Debt Relief Industry In The News

Does the New Debt Settlement Industry Get It?

A tipster (send in your tips here) sent in a link to a recent article from CreditCards.com that was published on Fox Business, “Debt settlement industry in flux as new rules start.”

In the article is a section attributed to Andrew Houser from Freedom Debt Relief.

Cherry picking the good cases

Housser from the settlement industry trade group says the fallout of the new rules may be fewer consumers receiving help getting out of debt and more people either filing for bankruptcy or facing civil lawsuits and garnishment of their wages.

He says debt settlement companies that continue to operate are likely to only sign up debtors with cases they can win quickly so negotiators can collect their fees as fast as possible.

“In the new world, the post FTC-rule world, if you’re not getting results for customers, you’re not making any money,” Housser says. Debt settlers likely won’t sign up clients with “low probability of success” in negotiating settlements with creditors. He asks: “Am I really going to want to do all that work for free if there’s only a 25 percent chance of success? I think it’s only natural that companies will start to turn down cases with a lower probability of success because they won’t work for so little or no return.”

Says Housser: “On the positive side, the fact that we are not charging any fees until after the first settlement means that we will be able to get the first settlement earlier in the process, which should improve customer satisfaction and therefore retention. On the downside, the fact that consumers are paying no fees at all in the early months of the program may decrease their commitment to the process. Without ‘skin in the game,’ consumers may be less likely to stick with it.” – Source

I really hate to say this but WTF!

See also  Regulation of Debt Settlement Companies Looming

Debt settlement companies should only be enrolling people that have a good chance to settle their debts without lawsuits or wage garnishments.

The point that was missed is that consumers that have their debt settled quickly are the most likely to be successful in resolving the debt. And that’s a bad thing?

Debt settlers won’t be likely to sign up clients with a low probability of success says Houser. Amen say I. So the downside to the new laws is that people with a low probability of success won’t be enrolled in debt settlement programs. Am I missing something here?

The statement is made that by not charging advance fees more consumers will have a greater chance of success. So why were you not doing that until the government forced you to change?

While the nonprofit credit counselors may be all giddy at the moment and feel they have won some battle, they haven’t. Regulation is coming that will further control what they can do and the underlying issue is the credit counseling product is broken in that only people that can afford their regular monthly payments are best suited for it.

Your Mother

This is a situation in which we need to apply the “Your mother” logic. Would you enroll your mother in a debt relief solution where she had a lower chance of success and a higher change of being sued or a wage garnishment? If you would, you’re an idiot.

There is no downside in the new law as long as you are putting consumers first. Let’s see, the result of the new law is more people that should never have been signed up for debt settlement, aren’t?

Sincerly,
Steve

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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.

24 Comments

  • hi bobby, our entire focus shifted from looking at enrollment numbers to how do we keep our clients committed to the plan so we have an enormous amount of data surrounding what it takes to drive these numbers. 2 main areas, complete disclosure of all good and bad aspects of a dmpprior to enrollment including what it will take as a consumer to succeed on a plan. scare straight if you will. we put a great deal of work in our quality control prior to proposing a plan to a consumer which in turn leads to a very high proposal acceptance rate which builds consumer confidence. to often i have seen first hand sales oriented shopd lead to sloppy enrollments which in turn leads to proposal problems and changes to the consumers account after the client signed up and thought they were good to go. most agencies lose there clients in the first 3 months due to not being focused strong enough on the front end to get it right out of the gate for the consumer. 2nd area we have developed a very strong post counseling effort that drives our clients to truly change there spending habits. every call and session we are working to help our clients have the ability to save so they can handle any financial challenges they may hit during the program. those 2 areas i would say have made a big difference. hope that helped christopher

  • the 50-65% is not bs jason, my doors are open and everything about cambridge since mid 2004 is extremely transparent. I have worked with several attorneys general and the ftc to provide data to support the fact that a well run dmp is beneficial for consumers and our data has been vetted out. I am not speaking for the entire industry as just like with debt settlers there are bad and good players all i am saying is a well run dmp with solid customer care and disclosure of expectations up front does have an end result of the average length of time on these plans of 33 months. this takes into account the folks that drop out before completion and yes in cambridges early days when it ran an upfront fee model focused on enrollments and not the quality care needed the average lenght of time on the plan was only 17 months. The upfront fee model does not work it was simply in play to pay for the advertising and the commissions being paid out to the salespeople back then. flawed model period so this entire “buy in theory” is a bunch of bs. you can feel free to call me jason christopher

  • Andy is right its the same scammers doing the same thing. Look at johnson law group in nevada. they pushed out the attorney eldridge. the owners of advance client solutioons ken kestinbaum and paul constantino, with ceo dan damonte opend a company called consumer debt legal group with attys from johnson law. the attys who front that company mike lee and nick snow worked at johnson law.
    constantino and damonte are felons its the same crooks doing the same things. its the same people and same companys all involved. nothing changes.

  • Andy is right its the same scammers doing the same thing. Look at johnson law group in nevada. they pushed out the attorney eldridge. the owners of advance client solutioons ken kestinbaum and paul constantino, with ceo dan damonte opend a company called consumer debt legal group with attys from johnson law. the attys who front that company mike lee and nick snow worked at johnson law.
    constantino and damonte are felons its the same crooks doing the same things. its the same people and same companys all involved. nothing changes.

  • I call BS on a 50-65% completion ratio for any credit counseling program. I also call BS on average lenght to completion being 17 to 33 months. If people could afford to pay that kind of payment in order to complete the program that fast THEY WOULD NOT NEED a credit counseling program.

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