Franklin Debt Relief Worried Debt Settlement Fees Will Be Controlled By Credit Card Companies

Franklin Debt Relief sent out the press release I’ve published below. In the release they announce they will comply with the new FTC rules on debt settlement. Smart move.

But then there is this statement, “The scary part of this [FTC TSR] is the control it gives to banks over the debt relief industry. After seeing how they treat the thousands of consumers with credit card debt who have hit hard times and contacted us, I’ll always be skeptical about giving them more power.”

I think what Franklin Debt Relief has missed is they are only a service provider and they have never had any control or power over creditors.

Until these new consumer protection rules passed debt settlement companies charged consumers a percentage of all the debt they enrolled, even if the creditor never eventually settled. That was scary. Companies made loads of money for services never delivered and consumers financially suffered as a result.

So Franklin Debt Relief is going to be upset that their income is now going to be determined by the work they actually do deliver and settlement agreements they actually achieve? If you are a consumer focused operation you should be applauding the new protection.

The new Federal Trade Commission rules don’t shift any power to creditors nor give them any control over fees. If creditors want to settle a debt, they can. If they don’t want to they don’t have to. That’s always been the case. The new rule is put in place to protect consumers from debt relief providers, not force creditors to do a damn thing.

If a creditor didn’t want to settle a debt yesterday and does not want to settle after the new rules go into force, the only thing is the now the debt settlement company won’t be able to charge the consumer for a service they could not deliver. Is that really the shame Franklin Debt Relief wanted to complain about in their release?

“Allowing creditors to determine when and how much debt settlement companies are paid will disturb the balance of power and alignment of interests in negotiations,” says Franklin CEO, Robert Zangrilli. “The nature of the relationship between banks and debt settlement companies will always be adversarial no matter how you look at it or how companies charge fees, but by tying fees into the savings realized by consumers, you’re allowing debt settlement’s biggest opponent to determine their income.”

The balance of power? Really? Because you never had any power over the creditors to begin with. And what’s that about alignment of interests changing? Your interests should have always been to provide consumers with the best possible advice and service, how do the new rules change that?

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The new rules do not limit fees that can be charged. They only limit the way fees are charged. Now the consumer will not have to pay until the service sold by the debt settlement company is actually delivered. If a debt settlement company is worried about enrolling a bunch of debt into a program they know they won’t get paid on, gee, how about not enrolling those accounts?

I also take exception to the statement that the relationship between banks and debt settlement companies needs to be adversarial. There are debt settlement companies that have good relationships with creditors and know what their policies are. It does not have to be adversarial, it can be a cooperative relationship, that is unless the debt settlement company is intentionally telling consumers not to pay the creditors and send the money to the debt settlement companies instead. Yea, that’ll make it adversarial.

If there has been any shift in power here it is not to the banks, it it to the consumers. People now must only be charged for service promises delivered and that’s a good thing.

Sincerly,


You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.

Damon Day - Pro Debt Coach

The Franklin Debt Relief Press Release

Franklin Debt Relief Worried About Future of Industry with New Debt Settlement Laws but Willing to Comply

Franklin Debt Relief, a leading debt settlement company operating nationwide, announces its support of new debt settlement laws, but is concerned that the future of the industry will be jeopardized by allowing their fees to be controlled by the credit card companies.

Chicago, IL (PRWEB) September 13, 2010

After investigating the debt settlement industry for over a year, the FTC chose recently to adopt new rules and perhaps most controversially, an up-front fee ban for debt relief programs. By doing so, debt settlement companies will be forced to only receive fees upon the successful resolution of their clients’ accounts. Franklin Debt Relief, a leading debt settlement company, has come out in support of much of the new rule, but expressed clear concern over the impact an up-front fee ban will have on the future of the debt settlement industry.

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“Allowing creditors to determine when and how much debt settlement companies are paid will disturb the balance of power and alignment of interests in negotiations,” says Franklin CEO, Robert Zangrilli. “The nature of the relationship between banks and debt settlement companies will always be adversarial no matter how you look at it or how companies charge fees, but by tying fees into the savings realized by consumers, you’re allowing debt settlement’s biggest opponent to determine their income.”

Franklin Debt Relief intends to comply with the new rules for debt relief services, and in fact, estimates that their revenues will increase by moving to a contingency fee model. Statistics from the company last month show their average settlement was 33% of the original balance, which would result in a fee of nearly 17% of the original balance if they were charging their clients a fee of 25% of the savings realized. Currently the industry average fee is 15% of the debt a consumer owes upon enrollment into a debt settlement plan.

“We know we deliver results and that we can continue to be profitable under a contingency fee model. The bad companies on thse other hand will go out of business, as will some of our smaller competitors. We’re definitely excited about the opportunities this will open up for us,” Zangrilli adds. “The scary part of this is the control it gives to banks over the debt relief industry. After seeing how they treat the thousands of consumers with credit card debt who have hit hard times and contacted us, I’ll always be skeptical about giving them more power.”

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Robert Zangrilli
Franklin Debt Relief
312-445-4700

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30 thoughts on “Franklin Debt Relief Worried Debt Settlement Fees Will Be Controlled By Credit Card Companies”

  1. I have written a few articles, submitted public commentary, written to Senators, submitted to some of the largest card issuers, the following:

    Debt Settlement, based on all available data, for the consumer who cannot and/or should not enroll in a DMP, but otherwise cannot continue timely payments; Affords the best return to creditors/assignees/purchasers. By a wide margin. As Sean puts it – The beans are the beans.

    I have obviously presented the facts differently than I do here, but the message boils down to that.

    Further, I have combined the math to show that other than chapter 7, settlement (aggressive settlement mind you – not 3 yr plus programs) represents the quickest path to recovery at the national level when considering the demographic that has been pounded the hardest this past decade and certainly the last 3 years; Middle Class.

    I see nothing on the horizon that would adjust the figures to support any other contention than what we see today (unless it is to further my point, i.e. increased BK figures)

    Even the ill fated 60/60 plan, were it to gain traction, would push individual and bank recovery out to a longer slog than our economy needs right now, when looking with a macro view to the individual consumer and their consumption and spending.

    What would help is a 40/40 plan or a 30/30 plan, which is to say; 40% of the balance stretched out over 4 monthly payments or 30% of the balance stretched out over 3 monthly payment (which we see with some issuers now).

    Reply

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