar =-.