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.”
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!
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.
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?
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