Business Models Debt Relief Industry

I Am An Attorney Affiliate of Legal Helpers Debt Resolution (LHDR) But Have Concerns

“Dear Steve,

I am an attorney affiliate for LHDR. They have told me that it complies with FTC regulation because I am having a face to face meeting.

In addition they have added a litigation defense clause in their agreement so it is not merely a loop hole to the FTC.

My concern is after the fees are paid what incentive do they have to continue providing relief for the client? They have a law license which if they dont abide by the agreemet can be easily reported to the Bar Ethics committee but that hasn’t stopped them from being branded on these websites.

I am concerned that in a year or two from now I might be drawn into this mess from unhappy clients.

More so this new model has not been tested so I don’t have much to go on. I need to sleep at night with a moral God fearing conscience and I do explain and disclose all the pitfalls and possible benefits of the program with its defense litigation but I am still wary.

Might you have any insight? Suppossedly they have thousands of clients monthly and so a b+ rating from the BBB doesnt seem too bad. I would like your professional opinion.

Thanks.

X, Esq.”

Dear X,

Thank you for your question. Some people think I am against Legal Helpers Debt Resolution, I’m not. I sincerely hope they offer a consumer service with tremendous benefits and consumers receive value for it.

There are four sides to this situation. We have the consumer, the attorney, the company, and the marketer.

From a company point of view, all along my issue with LHDR has not been if they have a well thought out plan. They are smart guys and have probably done a fantastic job of trying to work their way around the FTC telemarketing sales rules.

The consumer side is interesting. From a regulator point of view, consumers with financial problems are considered to be a disadvantaged class of people that need to be protected from opportunists.

If a debt relief company wants to avoid consequences and negative publicity then the transaction between the consumer and provider must be simple, easy to understand, not overly complicated and most importantly it must offer a full and total refund to any consumer that has any issue. Consumers that get full refunds generally don’t complain.

Attorneys that participate are gambling with their reputation and license. There are certainly enough examples of attorneys being sanctioned and disbarred from debt relief activities. Read “The Critical Flaw in The Attorney Model for Debt Settlement” for more information. In your case your risk lies not with the relationship with the company, or the consumer, but with the relationship with the fourth party, the marketer.

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LHDR was sold and promoted to affiliates as the way to get around the FTC TSR advanced fee rules to marketers. The sales people it has attracted are many of the same representatives that have bent logic and made statements to consumers in the past to make the sale. In the debt relief industry there is no room for performance compensation. If sales and affiliates are paid by the number of deals they bring to the table they will lie and misrepresent the facts to close the sale. This is not a prediction of the future but a statement of fact from the past. All you have to do is listen to any of the undercover calls I’ve made to hear what the salesperson says. And that’s the weakest link.

So you are not staking your license and reputation on the company, your capabilities, or the consumer. You are betting everything on praying the sales person does not lie or stretch the truth.

If the salesperson does, and they will, the consumer will have unrealistic expectations, that will lead to disappointment, disappointment leads to complaints, complaints lead to bar complaints, and so on. It seems you also have no authority to require LHDR to make a full refund to any unhappy client so like it or not, you will probably be part of a future complaint.

You need to ask yourself, if the debt settlement service is so great then why does LHDR need to create a model that collects the fee up-front. What’s wrong with performing the service and being paid a fair rate for that?

Recently the state of North Carolina filed suit against Consumer Law Group. And in the complaint they laid out some good arguments that others might copy. If your state applied the same standards for your relationship with the client, would you meet them?

“Despite the promises of legal representation, none of the defendants are licensed to practice law in North Carolina. On information and belief, defendants have occasionally referred a few of their North Carolina clients to a North Carolina attorney for purposes of bankruptcy representation or other assistance.

  • The North Carolina referral attorney has his own independent North Carolina law firm;
  • he has no attorney-cleint relationship with CLG’s customers;
  • he does not handle any funds received by CLG from its North Carolina customers;
  • he does not meet with, talk with, or have any other contact with any of CLG’s North Carolina customers, except on a very occasional basis;
  • he does not negotiate with third party creditors on behalf of CLG’s North Carolina customer;
  • and he is not otherwise involved with the operation of CLG’s debt settlement program.”

Source

So as an affiliate attorney, is your job to have the type of relationship with the consumer above or are you simply being used to allow a “loophole” strategy to be executed?

You asked, “My concern is after the fees are paid what incentive do they have to continue providing relief for the client?” The answer is, none.

The front-loaded fee models fail because the fees from consumers are spent before the services are fully delivered. Money is paid out in-full to marketers, the company, etc. before the consumer receives all the services promised. A front-loaded model would not be so bad if the company escrowed fees until actually earned through the entire client relationship and the front-loaded payment of fees did not prevent consumers from making settlements quickly.

Historically the front-loaded debt settlement fee model has been akin to a Ponzi scheme. Fees are generated and taken, new clients must be brought in to generate new fees to now pay for services for clients whose fees were taken before, and repeat.

Eventually what you wind up with is a big beast that is dragging along client obligations as a liability but is not generating sufficient income to pay them all off and requires new sales to remain moving ahead.

So what happens when clients will bail in the future and refunds will be hard to get or just flat out refused by LHDR for a client you touched? And we know what a lack of prompt refunds gets you, that’s right, reported and a bad reputation.

Do you really want to be a party to people that follow this process?

You say LHDR has a B+ rating but that’s not quite true. They also have an F rating with the BBB. See this story. So if the LHDR argument is going to be that the site in that article is actually one put together by an affiliate, that just proves my point about marketers placing you at risk.

So what do you think now?

Sincerly,
Steve

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.





About the author

Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

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