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Loyal readers may have observed that I routinely never mention IAPDA, the International Association of Professional Debt Arbitrators (IAPDA) or even mention that a company may display their logo as being a member.

It’s not that I’ve not noticed their logo displayed on sites, it’s that many in the industry have disparaging things to say about what the logo represented and did not take it seriously.

But I’ve just been handed, by a tipster (send in your tips here), what I am told is material taught and promoted by the IAPDA, including debt settlement sales scripts.

The IAPDA makes the statement about who they serve. They say “You – whether you are an individual looking to start your own debt settlement business (one where you can work at home), or you are managing a debt settlement company and would like all of your employees certified, we’re here to help.” – Source

IAPDA membership costs $797 for the individual who wants to take their certification course and then call themselves a IAPDA Certified Debt Specialist. – Source

According to the IAPDA the training includes:

Certification as a CDS – Certified Debt Specialist (on successful completion of training)
Training is fully online and at your own pace
Lifetime membership in the IAPDA
Inclusion in the IAPDA database of Certified members
Use of the IAPDA logo on your website and marketing materials
Periodic articles and circulars on industry changes and legal updates
Help for entrepreneurs / business owners in setting up and running their debt settlement business

That last item is interesting because it must be under that category that I am told IAPDA sent out the call script below.

I reached out to the IAPDA for comment on the materials and asked them to provide me with current copies of their telephone scripts to review. As of the time of this publication they had not responded.

An Insider Speaks Out About the IAPDA

My tipster (send in your tips here) on this story sent me the following summary of their IAPDA experience to share with you. Here is what they said.

“I began my professional debt settlement career by taking a course from the IAPDA. I have had previous experiences with debt settlement companies by referring credit challenged consumers to a couple companies. I expected that to be an alternative solution to eliminating debt and avoid bankruptcy under the new legislation that took effect in 2005.

For two years I patiently hung on with the clients waiting to see some sort of result delivered as promised. Nothing happened. The clients paid the up-front fee and than pushed into bankruptcy by creditor lawsuits.

One client had $80k in debt. During the 2 years in the program, he settled 4 accounts and nearly paid off the settlement firm’s fees but his debt still totaled the original amount because of collection fees and interest charged.

I decided to investigate debt settlement. I turned to the IAPDA training to get educated and make some money along the way. I was in for an unpleasant surprise.

Failures of Training Program:

Curriculum poorly written and delivered
Did not disclose the consequences of debt settlement
Did not elaborate on industry trends or communicate foreseen regulations
Failed to clarify the laws and provisions that governed the industry
Abandoned client screening process and qualified every debtor
Does not enforce its ethics policy
Certification Exam consist of common sense questions

The most disappointed part was the IAPDA did not give explanations of important laws. They provided a full text of each Act but did not clarify its purpose. However, they did in fact use laws to promote profits. For example; “the Fair Debt Collections Practices Act is on your side and creditors have to abide by it.”

Enhancing Credibility of Debt Settlement Firms

The IAPDA touts that their training program is the best. They were successful from the start because they were the only association that represented the industry (pre TASC and USOBA). In 2006, it was slowing coming to light that settlement companies used deceptive tactics and allowed unethical practices to enroll vulnerable clients. Hell, in 2007 JD Powers & Associates gave Credit Solutions of America an award for excellence in satisfying customer call centers. They probably regret that one!

As the industry was under review by regulators, the IAPDA was in position to profit even more. They claimed that when you get their training, your company and employees will be recognized for appropriate training and it will set you apart from the unscrupulous firms out there. The IAPDA site seal promised to enhance your company’s reputation, but quite honestly, the seal made your company sound more believable when promising horseshit to consumers. TASC and USOBA eventually adopted this marketing ploy.

Advising Program Structure

If the IAPDA provided training to major players in the industry, shouldn’t they also be responsible for the harm they’ve caused consumers? [Excellent question.]

Most of the top-tier clients have received numerous complaints, has a D or F rating with the BBB, and/or named in a lawsuit by states’ attorney generals office. IAPDA promoted the industry sales pitch:

Reduce debt by 60%
Pay off all debts within 12-36 months
Consolidate all debt into one simple payment
Stop creditor harassment

And, than used the pitch to assist in calculating the consumer program plan:

1. Project all settlements at 40%.
2. Include service fee of 14%-16%.
3. Require an up-front fee to activate client program.
4. Collect your fees by halfway mark of the program.
5. Divide your projection by what the client can afford per month (ability to pay).

This sets the tone for misleading clients. Since most firms use the “reduce debt by 60%” marketing message, they will often use the original delinquent balances provided by the consumer and apply that ratio – knowing full well that the creditors have added penalties, fees, and interest to that amount. Not disclosed or mention to the rookie in training.

They put this all in a call script for their member firms to follow. The rest is history!”

The tipster (send in your tips here) raises a number of excellent points and makes observations I have heard from others as well. It is because of that I wrote this article in hopes we could openly discuss these issues.

Debt Settlement Call Scripts

Here are the alleged IAPDA call scripts provided to the company that shared the statement above. The Word document I was sent say it was created by a person with the last name of Larose, the same last name as the executive director of the IAPDA.

In fact Laurence Larose from IAPDA is quoted praising Credit Solutions, the much sued and target debt settlement company, and saying:

“We are very proud to recognize Credit Solutions’ outstanding achievements and leadership in the debt settlement industry,” said IAPDA Executive Director Laurence Larose, adding, “The Platinum Member participation level was created to recognize the companies that best embrace IAPDA’s principles.”
“With this certification, Credit Solutions provides additional guarantees to our clients that we are committed to maintaining the highest standards of professional conduct,” said Credit Solutions CEO Doug Van Arsdale. – Source

Those of us familiar with the debt settlement industry know how well that turned out. Now to the actual scripts.

Scripts Begin Here

Strategy 1 is for clients on a short-term program (1-3 months). People who had money up-front to negotiate immediately.

Strategy 2 is when clients need to be put on a debt settlement program (12-48 months).

First Call:

Find out the client’s financial situation Key points:

Do you owe more that 20% of your income per month in debt payments?
Are you saving any money per month?
How much credit card debt do you have?
Do you have kids? Are you saving for college?
Do you have access at this time to funds for immediate settlements?

Get friendly with the client, get to know them.

Explain that we need to gather all of their financial info to see if they will qualify and be accepted to the “Your Debt Arbitration Company” Program.

Explain that it will take about 24 hours before we will know if they will qualify and are accepted on the program. Also explain that we only accept people who qualify and that will depend on their personal financial situation.

Arrange to send our Document Package at this time: tell the client only the following regarding our program.

Mr./Mrs. Client The “Your Debt Arbitration Company” Program will take your unsecured debts and settle them for half or less and is all based on YOUR ability to pay not what the creditors say to pay. It will also protect your rights under the Debt Collections Practices Act against the collection process.

We will get back with you in 24 hours and let you know if you qualify for the program.

Client Homework: Please start gathering all of your statements for the unsecured debts we discussed so you have them in front of you when we talk next.

Set up an appt. for next call (after they receive documents)

End the call.

Here is the hilarious part, everyone qualifies. There is no qualification. It’s a sales pitch.

Second Call:

Mr./Mrs. Client:

Based on the information you’ve provided, it’s been determined that you qualify for the “Your Debt Arbitration Company” Program.

Here’s what “Your Debt Arbitration Company” will do for you.

You owe a total balance of $ ___________ on all of the unsecured debts like credit cards.
Currently you’re paying $_______ per month on those unsecured debts.
”Your Debt Arbitration Company” projects a new monthly payment on those unsecured debts of $ ________. (Less than current) (Strategy 2)
Saving you $ _______ every month.
And “Your Debt Arbitration Company” will settle those unsecured debts for approximately $ _________. (50%)(Strategy 1 or 2)
And we project that it will take only about ______ months until all the debts on your program are completely settled. (1-2 months, Strategy 1 or 24-48 months, Strategy 2)

Here are some commonly asked questions your prospect will ask:

How will the creditors react when I stop making my monthly payments? (Strategy 2)Have you ever heard of the Debt Collection Practices Act? [It’s not even the right name. It’s the Fair Debt Collection Practices Act.] (The client will most likely say, “No”.) Most people haven’t and that’s what creditors count on. The Debt Collection Practices Act protects the consumer against unfair harassment and intimidation during the course of collecting on outstanding debt balances. “Your Debt Arbitration Company” steps in and enforces your rights according to the Debt Collection Practices Act.
This legislation outlines specific guidelines all creditors must follow. However, since creditors know that most people are completely unaware of the way this law works, they frequently step outside the law when attempting to collect. “Your Debt Arbitration Company” will educate you on exactly what to do if and when your creditors call and put an end to most, if not all, harassing phone calls from creditors.
In the first 90 to 120 days you may experience some harassing calls. But don’t be intimidated. We will work with you to put an end to all of that as long as you continue to communicate with us as these calls occur.
This time frame is important because we initiate and enforce your protection according to the law. Every time a creditor oversteps the boundaries of the law, we will remind them and represent you. The most important thing about the first 90 to 120 days is that “Your Debt Arbitration Company” will inform your creditors in writing to contact us to discuss any disputes they may have with you. We are well trained on how to deal with the credit industry. After the first 90 to 120 days, most, if not all, of the harassing calls come to and end.
Understand one thing. Your creditors want their money and we know that.
Finally, we’re not disputing whether or not you owe them money. We’re simply disputing that you can afford to pay them now. “Your Debt Arbitration Company” will stand between you and your creditors while you build up enough money to settle all of your accounts.
What will this program cost me?“Your Debt Arbitration Company” works within your budget by establishing a monthly payment that you can afford. The monthly payment I mentioned earlier is your only out of pocket expense during the program. Our fees are built into that monthly payment plan.
There are two fees associated with the program.
1. The Enrollment Fee: During the first two months, “Your Debt Arbitration Company” will begin to take the necessary steps to contact your creditors and put an end to those harassing phone calls. The enrollment fee is equal to 3 times your ability to pay (monthly payment). In your case your ability to pay is (give them their monthly ability to pay here). This means your first three payments go towards establishing everything necessary to enforce your rights under the Debt Collection Practices Act. (Strategy 2 only)
2. Settlement Fee: Each time we reach a settlement with one of your creditors, there is a 30% settlement fee. For example, if you owe $2,000 on a credit card, we’ll attempt to settle it for $1,000 or less. When your accounts are settled you incur the 30% settlement fee. If we save you $1,000, there is a fee of $300. What this means to you is that every attempt will be made to save you as much as possible on every account. This fee comes out of your account that’s been building over the course of the program. This means all you pay throughout the course of the program is the (mention their monthly ability to pay here), I mentioned earlier.
How do I know the creditors will settle?
Typically after an account is 120 days behind, it’s passed on to a collection agency. This means that the creditor has already agreed to at least a 50% settlement because that’s what the collection agency will charge. By the time the collection agency takes over, the collection agency has nothing invested and the faster they can get something, the better it is for them. Any collection agency is motivated to collect whatever they can as fast as they can.
How is this different from Consumer Credit Counseling or other programs like CCCS or OPD that say they can do this for free?(Strategy 2)With any program that works with creditors you have to make a monthly payment. And there are two major differences between “Your Debt Arbitration Company” and the other programs you see on TV.
1. The other programs work with your creditors to negotiate a payment. We believe your payment is non-negotiable. After all, you can only pay what you can afford. Those other programs are subsidized and overseen by the credit industry. This means the creditor is in the driver’s seat during the negotiation process. “Your Debt Arbitration Company” puts you in the driver seat by enforcing the Debt Collection Practices Act on your behalf and dictating the terms of payment. Other programs work the other way around by having the creditors dictate the terms. Typically, “Your Debt Arbitration Company” creates a lower monthly payment .
2. While “Your Debt Arbitration Company” creates a lower monthly payment for you, let’s just say that in your case one of the other programs were able to create the same low monthly payment. The other programs will take between 4 and 7 years to complete. They do not negotiate a lump sum settlement of your accounts. Remember I mentioned that “Your Debt Arbitration Company” projects a completion time frame of (mention the total number of months for this prospect here). Obviously you would rather complete your program as fast as possible. (We suggest that you work out the numbers for this prospect to create a dollar for dollar comparison for their program).Example:
  “Your Debt Arbitration Company”
  Ability to Pay = $450
  Projected completion time frame = 29 months
  $450 x 29 months = $13,050
  Other Programs Like CCCS
  Monthly Payment = $450
  Projected completion time frame = 4 to 7 years (48 to 84 months)
  $450 x 48 = $21,600
  $450 x 84 = $37,800
  The question is how long do you want to be making those monthly payments? Even if the other programs can match the payment created by “Your Debt Arbitration Company” you would be making that payment for much longer.
Will this affect my credit rating?
Yes. Your credit rating will be affected. During the course of the next ___ months (mention the projected program timeframe for the prospect here) the delinquencies will show up on your credit report. However, as we settle with your creditors, your report will reflect that those accounts have been settled.(If the prospect was attempting to qualify for a loan and was unable to, then their credit is already less than acceptable). Currently your credit is in need of rebuilding. That’s why you didn’t qualify for the loan you applied for. The only way to rebuild your credit is by taking the necessary action now. Enrolling into the “Your Debt Arbitration Company” program is the right course of action for you to take. Let me explain.
Your ability to pay is (mention the prospects ability to pay here). What all this means is that upon the completion of the program, you’ll have cash flow you don’t have now, you’ll have a better ratio of debt to income than you have now, and you could even have a few thousand dollars in savings that you don’t have now. All within the next ___ months (mention the projected timeframe for the prospect here) months.

Simply close the call by answering any questions they may have and send the client the contract agreement.

The Third Call

The Third Call Will Be based on the following information, this information will be sent with the Client Contract documents before this follow-up call. (both Strategies)

Your Rights Under the Debt Collection Practices Act.

By enrolling in the “Your Debt Arbitration Company” Program you have taken a bold step towards freeing yourself from the wasteful burden of debt. As your Certified Debt Arbitrator, one of my first steps will be to write to each of your creditors notifying them that you are now on our Program and that they must now contact us, not you, in regards to your accounts. In order for the program to work effectively, our office representatives must be the only individuals speaking with your creditors.

If your creditors persist in calling you, you should say to them only what we have suggested as per the scripts we have provided to you. (see below) For each and every telephone call from any of your creditors, you must write on the Weekly Log Sheet the necessary information.

MAINTAINING THE WEEKLY LOG SHEET IS VERY IMPORTANT to ensure that you are protected from further bother or harassment.

The debt collection business sometimes is very brutal. Collectors often will say anything they can to intimidate or confuse you. Remember, collectors only make money when they collect money from you. In order to ensure the integrity and success of your program, you should never under any circumstances discuss any of the financial arrangements you have through our program. To do so may damage the success of your outcome and your expected results.

These are just some of the offenses your creditors may use during their attempts to collect money from you. Any of these offenses should be immediately written on your weekly Log Sheet. With the proper documentation, we may be able to pursue the creditor for violations on your behalf.

Creditors may only call a debtor between the hours of 8:00 a.m. and 9:00 p.m.(in most areas)
Creditors may only call Monday through Saturday. (No Sundays)
Creditors may not call you at work once you have instructed them not to call you at your place of employment;
Creditors may not call you at home if notified in writing.
Creditors may not threaten you in any manner other than the initiation of proper judicial remedies. (For instance, a creditor may say that he is going to initiate an action in the courts for the collection of the entire amount of the outstanding balance. A creditor cannot indicate that his company will contact your employer in order to attach your wages.)
Creditors may not use any vulgar or obscene language while speaking with you.

Again, write the necessary information on the log sheet each and every time a creditor calls you.
Send the weekly log sheet to our office each week along with any creditor statements or letters you might receive. If you have any questions or just need someone with whom to speak, feel free to call me at XXX-XXXX between 9:00 AM and 5:00 PM eastern time. With patience, this program will work for you. It took you years to get in your present situation, and, as such, results will not happen overnight. If you stick to the program, we will set forth a concerted effort to relieve you of your crushing burden of debt.

“Your Debt Arbitration Company” CLIENT INFORMATION SHEET

(Sent to Client after Contracts Signed or with other docs.)

Thank you for giving us the opportunity to be of service to you. I will be your designated representative, sometimes called an attorney-in-fact. That means I will be authorized to receive calls, negotiate resolutions, and otherwise act on your behalf with your creditors.

We want assurance that each person requesting participation into the “Your Debt Arbitration Company” Program fully comprehends their responsibilities and understands the benefits provided by this program.

The attached documents are provided to you in order to prevent any misunderstandings of any nature between us. As you read these documents, if you do not understand any of the statements, or need further clarification, please call me to provide further explanation.

In order for our program to work on your behalf, the following steps on this sheet must be strictly followed:

IF A CREDITOR CALLS YOU WHILE YOU ARE AT HOME:

When you answer the telephone ask the person calling to hold while you get a paper and pencil, wait 10 to 15 seconds then ask the following questions. Remember at this point YOU are in charge!

Ask them the following questions ONLY, and record their responses on a piece of paper:

a) WHAT IS YOUR NAME?
b) WHICH CREDITOR DO YOU REPRESENT?
c) ARE YOU A COLLECTION AGENCY? IF SO, WHICH ONE?
d) WHAT IS YOUR TELEPHONE NUMBER AND EXTENSION?

After writing down this information, you should state: “I am a client of “Your Debt Arbitration Company” and they have my Power of Attorney to handle your claim. They can be reached at (XXX) XXX-XXXX. ” THEN HANG UP! DO NOT, UNDER ANY CIRCUMSTANCES, discuss any financial arrangements, including any payments to us with your creditors.

YOU SHOULD NOT PROVIDE TO THE CREDITOR ANY INFORMATION OR ANSWER ANY OF HIS/HER QUESTIONS!

Forward your creditor notes to us on a weekly basis.

DO NOT RETURN CREDITOR CALLS (i.e. messages left on your voice mail or answering machine).

IF A CREDITOR CALLS YOU WHILE YOU ARE AT WORK:

You should inform the creditor that your employer does not permit personal telephone calls during your workday. THEN HANG UP!

Please keep any calls from “Your Debt Arbitration Company” at the top of your priority list. Please provide us with any address or phone number changes.

— End of Script —

IAPDA Sill Provides Scripts for Client Calls

According to the IAPDA site they still provide scripts for clients calls as part of the Executive Training Materials. – Source

The IAPDA Code of Ethics

The IAPDA has a code of ethics that their customers, the debt settlement employees, and companies, should abide by. Some highlights for the code are below. – Source

CDA and CDS professionals may be placed by clients in positions of trust and confidence. The ultimate source of such public trust is the CDA and CDS professional’s personal integrity. In deciding what is right and just, a CDA and CDS professional should rely on his or her integrity as the appropriate touchstone. Integrity demands honesty and candor that must not be subordinated to personal gain and advantage.
A CDA and CDS professional shall perform debt settlement in a manner that is fair and reasonable to debtor clients, creditors, collectors, and collection attorneys and shall disclose conflicts of interest in providing such services.
A CDA and CDS professional shall not engage in or associate with conduct involving dishonesty, fraud, deceit or misrepresentation, or knowingly make a false or misleading statement.
A CDA and CDS professional shall not solicit clients through false or misleading communications or advertisements, and for greater certainty;
A CDA and CDS professional shall not criticize another CDA and CDS professional without first submitting this criticism to the CDA and CDS professional for explanation.
A CDA and CDS professional shall not adopt any method of obtaining or retaining clients that tends to lower the standard of dignity of the profession.
A CDA and CDS professional shall make and/or implement only those recommendations that are suitable for the client.

Is the IAPDA Culpable in Aiding Low Budget Debt Settlement Companies to Harm Consumers?

The tipster (send in your tips here) asked the question, “If the IAPDA provided training to major players in the industry, shouldn’t they also be responsible for the harm they’ve caused consumers?”, and it does raise some interesting concepts.

The IAPDA held and holds itself out as “North America’s leading training and certification program for individual Debt Settlement Professionals.” – Source. But in the training materials I was given they essentially appear to help even the most minimally qualified get started as a debt settlement provider with little to no investment. legal compliance, or competence.

Some debt settlement companies and trade associations make the statement that it is ridiculous for regulation or legislation to prevent large upfront fees because debt settlement companies need these big fees in order to survive. But the issue is really that companies that are performing debt settlement were undercapitalized to begin with and started operations without nearly any investment at all.

The material also appeared to totally gloss over the negative consequences of debt settlement and not provide students with fair and balanced training in order to best advise consumers on finding their “best” option for their individual situation. Instead, the materials appear to be designed to sell debt settlement to all.

The material says things like “And a bankruptcy on your record will be the worst thing you can do”, it suggests student run ads saying “Considering Bankruptcy? Know your Options. Debt Arbitrator 555-5555”, or “This program is ideal for individuals with debt in arrears or collection who are considering the potential need to file bankruptcy. We can eliminate your need to do that.”

The training material also says, “These consumers are so intimidated by their creditors, that they
flee to bankruptcy, even though bankruptcy can bring total financial devastation
for at least the next ten years.” That is just simply untrue and my opinion is students that were taught that were totally mislead.

So whose needs are placed first by this training when the following statement is made, the consumer or the debt settlement company and creditor? “We learned that bankruptcy is the best option for very few consumers, but it is so much overused. And, when a consumer files for bankruptcy, everyone loses – especially the creditors. The need for Professional Debt Arbitration is now and demand for this service can only increase as the only real alternative to bankruptcy.”

In the training material I was given, I could only find one statement about the realities of a consumer facing legal action from a debt. The material said “The risks of judgments, garnishments, and property seizures must be properly balanced against the likelihood that such drastic collection measures will ever happen.” That doesn’t seem to represent reality these days and dismisses the likelihood these negative consequences can happen. Don’t forget, the majority of consumers bail from front loaded fee debt settlement programs because they continued to get collection pressure, were sued, received judgments, etc.

I could find no information in the IAPDA training module about the tax consequences of settling the debt or the resulting bad credit from doing so.

Let’s see what the IAPDA materials say a debt settlement company needed to start a debt settlement company.

Getting Started
This business does not require an investment in inventory (Other than business forms), it doesn’t require expensive premises or manufacturing equipment. As with any business though it does require a strong commitment to “Marketing”. The cash flow from performing the work can come very quickly once you have the work. Expect to put all of your initial effort into “Marketing” your Professional Arbitration service.
Your Office Equipment
Your office should provide you with the ability to conduct your business in an environment that is quiet and professional while performing telephone work. Telephone with voicemail (answering machine) capability, a fax machine and computer access to e-mail and internet are all important to presenting you as a professional. It is not necessary to invest in leased commercial space to operate your business from although many choose to do so.
The Forms and Contracts
The forms and contracts used are standard within the industry and basic in legal nature. These forms are included with this course. You can edit to add any personal contact numbers etc.. A review of the forms will provide you with an understanding of each form. These forms are as simple as possible to be understood by the clients while giving you legal protection and a basis to earn your fees.
Again, congratulations on your completion of the Six Training Course Modules.
This lucrative business has a simple concept: Take old bills, disputed invoices,
lawsuits, liens, medical bills, utility bills, judgments, and professionally negotiate
out-of-court settlements.
A successful Certified Debt Arbitrator will reduce the debt by 40% to 80%.
– Source

From that same material is a description of the types of consumers that should be targeted for the debt settlement service.

The cases that you want and that are cases that you can really help your clients are the ones where there is a source of funds available. As mentioned the normal source is with help of, family, friends, employer, or, sale of an asset or new credit (credit card or line of credit, consolidation loan), re-direction of minimum monthly payments or a combination of these sources.

Notice that it is advised by the IAPDA that people pay for the debt settlement program using a new credit card and to re-direct their minimum monthly payment. Interestingly it does not say that redirecting the minimum payment will exacerbate collection activity, potential lawsuits and more.

In some additional scripts the IAPDA taught people, in my opinion, to misrepresent options like bankruptcy.

From the IAPDA materials:

Typical Case Study

This case study example is taken from an actual case recently settled, following the progress from the very first contact with the client to final settlement. *NOTE: You (or your firm) may not administer client payment accounts exactly like this example.

First call/contact:

Mr.Client calls, explains that he has several creditors who he has been unable to pay. He has fallen several months past due, some accounts are now with a collection agency. He has tried to arrange for a debt consolidation loan, but has not had any success. He is considering declaring Bankruptcy but is not sure that would be the right choice. He is single, working and paying rent, he is concerned that Bankruptcy will limit his options in the future (re: buying a house etc.). He also says that the calls from collectors are becoming very uncomfortable and he is concerned that his employer may become aware and be upset about this. He is afraid of some of the threats made by collectors regarding judgements and garnishees.

During this call it was important to do very little talking and to let Mr. Client detail all of his concerns and thoroughly describe his situation. It was also important to let him know that his problems are not “uncommon” and that we deal with these situations everyday. We explain that for a lot of people Bankruptcy is not necessary or by any means the right choice. We tell him that the fact that he is exploring his options rather than just throwing up his hands is “good”.

We then proceed to tell him how our business works, that what we do is work with each of his creditors to resolve the disputed debt. We explain that as independent third party negotiators we are able to conduct the negotiations without all of the “emotions” that he is going through. We let him know right now that as soon as he retains our services, we will immediately contact the creditors and collectors and that the collection calls will now be routed to us. (This is usually very good news to our client). We then explain that we employ a “system” of consensus building negotiation techniques.

We explain that once settlement is reached on the creditors claim, that funds will have to be arranged to pay. We explain that past unsuccessful applications for consolidation loan may now be successful as the amount that needs to be borrowed is a lot less than originally planned. We go on to explain that because he has shown the responsibility of retaining our services and working out the problems with past creditors, he is viewed by potential new lenders as a much different risk than before (a better risk).

We explain that our work can take a few weeks of negotiation with creditors and collectors. We then ask (without giving a lot more detail of the actual processes) if he would like to proceed to the next step and have us deliver our 10 page package of forms, contracts and details of getting started on his case. We explained a little about the package contents and then fax the complete package to Mr. Client for him to review and complete. We stress that he call with “absolutely any question” at all.

Actual Case Examples

The following three examples will give you a good idea of what Debt Arbitration / Debt Settlement entails, across three different situations. The names have been changed, but they should provide you with an inside view of the debt settlement and debt arbitration business, and how it differs from (and provides an advantage over) debt consolidation, bankruptcy, and similar.

[I’ve shown only one of the examples they listed.]

Example 3 – Credit Card Debt

Mr. and Mrs. O. are parents of three children, two of whom are living at home. Their financial problems started in 2002 when Mr. O. lost his construction job. Since that time, he has been either unemployed, or severely “under-employed”. As such, his earnings have declined from an average of $52,000 annually to an average of $26,000. During this time, Mrs. O has been earning a part-time income as an administrative assistant at an insurance company, bringing their total income to approximately $35,000.

Since the construction job loss, Mr. and Mrs. O have struggled to maintain payments on a home they bought (and was affordable) during better times (1999.) In addition, Mr. and Mrs. O have also had significant credit card bills since the late 1990’s. Despite their financial problems, they avoided default on those debts by making minimum payments between 1999 and 2002. However, the total amount of their credit card debts increased from about $11,000 in 2002 to about $29,000 in 2006, largely due to the accumulation of interest at an average annual rate of 18.5%.

Mr. and Mrs. O attempted to make payment arrangements with her credit card lenders so that she could focus on her mortgage obligation. They were told that no payment arrangements were possible and that they should “borrow money to pay off the debts.” Mr. and Mrs. O went to consumer credit counseling where they were advised that their budget did not support any payments on credit cards. They were advised to consider chapter 7 bankruptcy in order to eliminate the credit card debts so that they could maintain their payments on the mortgage.

In September 2005, Mr. and Mrs. O obtained advice from a bankruptcy lawyer and seriously considered the option of bankruptcy, but they did not want to be burdened with the lengthy credit consequences.

As a last resort, they were referred to you (a CDS) by a friend, and you were successful in negotiating with the credit card companies, because you know how to. Rates were frozen, balances were reduced, and a feasible monthly payment plan that suited their budget was setup. Within 3 years, the credit card debt was gone, without the need for bankruptcy.

It’s my opinion that the IAPDA case studies provided totally gloss over bankruptcy and perpetuate misinformation that does not give the consumer a fair and balanced look at their options. For example, in Example 3 it says “but they did not want to be burdened with the lengthy credit consequences” so apparently the potential tax consequences of debt settlement, 7 year bad debt from debt settlement, continued collection calls, and possible lawsuits was a better approach?

Now for Something Good

Besides the fact, in my opinion, the IAPDA training I’ve been given totally and inadequately prepares anyone from becoming a competent debt settlement professional, leads unqualified people into the field, and seems to direct people to deliver some questionable services, I do have to give the IAPDA material some props.

It appears that the IAPDA material tried to direct students at some points to a flat fee or a performance based fee model. Either of those approaches would have been much better than the advanced fee model many IAPDA certified debt settlement professionals decided to follow. In fact an advanced fee model does not violate the IAPDA code of ethics, which in my opinion, it should. – Source

It was unfortunate that IAPDA did not provide me with updated material to review and instead I was left with material they sold to students in the past. Let’s only hope they will read this article, take the points raised seriously, and modify their course so future students are not lead to believe the information in the material I read.

Future students need to instead learn.

You must be properly capitalized to start a debt settlement company and be ready to start operations and fund yourself until actual settlements occur and you receive income from providing the work promised.
All providers of debt settlement services need to register to do business in every state they operate in.
Before doing business in any state the provider needs to check with competent specialized legal counsel they are in compliance with all rules and regulations.
Debt settlement companies need to be honest about fully informing consumers of the realities of the available debt solutions so the consumer is not misled into making a decision only to enrich the debt settlement company.
The consequences of debt settlement need to be taught along with the benefits.
Students should be taught that they cannot use blank generic forms without first making sure they are properly reviewed by an attorney.
Students should avoid selling any program that requires the consumer to pay most or the majority of the debt settlement fee in the beginning of the program. Debt settlement should be performed on a flat fee or contingency fee basis.
And the list could go on and on. You get the point.

IAPDA Members

The IAPDA on their site claims the following companies are members:

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Freedom Debt Relief, GHS Solutions, Credit Solutions, Express Debt Settlement, Nationwide Support Services, Square One Debt Settlement, Quality Support Services, Superior Debt Relief Services, Debtmerica Relief, RiseAbove Debt Relief, Swiftrock, Debt Settlement America, Elite Debt Services, Topaz Financial Services, Mesa Rock Financial, ClearDebt Solutions, Credit Answers, Assureti, Greenshield, J Hass Group, American Debt Services, American Financial Service, Vortex Debt Group, EFA Processing, Horizon Debt Group, Fidelity Reserves, Debt harmony, Assista, Consumers Debt Management, Credit Management Network, Debt Relief USA, CDS Debt Resolution, LG Financial Solutions, DebtRelief Center, Champion Debt Relief, America Debt Resolutions, DebtRegret, Solutions4Debt, Total Debt Freedom, Canadian Customer Debt Relief, Step Debt, Affordable Debt Solutions, ABM Debt Services, K&G, Nationwide Debt Solutions, Federal Debt Resolution, New Horizons Debt Relief, State Capital Financial, New Life Debt Relief, Sunrise management, Think Debt Relief, Alliance for Debt Relief, Financira, Liberty Settlement Group, Yellow Brick, EmergeAmerica, TD DebtRelief, United Consumer Services, Halo Debt Solutions, SJ Packman & Associates, Universal Debt Settlement, North America Debt Settlement, Manageable Debt Solutions, Eagle Debt Relief, MaxMarket Solutions, Debt Eliminators, Power Solutions, Professional Debt Consultants, Clear Credit Exchange, FAST Debt Advisors, First American Debt Solutions, Credit Advisors, SilverLeaf, Accelerated Financial Services, DebtZero, The Debt Settlement Company, Total Debt Services, Neutral Ground, Precept Financial Solutions, E-limidebt, First Rate Debt Solutions, Practical Debt Relief, DebtShield, Elite Financial Services, NewPath Debt Solutions, DD Consulting Group, Churchill Debt Settlement, Help With Debt, Hispanic Credit Solutions, Global Credit Consulting, Nationwide Debt Settlement, Debt Settlement USA, Debt Team USA, Compass Credit Services, First American Debt Solutions, Principal Financial Solutions, First Class, Franklin Debt Relief, All American Debt Settlement, Debt Remedy Advisors, Liberty Debt Relief, Precision Debt Relief, Debt or Solution, Mantis Financial Group, Certified Debt, Federal Consumer Relief, Clean Slate, Absolute Debt Solutions, FH Financial Service, CWN Debt Relief, DSSC Debt Settlement Servicing Company, DebtCC, NY Debt Co, Whitestar Financial Services, American Debt Control, Loan Amnesty, First Choice Debt Resolutions, Debt Free Associates, Common Cents Credit Solutions, US Credit Relief, RAM Financial, NDS, National Debt Solutions, KeyDebt, Clear Solutions Debt Relief, First Choice Debt Relief, Red River Debt Relief, LiveWell Debt Solutions, Global Debt Management, DebtPro, National Debt Resolution, United Debt Settlers of America, DMB Financial, Heritage Debt Relief, Life Wisdom, Please Reduce My Debt, Legacy Debt Settlement, United Debt Resolution Group, Ellie Smitt & Company, Become Debt Free, ML Debt Solutions, Americor Financial, Lincoln Capital Solutions – Source

IAPDA Update – July 13, 2010

Today I received an email from Laurence Larose regarding this article. He asked that I not publish his comments, so I won’t. However, some points were raised that need to be part of the public record.

Before I published this article I reached out to the IAPDA and asked them for help and information.

I am currently working on a story about IAPDA certification for the site.
I need copies of the current telephone scripts you give out to member and/or member firms. I believe these scripts are referenced in your executive training materials.
At the very least, can you confirm if this language is part of those scripts now, or in the past that you distributed.
“The debt collection business sometimes is very brutal. Collectors often will say anything they can to intimidate or confuse you. Remember, collectors only make money when they collect money from you. In order to ensure the integrity and success of your program, you should never under any circumstances discuss any of the financial arrangements you have through our program. To do so may damage the success of your outcome and your expected results.”
“The question is how long do you want to be making those monthly payments? Even if the other programs can match the payment created by “Your Debt Arbitration Company” you would be making that payment for much longer.”
“This legislation outlines specific guidelines all creditors must follow. However, since creditors know that most people are completely unaware of the way this law works, they frequently step outside the law when attempting to collect.”
Is Laurie Larose a relative of Laurence Larose? What position does she or did she hold at IAPDA?
Can you forward to me a copy of the module 5 for sourcing clients.

I asked them the questions about the phrases in case they did not send me updated scripts. I wanted to see if they were still used in the materials. While the IAPDA responded to my email they did not answer any of my questions and did not deny the sections of text that I had were not being used by them anymore and as far as I know, they still are. They also did not provide the information I requested to compare against what I already had.

In my email exchange today I offered to update my article by reviewing current copies of the IAPDA materials if the IAPDA felt the materials I reviewed were old and outdated. The IAPDA acknowledged my request for the updated materials but specifically refused to provide updated modules for me to compare and review.

Additionally I offered the IAPDA to post any comment or feedback to this article they wanted. They said they would not.

Sincerely,

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Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.