NCO Group, a huge debt collection company recently provided an opinion about debt settlement services. Of primary interest to me was the statement from NCO that they are under instructions from their creditor clients that when a consumer tells NCO they have signed-up with a debt settlement company that NCO should refer the consumer account to the legal department for litigation.
That is certainly a weak point of debt settlement since there is nothing debt settlement can do to prevent any creditor from pursuing the consumer through the courts for debt.
Here is what the records of the conversation say.
On July 13, 2010, Commissioner Brill met with representatives of NCO Group, Inc. (“NCO”), to discuss various issues relating to debt collection, including the Commission’s report issued on July 12 regarding debt collection litigation and arbitration.1 During the course of the meeting, the NCO representatives spoke to the Commissioner briefly about the debt settlement industry and the Commission’s proposed amendments to the Telemarketing Sales Rule.
The NCO representatives stated that many of their largest creditor clients will not deal with debt settlement companies. The representatives said that when a consumer signs up with a debt settlement provider and tells the collector to communicate with the provider, that they are under instructions from many creditor clients to refer the matter directly to counsel to pursue litigation, rather than deal with the debt settlement company.
The NCO representatives stated that it is typically only debt buyers who will negotiate with a debt settlement company; original creditors rarely do. Some debt buyers will also agree to structured settlements or installment plans, but those are usually for low settlements. They also said that if the provider is able to garner a fee at the beginning, then the provider has little incentive to see that the consumer makes the remaining payments. They said that providers often tell consumers “don’t talk to collectors.” However, according to NCO, direct communication with consumers is the best way for collection problems to be resolved, not going though a debt settlement provider. In their view, NCO employees do a better of counseling consumers on credit issues than debt settlement providers do.
Finally, the NCO representatives stated their view that the debt settlement industry needs to be regulated. They stated that there are low costs of entry, and as a result there are many small players and bad actors who are engaging in questionable behavior and who are difficult for the debt collection industry to deal with.
1 Participating in the meeting were Albert Zezulinski, Executive Vice President, and Steven Leckerman, Executive Vice President and Chief Operating Officer of NCO; Bernard Nash of Dickstein Shapiro LLP, counsel to NCO; and Robert Swan, Jennifer Souers, and myself from Commissioner Brill’s office.
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I have been warning consumers about this for years. Don’t ever have a debt settlement company send a cease communication letter to a creditor. Sure the benefit sounds great. You are told that they will get all of the calls to stop with these special letters. Well I bet they didn’t tell you that they can’t really stop all the calls, and as a special bonus, some creditors will not like getting these letters and decide to refer your account to litigation much sooner than they otherwise would have.
So you are paying a settlment company to increase your chances of getting sued. Sound like a good deal for you? I didn’t think so. If you want to get sued, you can do that all by yourself, you shouldn’t pay someone to get you sued faster.