Recently I was contacted by Andy Faria of Northeast Settlement Group. He wanted to share with me the approach of his debt settlement company and their approach of basing their fees on the actual performance of his settling debts instead of collecting large fees up front.
While his company is small he is able to provide help and assistance to consumers on a contingency fee basis. The larger debt settlement companies say doing this is impossible, but yet here is an example of a company that is.
So let’s get the basic information out of the way.
Northeast Settlement Group, LLC is located at 320 West Main Street, Norton, MA 02766 and the company was formed on January 26, 2009. Andy Faria is the managing partner of the entity and his cousin, John Faria, is the other partner. Andy says that as of right now they have five other staff members as well.
The website of the company is settleshort.com and their telephone number is 866-794-1869.
They state they offer assistance in Connecticut, Massachusetts, Rhode Island, and New York. But according to Andy Faria 95% of the clients are in the Massachusetts and Rhode Island area.
My Interview With Northeast Settlement Group
I had the opportunity to speak with Andy Faria from Northeast Settlement Group and we talked not only about his company but also about some of the positions put forward by TASC and USOBA saying that the debt settlement industry needs to remain as an advance fee industry where consumers pay years in advance for services they may never receive.
Andy’s position is that it is ridiculous for debt settlement companies to claim consumers would be harmed if they were being charged when settlements are actually agreed to and creditors would be a lot more willing to work with contingency fee debt settlement companies even though the debt settlement trade try to persuade people they would not. Andy speaks out that those positions by other debt settlement companies and says they make no real sense.
We talk about how long people should be in a debt settlement program and Andy feels nobody should be in a debt settlement program for three years. The shorter the better in a debt settlement program he feels.
Andy talks about why debt settlement companies need to move towards a model where they are earning their fee on a contingency basis and he also believes that debt settlement companies who will survive industry regulation need to ditch the big advance fee model as quickly as possible.
You can listen to my interview with Andy Faria below.
Northeast Settlement Group Wants to be a Good Guy in a Troubled Field
Andy and his Northeast Settlement Group want to show consumers they are good players in an otherwise troubled industry. He has embraced my call for transparent in the debt settlement industry, which you can read here.
Here are the answers to my transparency questions as given to me by Northeast Settlement Group.
- Debt Settlement Program Fee Structure
- SettleShort Elite Program:
The client will be charged a monthly service or maintenance fee of $25/mo for account handling and documentation processing. All clients will be offered the use of a Notworld Reserve Account, the monthly fee for this is $12.50. Our program fees are collected when debts are settled and paid, for example, when a settlement is established with a creditor the funds are allocated from their Noteworld account to settle the debt as well as our service fee. We will charge 20% of the amount we have saved the consumer/client spread evenly over the following 3‐6 months.
Example: A consumer has a $10,000.00 credit card debt and we arrange a settlement of $3,500.00. We have saved the consumer $6,500.00 of that debt. Our service fee is 20% of $6,500 which equals $1,300.00. Both the payment to creditor and NESG will be furnished through the consumers Noteworld reserve account, the total cost to settle the original balance of $10,000.00 would be $4,800.00 (48% settlement).
The monthly payment is calculated based the following criteria;
Amount of enrolled debt
Desired length of program
The monthly reserve payment is calculated utilizing this formula;
Total Enrolled Debt x .55 (55%) / Months in Program = Monthly Payment
Example: A consumer has $40,000.00 in “Total Enrolled Debt”, 55% of that figure is $22,000.00 divided by the program length (let’s assume they desire a 3 year program which would be $22,000.00 divided by 36 months) which would equal a total monthly payment of $611.11, $25.00/mo. of which would be collected as our maintenance fee. This would give the consumer a reserve deposit of $586.11/mo. throughout our program which would over time, accumulate a significant amount of reserve funds to allocate towards future settlements creating the ability to establish these settlements in far less time than a conventional settlement program where service fees are collected on a monthly basis.
1 YR Program: (Total Enrolled Debt *0.55)/12 [MONTHS IN PROGRAM] +25 [MAINTENANCE FEE]
2 YR Program: (Total Enrolled Debt *0.55)/24 [MONTHS IN PROGRAM] +25 [MAINTENANCE FEE]
3 YR Program: (Total Enrolled Debt *0.55)/36 [MONTHS IN PROGRAM] +25 [MAINTENANCE FEE]
4 YR Program: (Total Enrolled Debt *0.55)/48 [MONTHS IN PROGRAM] +25 [MAINTENANCE FEE]
- Settleshort Green Light Program:
Customer agrees to pay Northeast Settlement Group a program fee equal to 15% of the savings
amount, of each enrolled debt. The program fee will be charged to the CUSTOMER as settlements of 50% or lower are reached with each creditor. Any settlement offers above 50% can be refused by the CUSTOMER and Northeast Settlement Group will continue to work until a settlement of 50% or less is obtained. Any settlements obtained at 50% or lower will be considered complete and it will be the responsibility of the CUSTOMER to meet all terms set forth in the creditors settlement offer. It is expected that CUSTOMER will maintain the availability to funds to cover at least 50% of total remaining enrolled debts at all times until all enrolled debts are satisfied. If CUSTOMER fails to meet the creditors’ settlement agreement and the need arises for Northeast Settlement Group to renegotiate the terms, this enrolled debts fees will be charged again. A $500 Retainer will be charged upon our completion of submitting all the initial settlement offers to all creditors.. This Retainer is non refundable.
- SettleShort Elite Program:
- Debt settlement program terms and conditions
Here are sample representative copies of the program terms and conditions.
- Ongoing success rate of past clients that settled only some debt:
We have had less than 8% of our clients drop out of the program. All of them except for 1 were within the first 1‐3 months and granted full refunds for any fees collected. Most of them had a sudden change in income/expenses, or a change of plans and our program no longer made sense for them. We parted ways amicably with all of them and still maintain contact with many. We are in regular monthly contact with our clients and always return messages the very same day. Our negotiator is monitoring daily, all clients reserves and regularly opens contact with creditors even when the possibility of settlement may be months away. We have been able to successfully establish many long term settlements much earlier in the game than if we waited for the entire amount of reserves to build.
We also request that our clients forward any notices from their creditors in regards to complaints, law suits, or if the debt simply changes hands to an outside collector. Our policy here is to call on any debt immediately and open some kind of communication with them. I don’t have exact data yet(in an easy to read format that shows up to the second progress), but it’s a great idea. We have the data and will be creating a report from our CRM asap, I feel it will be a great tool to monitor our progress in one place. It may take a few days but I would be glad to provide you with that report when completed.
- Ongoing success rate of past clients that settled all debt:
In our first year in business we have only had 1 client so far that now has a zero debt balance. He was our very first client and he took a very proactive part in the process. Together over 11 months we were able to reach agreements on all of his accounts totaling $114,000. His total paid will be $47,222 (42.3% overall). He still has about 10 months to go on two accounts that we established 12 month term settlements for him with Chase and AMEX, after those he will be done. This particular client was with us for 11 months and he was on the old fee structure, so he paid $200/mo ($2200 total). He is now on his own and no longer being charged any fees.
- Average length of time in the program:
The average established program length for our clients is 34 months. [We will have to see on this statement since they are not aged enough to make an exact measurement.]
- Settlement Information:
Total Amount Settled: $121,366.37
Total Settled Accounts: 40 Accounts
Average settlement amount: $4860.20
Average Settlement Percentage: 40.42%
- Customer satisfaction data:
We handle our clients from start to finish, every aspect of the entire debt settlement process. We would never even consider sending our clients off to a back end. With this in mind we go way above and beyond in explaining every negative aspect that debt settlement presents (secret shopping calls welcomed). We will be working with each client from start to finish; it does us no good not to disclose everything. In addition, every single potential client is made aware of any and all options available to them (credit counseling, BK, etc) and we actually advise them to actively investigate those options before enrolling with us.
We have 2 sales/consultant staff and 5 back end staff to service our clients. We return all calls
the same day and any problems or issues that arise are always handled in house. We have NO
complaints with BBB or any other agency or organization. Our theory is that we would rather
grant a full refund to clients if an issue is so great that it can’t be worked out. Even if they are
being completely unreasonable, it’s just easier that way.
- Percentage of clients that were sued for a debt that was included in the program.
We currently have 189 enrolled accounts still unsettled. Of those we have 18 of them we have marked “legal”. That would leave the “percentage in legal status” at 9.5%.
We instruct any of our clients to immediately send us any complaints, lawsuits or notice that the
debt is transferring to a law firm or collector. Our policy is to call these new creditors or law
firms immediately. We find many times we will be able to reach an agreement before a lawsuit
We currently have 2 clients with court dates. One is in the end of July and the other is for late
September. Those accounts are currently on a weekly follow up at minimum and we are working
hard to reach an agreement before court is required. In the event that they do go to court, both
clients have been advised of their need for proper legal consultation or representation. Any
enrolled accounts in “legal status” are handled in this manner.
- Percentage of clients that continue to get collection calls while in the program.
This one is almost impossible to calculate accurately. If I had to guess I would say 90‐100% of our clients still receive collection attempts of some sort. We do our best to have creditor calls directed to us, but it’s impossible to stop every call. Every client understands this completely before signing up for either debt program we offer. The pitch that debt settlement will stop collection calls is not true.
- Reason why clients left the program before settling all debts, broken into category.
We have had 2 clients leave the program because they decided to file Bankruptcy. Another client had lost their job and wouldn’t be able to maintain their monthly payment towards settlement. Two other clients left because they had heard negative information about debt settlement and
decided to go in another direction. The last client that left, did so after 6 mos in the program and
we were able to settle 1 account for him in that time, saving him $954. I don’t really know why
he left, he never fully explained why.
Photos From Northeast Settlement Group
I really enjoyed the photos Andy from Northeast Settlement Group sent me. They brought back a lot of old memories for me from when I first started the credit counseling company in 1994. It’s nice to see them using the same old inexpensive furniture, dividers and desks.
Although I’m not sure they have the same problem we did of truckers on CB radios passing the office and cutting in on telephone conversations.
A review of the Northeast Settlement Group Web Site
Overall I’d have to give their web site a thumbs up over the disclosures that are made on 90% of other debt settlement sites. Here are some of the things they say on their debt settlement page. How refreshing.
- Good Stuff on the Site
All you need to do is Google the term debt settlement and you will find story after story of people getting burned by debt settlement companies. Most of it is true and a direct result of the debt settlement companies charging the majority of their fees upfront or over the first 6-12 months. Many times the fee is paid in full and nothing substantial has been done.
We don’t believe that charging large upfront fees is fair or ethical and we don’t charge them. We offer two separate debt settlement programs and with both, fees are charged when an account is settled and always based on our performance. If we don’t perform, we don’t get paid.
The negative press that the debt settlement industry has received lately has been caused by more than companies just charging high upfront fees. Not disclosing the many downsides to debt settlement can leave consumers getting blind-sided by growing balances, collections calls, and even lawsuits. For some, debt settlement makes perfect sense, while for others it would be far better off dealing with their debt with a different approach.
As mentioned at the top of this page our goal here is to provide you all of the facts, so you can make an informed decision. Most websites related to debt settlement will have all the benefits in giant font, sometimes flashing and sometimes racing across the screen. The disclosures, downsides, and fees are typically all the way at the bottom of the page in a very tiny font. We’ll make it easy for you, we’ll keep the font the same size and we’ll explain as many myths and disclosures to the debt settlement process as we can.
Debt Settlement Myths
- “We can stop all collection calls” – No they can’t. It’s impossible to stop all collection attempts. Part of our written correspondence to your creditors requests they contact us with their collection attempts and not to contact you. The creditors many times ignore these, and you may still receive calls from them. We can resend the correspondence as many times as needed if a creditor is being overly aggressive or persistent.
- “A government bailout program has made this all possible” – No it hasn’t. This one is total BS, and you should RUN from any company that offers this as a credible reason for enrolling in their program. No such government programs exist and the person you are speaking with is either completely misinformed or a blatant fraud.
- “You’re protected because we’re part of an official organization” – The debt settlement industry has two major “associations”. TASC and USOBA. Any member of either of these organizations will tell you it’s a badge of honor and you should always try to work with a member affiliate. The truth is that neither of these organizations offers the consumers very much in the way of real protection, many of the worst offenders in the debt settlement industry are members of these organizations. In our opinion both of these organizations currently represent the best interests of the debt settlement companies, not the consumers. Until one of these organizations steps up to the plate and offers real consumer protection in the form of a limit to upfront fees, we will not be affiliated with either.
- “Getting out of debt is easy” – This couldn’t be further from the truth. For many, being delinquent on any account can be a shock to the system. You will go into the creditor’s normal collection process and will be subject to all the normal collection attempts. We will help to smooth out the ups and downs to the debt settlement process, but it still won’t be easy.
- “We’re a law firm, so we have an advantage” – You certainly won’t have any advantage or gain any leverage working with a law firm, but you will most likely pay higher fees. Most of the time an actual lawyer will never make any calls on any of your accounts, they are just using their name in order to sell more and charge higher fees. They won’t represent you in court, and their fee structures can be the worst in the entire debt settlement industry. Doesn’t sound much like an advantage to us.
Debt Settlement Disclosures
- Credit Score – A debt settlement program will most likely have a negative effect on your credit score. How much your credit score will drop will be determined by how your credit score is right now. If you have been behind on your debts for a while already, your credit score may not be affected as much. If you have a great payment history and good credit score when you enroll in a debt settlement program, your credit score will likely plummet. A debt settlement program is NOT designed to improve your credit; it is a strategy to eliminate your debt as fast as possible and for as little as possible. Maintaining a solid payment history with all of your creditors is the only way to improve your credit.
- Balances can grow – When you fall behind on credit accounts, there may be late fees or interest charged until the accounts are settled and your creditors are under no obligation to reduce the balance owed.
- Lawsuits – Creditors have the right to sue in order to collect their debts. Each creditor has their own rules and policies as to whether or not it will follow through with a lawsuit, and these policies seem to be constantly changing. The only sure way to prevent a creditor from suing is to settle the account before they decide to take legal action. The fact always remains that a creditor exercising their right to sue is a possibility and if you are sued or taken to arbitration it is important you get legal advice and follow it concerning how to respond to the statements in court or arbitration claim. In our experience any time somebody failed to respond correctly to a lawsuit or complaint, a judgment was automatically entered for the creditor.
- Income Taxes – Another thing to be aware of with any debt settlement process is that it may have an effect on your personal income taxes. If the amount of forgiven debt exceeds $600, your creditors must report it to the IRS on a form 1099C as “Forgiveness of Indebtedness Income”. According to information on the IRS website this income can be excluded from your income tax under certain conditions such as if you were insolvent at the time the debt was settled. We always recommend using a tax professional to help with your tax returns while involved in a debt settlement program.
- Income – In order to be successful with any debt settlement program you must be able to maintain a steady source of income. The goal should never be to stretch out a debt settlement program as long as possible; it only increases your exposure to all of the dangers above. A debt settlement program should never last beyond 36 months, you may be a better candidate for bankruptcy or credit counseling/consolidation if you need longer than that build the sufficient reserves. – Source
- Stuff That Could Use Some Improvement
The FAQ page made me wince when reading the statements about bankruptcy.
Q. What is better, debt settlement or bankruptcy?
A. Many people struggling with debt consider bankruptcy. The main disadvantage of bankruptcy if compared to debt settlement is that it will damage your credit history and score so bad that you won’t be able to get any new loans for up to 7-10 years from the moment you file it! As opposed to that, a good debt settlement program will be able to settle your debts for a tiny fraction of their outstanding amount without letting the creditors make your credit history any worse. The second point is that debt settlement doesn’t take as much time and effort as the process of filing for bankruptcy. And last but not least, with the new bankruptcy laws, you will most likely be forced into a Chapter 13 repayment plan instead of being allowed to file Chapter 7 bankruptcy, which means that in the following years you won’t be able to spend money on anything but necessities. Doesn’t sound very tempting, right? – Source
I find that particular section to not be representative of bankruptcy. In fact, falling behind on your debts in a debt settlement program will be reported for seven years as well as a Chapter 13 bankruptcy.
People that go bankrupt and rebuild their credit will be able to get loans within a couple of years and will get offers for new credit immediately after the discharge of their bankruptcy.
The “tiny fraction” statement is a bit over the top for me, even an actual settlement near half, which is their actual percentage is not a “tiny fraction”.
The statement “without letting the creditors make your credit history any worse” seems inaccurate since the delinquent debt in the debt settlement program will be reported on the credit report and the debt settlement company has no control over what the creditors must report.
People that opt for bankruptcy, 70%+ file under a Chapter 7 bankruptcy that discharges their total debt in months. The remaining people file under a Chapter 13 bankruptcy and repay their debt over three to five years based on what they can afford.
The section also fails to mention the advantages of bankruptcy to give consumers a clear understanding what they are comparing. Bankruptcy will stop all collection calls quickly, will prevent lawsuits, will terminate and wage garnishments and give consumers legal protection from their creditors.
Q. Will my creditors still call me?
A. Once you miss a couple payments your creditors may still contact you. As soon as you enroll into one of our Settlement Programs we will send a “cease and desist” letter to all your creditors and this usually takes care of 99% of the phone calls, but if they continue to call we will work with you and the creditor to get them to stop. – Source
Ouch, that looks like it needs to be updated. By their own admission, “90‐100% of our clients still receive collection attempts of some sort.” That section looks like it needs to be updated in two ways. First, to reflect that most clients still do get collection calls and that a cease and desist letter has no power on the original creditor to stop calling, only third party collectors.
So it looks like NortheastSettlement Group is trying to be one of the up and coming good guys. They have gone a long way to speak openly and honestly about the debt settlement industry and have provided their transparency numbers for all to see.
The issues I had a concern with on the FAQ page look like the standard messages you hear on most debt settlement sites that gloss over the reality of bankruptcy. I’m hopeful that once I point out these concerns to them they will update their FAQ page with more balanced information.
Since Andy and his crew have already started out under the contingency fee model and are enthusiastic to be paid for their actual performance and delivery of services, I’m sure they are poised to better survive upcoming debt settlement regulation.
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33 thoughts on “Northeast Settlement Group – Small But Transparent”
First once again let me say I have nothing to do with the DS industry at all, no interest, vested or otherwise. For or against. I am very aware of what goes on in the Banking division in NY, as a matter of fact (according to my notes), my first conversation with regards to DS with the NY Bank division was on March 12th, 2008 @ 3:40 PM. (my guess is I was one of the first, b/c at that time they were completely clueless to the impact of the DS world).
See when reading the law, just because the Banking division doesn’t feel they have jurisdiction over DS doesn’t mean an AG can’t make a case (and that’s the big worry). That statute was made prior to the word DS being used. And here’s what should make a DS company nervous under the definition:
“has a contractual relationship with another person or entity that distributes, or supervises, coordinator or controls such distribution of, the same among certain specified creditors in accordance with a plan agreed upon and”
Based on pure transparency a DS company absolutely supervises and or coordinates the distribution of funds (or at least they should). And the one place I told Jane she was absolutely wrong was in the risk of the funds. Again based on pure transparency, most, not all, but most DS companies have control over the funds, and these banks and companies involved in the aspect of funds are very suspect. As we saw with the Rocky Mtn Bank.
So let me ask this, how are things working out in NY with Mr. Cuomo? I know, not well.
And I also made the statement; “Amending a statute is something companies have to worry about when pushing for their own legislation. States don’t have to pass some type of UDMSA, they can simply amend the definition in current legislation to cover DS”
And what did Ms Azia recommend? Exactly that. That would not be a good thing for most DS companies. Which goes back to my basic business 101, DS should have worked with the State first, rather than just gong ahead and operate as they did. Another problem that you see is major insurance carries will not write any type of liability, D&O insurance and are dropping companies.
Again, I’m not interpreting anything, generally what business consultants do is simply this. My recommendation based on the possibility of having problems with the AG, with the way the current statute is written would be to license your company under the current statue then work directly with the State to make changes. But anyone can take their chances. Here would be some food for thought I would give a CEO deciding to take a chance in NY. Let’s assume for the sake of argument you get in a tangle with the AG and you loose. Three yrs from now based on current changes in the law on a national level your DS company goes under. Now you have to look for a new job. Do you really want to explain (or have on your record) charges from an AG that you lost? I would hope the answer would be “no, not really”. But then again there are many people on Wall St that have gone to jail, and criminal charges, I feel could be an actual concern in DS in the near future.
I hadn’t seen Steve’s post regarding the NY Judge prior to my above posting. So please read it without taking into account that NY Judge.
Your interpretation of NYS Article 28-B – (455 – 457) BUDGET PLANNING, when pertaining to the debt settlement industry is actually wrong. Debt Settlement Companies Are Currently Not Regulated under New York Law. Before make a statement do a full investigation and speak with law makers as I have.
“In contrast to budget planners, New York law currently does not regulate what are known as debt settlement companies. Debt settlement companies negotiate with a debtor’s creditor to settle the debt for a percentage less than the amount of principal owed. The consumer deposits and accumulates settlement funds and related fees, many of which are front-loaded, in a bank account the consumer personally controls. Settlement will not occur until the consumers has deposited and accumulated sufficient settlement funds and fees.
Unlike budget planners, debt settlement companies do not receive or hold consumer funds for distribution. Rather, as noted, the consumer accumulates funds in a consumer controlled account. Therefore, consumer funds are not at risk for nonpayment by the debt settlement company. As a result, debt settlement companies are not regulated as budget planners, and there is no law that expressly prohibits or restricts their activities.”
I agree- I am not a lawyer, however my experience says that laws are generally upheld at the highest levels to their intended subject. Most, if not all of the laws mentioned seem to have been written specifically in regard to Debt Management Companies- not Debt Settlement companies. Any lawyer COULD argue it either way but i don’t see any reason for such a thing, as the intention seems to be that they written for a dif purpose.
Just my opinion.
Let’s be honest, there is no really difference b/w DM and DS, other then DS has made a few adjustments to try to avoid any regulation. Some states have similar statutes and have simply said those rules apply to DS and that’s that. Just happens Ms Azia thinks one way, but Mr. Cuomo thinks another way.
I’ve honestly never seen an industry so opposed to having rules when it comes to consumers and finance. It’s mind boggling to me.
In an interesting development a New York judge has just ruled that debt settlement companies need to be licensed as ‘budget planners’ under New York Law.
See Judge Rules Against Debt Resolvers USA. Orders Them to Repay All Debt Settlement Fees to Consumer.
As I throw my arms up and address the audience “You see what I’m talking about people?”
I’m not out to get anyone, I’m just very skilled in business and understand the possible outcomes and risks involved in business decisions. Now it’s too bad Debt Resolvers USA hadn’t consulted with me first.
What some of the readers fail to understand is that in the debt world, all customers are considered to be a disadvantaged class of consumers. If it comes down to an opportunistic debt settlement company or a harmed consumer, the debt settlement company is going to lose most, if not all, of the time.
If there is anything to be learned from these comments it is that debt relief companies should always error on the extreme side of caution and compliance as to avoid all the bad stuff that is happening in the debt settlement world.
LOL, no as I said before I don’t work in the DS industry (and I know those guys you’re talking about). I will give this post my two cents one final time, it’s wasn’t my intention to get involved in a consulting blog, but I’m always happy to inform people and be helpful if I can.
In just about every state DS can fall under in some way shape or form in the definition of current statutes/laws (that’s not to say every state). Now some lawyers are paid good money to argue those definition, and I’ve rarely seen, if at all, a DS company win, regardless of the model they use (including the so called attorney model – if it walks like a duck, sounds like a duck, acts like a duck, it’s a duck). So they have a choice, they can either contact the powers to be at the state level and meet with them, be completely transparent of how they operate and find out whether or not the state agency believes they fall under that statute, or they can simply do what almost 100% of the industry does (even those companies that claim to be the good guys), deny that the laws are applicable to them, b/c the word DS is not spelled out and operate under the radar and hope they don’t get caught. You won’t get any real help from any of the associations, they’ll just pitch you a sales pitch so you get paying them (they are for-profit organizations). As a company owner you’ve got to put your big boy pants on and call the regulatory agencies yourself.
In RI the UDMSA has been passed and you need a license, I’ve heard of some lawyers debating the MA law, and I don’t know what the outcome has been (I really had no interest in investigating the outcomes). And VT has enough case law from what I remember, and their opinion is what it is. Here is the VT definition (unless they’ve amended their statute or passed a form of the UDMSA).
“Debt adjustment” means making a contract with a debtor whereby the debtor agrees to pay a sum or sums of money periodically and the other party to the contract distributes, supervises, coordinates, negotiates, or controls the distribution of such money or evidences thereof among one or more of the debtor’s creditors in full or partial payment of obligations of the debtor. For purposes of this chapter, engaging in debt adjustment in this state shall include:
(1) soliciting debt adjustment business from within this state, whether by mail, by telephone, by electronic means, or by other means regardless of whether the debtor resides within this state or outside this state;
(2) soliciting debt adjustment business with an individual residing in this state, whether by mail, by telephone, by electronic means, or by other means; or
(3) entering into, or succeeding to, a debt adjustment contract with an individual residing in this state. [8 V.S.A. § 4861]
Amending a statute is something companies have to worry about when pushing for their own legislation. States don’t have to pass some type of UDMSA, they can simply amend the definition in current legislation to cover DS (and some have done that).
Happy 4th to all ! !
Hi sir, I must confess, at first I thought you may just be some yahoo sales idiot from another DS company. I am now impressed with your knowledge of the industry, I think I could learn a lot from someone like you. I spent a long time last night researching all the state statutes you mentioned in your comment (and it turned into an all night affair, I’m exhausted). I want to thank you for helping me to focus on these issues, we’re not above the law in any way, shape or form, and you’re right, that’s my responsibilty.
After last nights research, I must admit I may actually be a bit more confused than I was before. I don’t want to sound like a “Kennedy trying to explain away his weekend on the Vineyard”, but in last nights research I learned that I am not an expert in law, and I need to re-investigate our compliance, with the assistance of the proper legal consultation. This process is already in motion and I will post what I learn the second I get to the bottom of it.
Your comment “you’re not running BOA and have 300,000 employees” was great and it made me chuckle, I had to go back to see if I gave that impression. Maybe I did and maybe I didn’t but your delivery was perfect. It’s quite the opposite though, My team consists of 5 people sitting right behind me, and I listen to just about every phone conversation they have ever had.
If you have any input that you feel may help us, it is always welcome. Hopefully your knowledge in this area can continue to be a resource for us.
I can be reached directly by phone at 866-794-1869 or email at email@example.com anytime. Just ask for Andy.
Have a great fourth.
This is a long one Steve:
You see one of the major problems in DS is that the industry doesn’t understand about definitions. They believe that b/c the word “debt settlement” isn’t spell out, it doesn’t pertain to them. It’s best explained this way; let’s say someone is asked what they do for a job, and the person says “I am a “blank” (just make up a word), then they are asked what does a blank do? And the person describes the definition of a lawyer. And I respond “oh you’re a lawyer”, and the person says “no, I’m a blank”. In other words if you are performing duties as defined by something you are generally what that definition is, not what you call yourself. When DS started they were looking for ways around current statutes, the big way was “oh, we don’t hold any money”, and the train of thought was that won’t trigger any current statutes. But in most cases (and I won’t say all, b/c even OJ got off), it does trigger statutes based on the definitions.
Now let’s look at NY statute, and it’s what DS does:
(1) Budget planning, as used in this article, means the making of a contract between a person or entity engaged in the business of budget planning with a particular debtor whereby
(a) the debtor agrees to pay a sum or sums of money in any manner or form and the person or entity engaged in the business of budget planning distributes, or supervises, coordinates or controls the distribution of, or has a contractual relationship with another person or entity that distributes, or supervises, coordinator or controls such distribution of, the same among certain specified creditors in accordance with a plan agreed upon and
(b) the debtor agrees to pay to such person or entity, or such other person or entity that distributes, or supervises, coordinates or controls such distribution of, a sum or sums of money, any valuable consideration for such services or for any other services rendered in connection therewith. For the purposes of this article, a person or entity shall be considered as engaged in the business of budget planning in New York, and subject to this article and the licensing and other requirements of article twelve- C of the banking law, if such person or entity solicits budget planning business within this state and, in connection with such solicitation, enters into a contract for budget planning with an individual then resident in this state.
Now let’s look at MA
Definition: Credit counseling services as used in this chapter shall mean:
(a) the providing of financial and budgetary advice and judgment to individuals in connection with the creation of a budgetary plan; or
(b) the creation of a plan whereby an individual turns over an agreed amount of his income to a nonprofit credit counseling corporation which distributes it to his creditors in accordance with a plan which they have approved and which may provide for smaller payments or a longer term than the original contract; or
(c) the providing of educational services relating to the use of credit; or
(d) any combination of these.
Even if DS does nothing else, one of the first things they do in the sales process is calculate a budget off a projected settlement amount so they can say “see how much we can save you, and how much lower your monthly payment will be. Now tell me Mr/Ms Jones doesn’t that make sense to go with our program?”
Now let’s look at RI. If my memory serves me correctly (and I am getting old, on occasion I feel myself having senior moments). RI passed the UDMSA in 2007 CHAPTER 19-14.8 “Debt-management services” means services as an intermediary between an individual and one or more creditors of the individual for the purpose of obtaining concessions. You can check on their website for license holders, and Steve, although it may not be up to date, nowhere did I see a Northeast Settlement Group, or any principal by the name of Faria (all managing partners that claim a % of ownership must fill out a Bio and are listed on the license), so if they operated under another name either I missed it in your article or so much for transparency as well as, and let me quote Andy “We take every step to ensure we’re compliant and we’re not trying to hide what we are, we’re a debt settlement company.” Now let’s give Northeast the benefit of the doubt in two ways, and let us also bring me back to my teaching days at the University. Let’s say it’s an old list, then as a business owner, CEO, it should be your responsible to make sure that list is up to date by calling the State, and if they don’t comply immediately (cause it is government), then a posting on your site with you business license number should be up (or maybe a post that says if you call us we’ll supply you with that number). Secondly let’s say they are in the middle of that app process, again I would ask them what are you doing operating before you have a license? And let me ask how a managing partner (b/c he claims that on his Linkedin page), state “From what we understand, yes, we are licensed”. Again it’s simple; you either are or you are not. You either filled out the app or you didn’t. You’re suppose to be a managing partner, an officer, you’re not running BOA and have 300,000 employees and being asked what your policy and procedures are in your west coast call center.
See one of the problems in DS is that the industry is made up mostly of people that have a background in sales and virtually no background in finance, or how to run a business from top down. So instead of doing the normal things, and getting a business plan together, getting start up financing together, then going to state and federal agencies and finding out about regulations, they just went into business. What is a normal route to go would be that if a person didn’t think a statute pertained to them, they would meet with regulators before hand (preferable with council, I used to tell my finance students never meet w/o council), and hash things out. And if you don’t like the statues b/c there is some difference in the way you operate, or you think the industry has evolved beyond an old statute, you get licensed, then try and change it, or you don’t operate at all until it’s changed. But DS did it backwards, they just went ahead and opened shop and ignored any laws. Lets go back to our driving example again, but let’s say I’m from Montana, where we’re known for our wide open roads and driving fast (it’s Big Sky country), and I drive to California, and I say to myself, “hell, I’m from MT these speed limits don’t pertain to me, I can drive like I’m on I90 going from Billings to Bozeman.” If the California Highway Patrol (CHiP’s, that’s you Ponch and Baker) catches you, and they may not, but if they do, what do you think they’re going to say? And like our original example, you don’t have a driver’s license
From what we understand, yes, we are licensed to do business in the few states that we have clients. We are constantly working with our attorney’s and accountant to ensure us of this. I appreciate your concern and you can rest assured if we were ever advised that we are non-compliant, we would work to fix it immediately.
I must admit, I’m not an expert in the statewide regulation for debt settlement and that is why we rely on a team of experts and professionals to help guide us in that area.
Eventually, we would love the opportunity to expand and work in other states. This is exactly why we are huge proponents of regulation in the debt settlement industry. Until a uniform set of standards for this industry is established, we’re forced to “wade the murky waters”, that is the current state of debt settlement regulations.
Until we’re told that we are “clear” to work in any state, we simply won’t take on clients from that state. If we get out of state calls, we will do our best to help point them in the right direction, but we would never charge them a dime.
Steve – Your assesment of our FAQ page was right on the money. Outdated and Inaccurate. We have updated this page to reflect a more accurate depiction of the debt settlement process.
Thank you for listening to what I observed on your FAQ page, taking the comments to heart, and updating your page.
No need to apologize- But i still do not see any License regulations-
The NY statute you refer to is similar to FL, it is representative of laws that pertain to Consumer Credit Counseling Companies- In NY it says “can be”- The law was written regarding the above (CCC) however and not (to my knowledge) truly to govern DS companies, nor is it enforced as such- My company does not work in NY for that reason, however I know of NO licensing requirements for DS in NY- Further, none exist yet in RI or MA either. Correct me if i’m wrong.
The laws vary so much from state to state and that’s why we believe in regulation. Too much is left open to interpretation without it. Regulation would draw a much clearer line in the sand, and a settlement company can only be on one side or the other.
We take every step to ensure we’re compliant and we’re not trying to hide what we are, we’re a debt settlement company.
I wouldn’t exactly say that you’re seeing a “new breed of do gooders”. I would like to believe that you’re seeing people that believe in debt settlement as a viable option, and would like to perform the service on an ethical level.
Where are you getting this “license” info? What is your real interest here? It would appear that you have some background in debt settlement since you seem to know state regulation but your ignorance to the difference between Andy’s operation and the 99% of all others that do PREY on consumers would say you do not!
I find your questions ridiculous- I have NO fear in saying so as my company has NOT been examined on this site- What are your motives here? To me, they appear truly disingenuous.
That last comment is obviously addressed to PHDOC0 NOT Andy Faria
It’s as simple as a driver’s license analogy. Let’s say you’re 50 years old and one day you’re driving down the road, and you get pulled over by the police (for whatever reason, the reason is irrelevant). The cop asks for license and registration, upon that request it’s discovered that the driver doesn’t have a license. It’s also discovered that the drive has never, ever had a license in their entire life. They have been driving since they were 16 yrs old w/o a driver’s license. They have never had any type of driving infraction in those 34 yrs, not a speeding ticket, not parking ticket, not an accident….nothing…perfect record, let’s say for the sake of argument they are the best and the safest driver in the world.
Bottom line, the driver is still not following the law. Period. A rose by any other name is still a rose.
It’s like the guy that sells hotdogs or pretzels on the street; they too are required to do certain things by law to operate in that city or county. It’s a simple thing, what’s the big deal. It’s pretty simple to follow, all businesses do, and it’s not that hard to do. You put an addition on your house, or even put in a new bathroom, you got to have certain permits. Hell if you put a deck around your house you generally need a permit. What’s so hard to understand?
Laws vary from state to state in a lot of industries. I’ve read every piece of legislation and ever current statute in every state in the US that pertains to credit-related service. And as a CEO you should have as well. And I simply asked if you were licensed under any of the current statutes in those states you have a single customer. That’s a simple yes, or no. You either are, you’re you are not.
Quick example- NY has NO license requirement for debt settlement- The State attorney tho is very aggressive and the cloudy laws in NY may make it wise to do settlement as an attorney only in NY- as you could be considered giving legal advice in certain instances. You stated “I know for a fact that you need a license in those states”. You are wrong-
Further, selling a quality, delicious hot dog is not a requirement for a street vendor in NY- It’s only a problem if the license is checked. I find it odd as so many awful companies can simply pay in licensure states and continue to serve ONLY themselves but when you (fail) to read about a company that would ONLY MAKE MONEY IF THEY DO THEIR JOB you start to pretend to know the licensing requirements of the limited states they operate in. Is their model of doing business a threat to yours perhaps? I have news for you, any idiot can steal for a living, but it takes brains and hard work to actually earn a living.
If this was a blog about Insurance companies, would you have read the 1st paragraph on the company and then begin ranting about licensing? What’s your completion rate?… Hmmmm? How much does your company charge upfront? Bet you have alllllllll your licenses tho, dontcha?
Sorry if you got the idea I work in DS, I do not (but I have given my two cents to some who are very involved, from CEO’s to FTC). My background is in the finance industry, which I have been in since 1988, I hold an MS in management and finance and a double BS in economics and finance (among several other certifications). Part of what I do is deal with compliance in finance and banking, with such agency as the SEC, FINRA, FDIC, NYSE, etc., and state agencies. I just happened to stumble across Steve’s website some time back and I like to check in and see what he’s up too every now and again. (Steve, I really enjoy those drawings).
Under the NY statue debt settlement can be define as a “budget planner”, but you must be a 501c company and are required to hold a license under the NY Banking Dept. Citation: McKinney’s General Business Law § 455 and McKinney’s Banking Law § 579.
But I did read enough of the article to see that the company in question does 95% of its business in MA and RI, and that’s really where the crux of my question lies for the company with regards to licensing.
I briefly read the article (didn’t have time to read the whole thing in detail), and my question is do they hold licenses in those states or are they simply another settlement companies that denies they need a license? I know for a fact they are required to operate under existing laws in those states, and hold a license. if they operate and have good performance and no license, they are simply operating under the raider b/c no complaints are being filed, but that doesn’t mean they are some new bread of “do gooders” in a bad industry. that’s the thing about most debt settlement companies, they tell themselves and others that “oh, we’re a settlement company, not a management company” or “we’re this and not that” and convince themselves and others that by using a “different word” the legislation of that state does not apply to them.
This is from ABOUT US TAB:”We negotiate your settlements for you. We skillfully negotiate your unsecured debt for you, and essentially you will end up paying back just a fraction of the debt. Generally, we reduce your overall debt by 35-65% and Active Debt only gets paid when we successfully settle your debt.
Don’t be fooled by companies who charge an up-front enrollment fee that take 6 months or more to pay. Why would you pay for a service that you have not yet received? Our model is success based and we only charge a percentage of what we actually save you. So it’s obviously in our best interest to settle your debt for as little as possible. Many people end up falling out of debt settlement programs because after 6 months of paying enrollment fees they have not accumulated any funds to settle their debt.
With the Active Debt Solutions Debt Settlement Program there are no up-front enrollment fees so you can begin accumulating funds to settle your debt right away. In most cases, we can start settling debt within your first two or three months.
Your funds are held in a FDIC insured bank account – in your name!
Let’s face it; enrolling into a debt settlement program is not an easy decision and feeling safe is one of the most important deciding factors when choosing a debt settlement program. For an additional level of security the funds that you will accumulate to settle your debt will be held in an FDIC insured bank account in your name only. Our fees are paid to us at the time your debt is settled.”
Now we have been in biz for 4 years & get nearly NO leads from our site so it has not been updated in years- We buy leads- It IS a lead driven business, no doubt. No amount of referrals could keep a this business model afloat.
We charge a $39 maint fee and receive a % of savings on the back- Always have.
We are transparent & open & honest about settlement. That’s why we are still a small operation, making an honest living & helping our clients in the meantime.
I suppose we will have to simply disagree on whether our model can survive. Our model should be THE MODEL- instead, The Law Model will be- I am certain (and i dont actually drink anymore!) but your bet is accepted.
Thanks again for your site!
Yea, it’s kind of buried on your site.
Keep commenting on the site. Your opinion and feedback is always welcome.
I just did an interview with Alex Viecco from New Era Debt Solutions and asked him some of the issues you brought up. Watch for the interview on the site.
We are also watching the pending legislation very closely. Of course, the final result is still up in the air and we hope new regulations will allow us to still operate profitably.
Although our gains at first won’t add up like the traditional settlement model, we feel that will only grow as our clients reserves build and we settle their debts. Satisfied clients lead to referrals and more referrals will cut way down on marketing costs. We’re sure this model will be successful, and we’ve already had an overwhelming positive response, now we need to get to work and earn it.
When regulations arrive, of course we will need to make any necessary adjustments to stay compliant. We’re hoping the new model is close to what we have already established. Either way, we feel by setting this model up asap, we’ll be better poised to survive and make any adjusments necessary.
Andy- I appreciate your reply & Steve I wish I had the same optimism- Marketing costs right now are what they are- Whether they go up or down based on new rules is up in the air. Buying leads, paying sales, negotiators, customer service, rent, T1, website, paper, printer, taxes, insurance, BBB, benefits, payroll taxes, uggh….- Well, We have run this model for 4 years, but without a maintenance fee, some control over trust accounts, a fee of 10% of the savings, lose the ability to create Demand Drafts… It goes on-
Truth is, I see the Attny model gearing up FAST so companies like ours will be lost to that- No matter how much better a model.
Those will be the companies who attract & consume the VERY VERY few leads who could settle their debts at once Steve- In reality, its one customer in 15 who has that ability, we write one in seven leads- so, for about every 100 leads, there is one as you described (from back in the day i assume) It would cost $2000 to acquire that customer-
I was an optimist, but i reserve to see what happens. My guess, as it was long ago, Law Groups win- consumers (read our model) lose.
Sincerely hope it’s not the case, but i’ll bet you a beer.
I also believe that many companies will fail. I think the issue that you may be missing is that the changes are being put in place to protect consumers from the abuses they have suffered from the past four years. Bad actors, and an industry that had the chance but ineffectively policies itself, will die a tarnished death or have to find a way to live under regulation.
For me, the core of this issue is that the basic traditional debt settlement business model was always flawed. The thought of dumping vast numbers of consumers into long-term debt settlement programs where they still get collection calls, sued, garnished, etc. was never going to work long-term. The trail of bad shit was going to get dragged along and build up, just as it has. There is no turning that bus around now.
I understand your struggle to survive moving forward but the reality is that you just might not be able to in a pay per lead environment. As Andy mentioned, their good work and happy clients bring them many word-of-mouth referrals for free. In fact in my latter debt days I never even ran advertisements, we had so many people and sources that bragged about what we did.
Right now, I’m on your web site. And while you might be the best guy in the world, there is not much, if anything that separates your products or services from the crap the bad actors are pulling. Your site looks generic when compared to others. It does not stand out.
If you want to lower your marketing costs and increase client acquisition then focus on adjusting your business model to live on performance based fees, find the right clients you can best help, speak openly and honestly about what is wrong in the debt settlement industry so people can see what side you are on, put the client first, focus on happy clients, embrace transparency for consumers, and slash your operating costs.
It’s not too late to change your business model and survive. I’ll bet two beers on that.
Just my opinion.
Your last statement- “Since Andy and his crew have already started out under the contingency fee model and are enthusiastic to be paid for their actual performance and delivery of services, I’m sure they are poised to better survive upcoming debt settlement regulation.” got my interest.
As i’ve mentioned, my company is success based as well, however, we (maybe you do) do not know what the FTC has coming. The Schumer bill & HR3785 (?) would both pretty much eliminate his model- Or at least his ability to afford marketing and float the company.
And, of course, all the new State legislation- Ill, SC, GA, CA….
So my question is this: HOW is he poised to survive?
I would sincerely appreciate your insight.
Thank you for your work- And best of luck to the good guys in Mass
I’ll email Andy and ask him to respond to your question.
Thanks Steve- Youre welcome to send him my email as well.
I already emailed Andy and asked him to come in to answer your question. BTW, I just spoke to another debt settlement company that is in the middle of revamping their model to comply with the amended Debt Settlement Consumer Protection Act. They feel they can do it.
My opinion, moving forward will come down to debt settlement companies not paying huge marketing fees to attract candidates that are not qualified to settle now or within 18 months. Companies will need to focus on qualifying the right clients that can settle quickly and allow them to get paid within a reasonable period of time.
As I’ve said before on the site, I’ve done settlements before but we limited our work to those that had money on hand to settle, charged a flat fee, and refunded the fee if we were unable to obtain the settlement. I never had a single complaint and no consumer was ever out any money.
Much of the debt settlement industry issues today stem from settlement being incorrectly sold to anyone with a pulse with a lot of questionable claims which resulted in a lot of bad press and angry consumers.
I understand your concerns about the new models but that ship has already sailed.
It’s nice to see a positive story on your site.