After I published this article yesterday on the bankruptcy of the debt settlement law firm Johnson Law Group in Nevada it was pointed out to me that there was more to tell from the supporting schedules attached. – Source. And the tip was correct.
The court documents revel how much money was disbursed by the Johnson Law Group in the 90 days prior to their involuntary bankruptcy filing. What you will see is how much money was paid out in primarily marketing costs rather than disbursements made to actual creditors of clients.
As you can see in my low budget spreadsheet snapshot below, it appears the agents and marketers of the program received the vast amount of money disbursed that was not out of the client trust account. Debtwave alone received over $6.4 million. And a company, CBDC, received over a million. CBDC I believe is actually Consumer and Business Debt Counseling Services. See this article for how CBDC and JLG fit together. It’s interesting.
From looking at the details in the documents $9,206,164 of the money consumers paid into the law firm to handle their debts was mostly disbursed to operating costs while only $483,560 was disbursed to creditors of clients in the same time. Put into context, less than 5% of the money collected from consumers was actually used to pay their creditors.
One argument that might be made is the massive disbursements to agents and obligations was the result of new clients recently entering the program and these were the front loaded fees that were being paid out to the marketers. That is probably a factual statement but certainly does not change the fact that while the consumer was sold a attorney based debt settlement program that would help to repay the creditors of the consumer, 95% of disbursements were not made to creditors.
This look into the disbursements of the Johnson Law Group seems to be great evidence why attorney front loaded or advanced fee models are not fair to consumers. And while the FTC telemarketing sales rules that go into effect on October 27, 2010 are set to ban these types of advance fees the one group that claims they are exempt from the regulation are law firms and attorneys.
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Debtwave has been an excellent service for me. I started with over 140,000 in debt and am down to below 90,000. They always answer the phone, e-mail me back or call me proactively if there’s a question. Super courteous, professional and honest. Seriously.
I’m a smart guy and I tried for nearly two years to negotiate directly with my creditors to reduce rates. I did NOT want to go to a counseling agency. I wish I had just started with them back then, because I would be almost done by now. Instead I paid over $60,000 more in interest than I had to.
Ultimately, a commercial lender I know was the one who referred me to them because he had a number of clients who had success with them.
I did have some concerns, initially, with the Sales Rep who was a little pushy. Do what I did – tell them to back off. If it’s a good idea today, then it’s a good idea in two weeks or a month. After I thought about it a while (and saw that I would recoup my upfront fee in two month’s of interest savings) I decided to go ahead.
A couple of hints if you are starting one of these programs (which you should)
1.) If you have a lot of accounts, start with one or two. First, the set-up fee is based on your initial monthly payments. You can come back later and add more.
2.) If you are interested in protecting your credit, you should make double payments (send one payment to the creditor yourself, on top of the one Debtwave is sending). Sometimes creditors won’t post a payment until a plan has been accepted.
Past due payments during the proposal period can also cause your proposal to be rejected, or come back with different numbers than what were originally proposed.
It’s been a totally positive experience for me, and I have gotten other people involved with Debt Management Programs since. I’m ending my “wage slaveryâ€, so I’m a convert.
It appears that people who have problems with counseling agencies are in denial about the real problem, and just want someone to blame for their problem. People with problems with their CCCS may also be confused with another Johnson Law Group, which is definitely a scam operation and in the news a bit, too. The Florida and Nevada ones – stay clear. San Diego – good to go – RATED A from BBB.
You don’t get something for free and the fees these companies charge are WELL WORTH the service you receive.
Feel free to e-mail me if you want to discuss these guys or credit services in general.
The debt business is controlled by the almighty marketers. Wow this idiot paid $170K to a Vegas law firm (Hutchison and Steffen) to try to protect him while he stole the money!!
Only in vegas kids.
The debt business is controlled by the almighty marketers. Wow this idiot paid $170K to a Vegas law firm (Hutchison and Steffen) to try to protect him while he stole the money!!
Only in vegas kids.
Looks like CBDC listed above is a back end for Hess Kennedy as well- interesting look here
http://www.cbdc.us/client_logi…
Looks like CBDC listed above is a back end for Hess Kennedy as well- interesting look here
http://www.cbdc.us/client_login.php
JV – Would you happen to know what amount of fees went unpaid to Elimidebt?
Was it marginal? In excess of what CBDC was listed as paid above? Did it reach the amounts listed for Debtwave?
So the company Elimidebt that is suing them never got a dime. Classic.
So the company Elimidebt that is suing them never got a dime. Classic.
JV – Would you happen to know what amount of fees went unpaid to Elimidebt?
Was it marginal? In excess of what CBDC was listed as paid above? Did it reach the amounts listed for Debtwave?
I agree with you 1000% Damon. What bothers me the most is that, there is a right way to continue operating within means to successfully service clients to help them with debt settlement but majority don’t see that and there is a new law that is going in full effect in the next 7 days and seems like alot of these companies think they will not be affected. I had a comment from a place stating that FTC only focusing on the big companies operating illegally so I am thinking wait, just because your a small company and you think you are going to skirk the law by avoiding any complaints and get the issues resolved before the client contacts the authorities is rediculous. They are forgetting the fact that they are still outsourcing these clients to big backends which has multiple affiliates that will linked back to them and affect their business in the future aswell. If the law is written nice and BOLD that its ILLEGAL to collect fees upfront before performing, than thats what they need to digest and abide by unless they aren’t too concerned about getting fined for $16,000 per infraction by all means good luck. Any investors will look at this is cry TOO RISKY of an investment in a hard beat.
One of the great things about all of these settlement companies going into bankruptcy is that it provides proof of exactly why these guys love their front loaded fee structure. I have been saying it for a long time and always get attacked from the industry for saying it. Front loaded fees are simply to allow the company to rake in a ton of money regardless of performance. It has nothing to do with the service or lack thereof that it provides to the client. Sales people are focusing on volume of enrollments and commissions, not on properly qualifying and assisting consumers. Any debt settlement company that front loads their fees is a con, and you can take that to the Bank.
One of the great things about all of these settlement companies going into bankruptcy is that it provides proof of exactly why these guys love their front loaded fee structure. I have been saying it for a long time and always get attacked from the industry for saying it. Front loaded fees are simply to allow the company to rake in a ton of money regardless of performance. It has nothing to do with the service or lack thereof that it provides to the client. Sales people are focusing on volume of enrollments and commissions, not on properly qualifying and assisting consumers. Any debt settlement company that front loads their fees is a con, and you can take that to the Bank.
I agree with you 1000% Damon. What bothers me the most is that, there is a right way to continue operating within means to successfully service clients to help them with debt settlement but majority don’t see that and there is a new law that is going in full effect in the next 7 days and seems like alot of these companies think they will not be affected. I had a comment from a place stating that FTC only focusing on the big companies operating illegally so I am thinking wait, just because your a small company and you think you are going to skirk the law by avoiding any complaints and get the issues resolved before the client contacts the authorities is rediculous. They are forgetting the fact that they are still outsourcing these clients to big backends which has multiple affiliates that will linked back to them and affect their business in the future aswell. If the law is written nice and BOLD that its ILLEGAL to collect fees upfront before performing, than thats what they need to digest and abide by unless they aren’t too concerned about getting fined for $16,000 per infraction by all means good luck. Any investors will look at this is cry TOO RISKY of an investment in a hard beat.
wonder what the courts will think about this? they have what over 15 pending lawsuits but pays over 9 million to their affiliates and disregard the consumers creditors and hit the BK Button. what a bunch of scumbags.
CARDS WITH THE TARDS
Can you say “Fee Splitting”?
Can you say “Fee Splitting”?
CARDS WITH THE TARDS
wonder what the courts will think about this? they have what over 15 pending lawsuits but pays over 9 million to their affiliates and disregard the consumers creditors and hit the BK Button. what a bunch of scumbags.