I had a very interesting conversation with a debt settlement insider that mentioned how many debt settlement companies he talks to that hate me for what I write. Yea, I’m not losing sleep over that.
I made the following podcast of this article so you could enjoy it with background music.
But as a journalist writing about the debt relief world and as someone that has lived inside that very same world for years and years I see patterns and trends. I see many younger than me, just jumping into some sort of debt relief business “opportunity” without care, research and a focus on even the least bit of compliance. I see perceived opportunity being celebrated and raced to without consideration of what’s illegal or deceptive. And most importantly I see profits celebrated over people.
Let me state clearly, it is not my goal for the debt settlement industry to be closed down.
Debt settlement companies had years to create meaningful trade associations that could have crafted real guidelines to create ethical borders to prevent the widespread damage done to consumers by bad actors. And look, let’s be honest, the bad actors in debt settlement are not a “few” as the associations like to say. It’s rampant.
If anyone needs to be looked at closely with disdain it is the trade associations that failed regulators, consumers, and the good guys that wanted to build an industry with a foundation of respect.
Some say they don’t like what I write about the debt settlement industry but the reality is that if companies didn’t do bad things there would be nothing to write about. It reminds me of that old joke — Guy goes to the doctor and says, “Doc, it hurts when I wave my arm like this.” Doctor says, “Well then don’t wave your arm like that.”
If the debt settlement industry as a whole had an accepted code of ethics that said deceptive marketing is unethical, lying to consumers is disgusting, and unfair business models will not be tolerated, and kicked assholes out, then you would have an industry that would have some sort of internal regulation. But that’s not what happens in the debt settlement industry of 2010.
Man-oh-man it would be wonderful to see the good guys of the debt settlement industry become more vocal and speak out strongly about the bad actions of debt settlement companies that appear to take advantage of consumers. I would celebrate it when it happens. Until then I will continue to speak out and point out activities and facts that concern me.
Look, I get the argument that most make about the evil consequences of debt settlement regulation. They say it will put good guys out of business also. And I fully agree that it will and that’s not fair but consumers continuing to get screwed by advance fee debt settlement is not fair as well.
There will never be a broad enough brush to regulate any industry that will not catch up people with good intentions. It’s just the way it is.
But let’s not get lost in good versus bad. The real sin in debt settlement is not who is behind the wheel, it’s the mode of transportation that’s dangerous. You could have Mother Teresa driving a debt settlement company and if that company was charging advance fees based on enrolled debt I would be outraged.
There is nothing about charging a fee based on enrolled debt and collecting the majority of that fee in the beginning of the plan that is fair, proper, ethical, or moral. Time and time again it has been shown that the majority of consumers enrolled in such plans do not benefit. They wind up paying more for services, getting less real help, and are generally unsuccessful in settling their debt. It’s just not a business practice that needs to continue or that can be realistically defended. Stop doing it.
As an end result of debt settlement regulation and legislation the goal is not to shut down the industry, it is to clean it up.
It would be wonderful to see an industry that:
- Would hold conventions where they would invite critics to attend and participate instead of wanting to hide from public attention.
- Would provide a product that protected the consumer with fair fees and the truth at the same time.
- Would work in collaboration with other solutions to best help the consumer in trouble rather than in competition with other solutions in order to maximize their own profit and market share.
The debt settlement industry today appears to be overshadowed with players who spout off intentional lies or misinformed statements in order to sell any consumer with a pulse into a program that the companies know for a fact will not benefit most consumers.
The debt settlement industry of tomorrow needs to be one that is honest about the services they provide, gets paid a fair and reasonable fee for ACTUAL results, is focused with enrolling qualified consumers and who wants to provide a product where the vast majority of consumers get a real benefit from participating.
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I can’t find anything in this article that I don’t agree with. Performance based debt settlement is not new, and companies have been successful with that business model for years. Their success is due to proper qualification requirements and performance. Another interesting fact is that performance based companies normally have no problems documenting or providing proof of their success, while most upfront fee companies have continually dodged this question, for no apparent reason.
The BBB, FTC, Attorney Generals, and just about every consumer protection group in the US has made it very clear that upfront fee debt settlement is severely flawed, and puts already distressed consumers in a worse position. There is no shortage of proof to the damage it has already caused. I have yet to see one single piece of hard evidence, that supports the argument to keep upfront fees in place. What is so hard to understand here? It’s elementary, and very troubling that this is even a valid debate.
The only change I would make to this article is the following statement:
“If anyone needs to be looked at closely with disdain it is the trade associations that failed regulators, consumers, and the good guys that wanted to build an industry with a foundation of respect.”
It needs to be in bold. In fact I believe that these same trade associations have done more to contribute to this mess, than they have done to prevent it.
I’ve always wondered who they actually represented, and I think over the past year that answer is becoming clear.
TASC mission statement: TASC™, The Association of Settlement Companies, is a nonprofit organization that was created to bring professionals, legislators and consumers together to promote good practice in the debt settlement industry
Do they represent the consumer? If the thousands of complaints regarding upfront fee debt settlement are any indication, no they don’t. Instead of posting rebuttals to every consumer advocacy group that shows concern with the industry’s track record, why not work with them? To understand where they feel people are getting ripped off, and then fix it, and make it mandatory for all members. That would be what I define as “promoting good practice in the debt settlement industry”
Do they represent the entire debt settlement industry? No way, and their current lame excuse for “lobbying” doesn’t help the cause. It’s important that lawmakers understand that there are many companies out there, that can perform this service efficiently, without the upfront fees and long string of complaints.
Do they represent the upfront fee debt settlement companies? Bingo. It seems that they have every intention of “going down with the ship” in an effort to protect upfront fees. The problem is that many upfront fee companies have built such a massive back end of clients, and already been paid for it. It will be impossible for them to carry on without revenue, if forced to switch to a performance based model. It’s inevitable though, and instead of siding with common sense and what is best for the industry as a whole, they have decided to go with greed.
Instead of stepping up and blowing the whistle on members with horrible track records, they have looked the other way, helping to shape the the reputation debt settlement now has.
This industry is full to the brim with chiselers and con men and it’s not entirely the fault of the trade organizations. They have created some very good standards and disclosures, but the con men have just become better at adding a “but” at the end of every disclosure they read to the consumer.
The greaseballs in this industry have got to go, and the only way to do that is to create regulation that bans upfront fees. The problem is not the companies working hard to settle debt, it’s the ones that make it almost impossible to do so.
It’s funny, as I conclude my (hopefully coherent) rant, an old eighties song is playing on Hair Nation, “If you don’t like … what you see here … get the funk out”. How fitting.