I’m a newly admitted “green state” attorney and have been doing loan modifications and settlements for over a year now for clients who come to me based on referrals.
I absolutely love your site and have been going through all of the material related to the debt settlement industry and the new regulations for weeks now.
I have an opportunity and wanted to know your opinion as to what i should do. A group aproached me and told me they were starting a new settlement company in my state. they wanted to hire me as in house counsel to work on the settlements. they do no advertising out of the state and do not accept out of state debt.
They asked me to research the new rules so that they will fully comply with the TSR. I told them the rule didn’t apply to them. They still want me to be in house counsel and open an escrow account so that the clients will be able to deposit the company’s fees and repayment monies there.
They are charging the clients an option of 15% of the debt enrolled or 10% of the savings realized. they want the money kept in their/my escrow account in case the client decides not to pay once the services have been performed.
My questions are:
- can i work as in house counsel and have an escrow account dedicated to holding the clients deposits?
- can they claim to be attorney backed if the attorney is working in house?
- since the tsr does not apply to them can they collect their fees in advance?
- and if they can’t, can they collect a monthly maintenance fee and charge an initial set up fee of $50 so that they can cover costs of operation (they say they will not collect any of the percentage feesunless they successfuly settle and the client agrees and makes first payment as provided by the rule)?
i would appreciate a quick response because they want to move quickly and i don’t want to lose out on the opportunity if it is legitimate. Thank you.
My opinion is jaded by two things. 1. I’m not a gambler and would never gamble with my law license if I had one. 2. Unless you were making the sale I would never trust what an agent would say to make the sale.
It seems like the reason to include you in this scheme is to try and avoid the FTC telemarketing sales rules. That alone on face value is a huge red flag for me. The minute someone wants me to avoid a rule by doing something intentional to avoid it, I would get VERY worried.
Let’s look at this situation from a different point of view. The majority of debt settlement companies are going to start advertising their FTC TSR compliant model. They are also going to educate the public why they don’t need an attorney to do this. So in order for your guys to overcome objections and make the sale they are just naturally going to start pushing the line and making troubling statements and promises. How else are the going to overcome the attraction of a consumer to company X that charges no fee?
There’s also been enough examples of attorneys getting disbarred and even forced into bankruptcy by letting others use their name or not playing an integral role in the debt relief business. Lookup Liberty Law or Allegro Law on this site.
So maybe you still are not convinced this is a bad idea. Consider this. What is the purpose of skirting the law and charging fees upfront? Probably to make quick cash and not focus on actually settling debts and delivering the service. If the focus was on settling the debts quickly and not quick cash then what is wrong with complying with the FTC TSR and moving to settle debts fast. If the fee is not sucked out of consumers first then debts can be settled fast. All you have to do to earn the fee is enter into a settlement and make the first payment.
You can comply with the TSR, protect your license, use a third-party escrow account and get paid well for actually settling debts.
I learned a long time ago that people with financial problems are considered a disadvantaged class of people. Regulators and courts are not going to take kindly to ANYONE, even a lawyer, taking advantage of a consumer in trouble.
If this was something you were personally going to do then my advice might be different. But when you are talking about getting into bed with loopholers, I’d run away.
Almost forgot, the use of your escrow account for settlement funds is a, excuse me, stupid move. If you want to stay out of trouble then you need to provide your settlement clients with easy and transparent access into their escrow account like NoteWorld or Global Client Solutions offers.
You sound like a good person that is being attracted by the lure of a big plan. Don’t do it this way is my vote. If you do want to get into debt settlement, do it yourself and in full willful compliance with the rules.
Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.