The following guest post was submitted by Damon Day. Damon is a Financial Consultant and a Debt Coach. Through his website he offers advice, tips and strategies for consumers to get out of debt without falling victim to predatory debt relief firms you see advertised everywhere. If you would like an unbiased consultation and a step by step plan to resolve your specific financial situation, you can schedule a telephone consultation on his website. Speaking with Damon about your options before making a decision will save you a lot of money, Guaranteed.

If you hired a contractor for a remodel and he asked for payment in full after only the demolition phase, would you pay it and just hope he showed up the next day to do the job? Now you might laugh at the absurdity of the suggestion but Legal Helpers Debt Resolution asks consumers to do this every day with their debt settlement program. Why would consumers agree to that?

In my opinion, there are two main reasons why a consumer might hire Legal Helpers even though it should be obvious to them that the program is not set up with their best financial interest in mind.

1. The highly commissioned sales people that flocked to Legal Helpers after the passage of the new FTC law banning upfront fees, are very good at telling people what they want to hear and are paid based on the amount of debt enrolled into the program, not on the success of the client. What sort of advice would you expect from a person who is about to make a few thousand dollars if you enroll into the program they are selling?
2. Many consumers are nervous, stressed, scared and frustrated with their debt situation and quite often just grasp on to the first thing that sounds good and are simply not aware of other, more financially sound options available to them.

I recently received a copy of LHDR’s new contract and as far as the fees go, little has changed since the FTC amended the TSR last year.  LHDR is still running a front loaded fee program and as if to stick their nose up at the FTC, has actually raised the upfront retainer from $500 to $900. Bold Move.

If you would like to know why I think a front loaded debt settlement program is one of the worst things a consumer can enroll into, please see Freedom Debt Relief Says Upfront Fees Help Consumers and also Express Debt Collects $17,000 from consumer, settles nothing, and offers no refund.

When looking at a debt settlement program, forget what the sales person tells you, the contract is the only thing that matters. Let’s start with the most common question. What are the fees?
LHDR Fees:

1. $900 dollar retainer – Paid to LHDR over the first 6 months
2. $79 a month fee – Paid mostly to Non Attorney Servicing Company. Legal Helpers only receives $19 a month starting in month 7. Source
3. 15% of Debt Service Fee – Paid to Non Attorney Servicing Company. – Collected during the first half of the clients program.
4. $200 dollars an hour – Paid to LHDR for optional legal representation not covered in contract.
5. $10.50 a month fee for Global Client Solutions Account.

Now let’s play an educational game. I will think of a statement that a LHDR sales person is likely to say, and then we will see what the contract actually says.

1. Sales Person – Legal Helpers is the best program because you will have a licensed attorney negotiating your debt with the creditors.

   Contract – LHDR shall subcontract out to a third party certain tasks including, but not limited to, negotiations with creditors and collectors and certain customer support responsibilities. LHDR and other legally trained, licensed personnel will supervise all negotiations and customer support, and ensure that those services comply with established rules and procedures.

   The implementation, management and maintenance of a debt resolution plan by LHDR shall be performed under the direct supervision of LHDR by Legal Services Support Group, LLC (LSSG) at a cost of the Client’s total scheduled debt (hereinafter referred to as Service Cost). LHDR has a non-exclusive reciprocal referral Agreement with LSSG to provide these services under LHDR’s direct supervision. These are services required for the debt resolution plan, but are not legal services. There is no attorney-client relationship between Client and LSSG in regard to these services and any specific communications between client and LSSG are not protected by attorney-client privilege. LSSG cannot and will not provide any legal advice to the Client other than as communicated through LSSG by LHDR and under LHDR’s supervision.

   (My comment) Also notice how much money LHDR actually makes vs how much the Non Attorney Servicing Company makes. Who do you think is doing the work?

2. Sales Person – If you get sued, you are going to want to have an attorney that can represent you in court and LHDR does that for clients.

Contract – (Summary in my own words)

1. Client is responsible for all court costs and filing fees.  LHDR is under no obligation to file any responsive document until all fees are paid.  Under no circumstances will LHDR advance any fees or costs to Client.
2. If LHDR obtains a settlement offer of at least a 35% debt reduction of the total debt at the time of the settlement inclusive of interest, penalties, cost and late fees and client does not or cannot accept such settlement, LHDR will not have an affirmative obligation to formally respond to the lawsuit unless the Client has a valid defense as to the legitimacy of the subject debt.

   Example: You enroll with LHDR owing $10,000 on an account. 12 months later you are sued and now owe $12,500 because of interest, late fees and attorney costs. If LHDR can get the creditor to offer a settlement of $8,125 then that would satisfy their obligation. Remember you would still need to pay the $1,500 settlement fee as well on that account making your total payoff $9,625, for a total savings of only $375 dollars from your original balance.

3. In the event LHDR is not under obligation to assist Client, Client will have the option of retaining the law firm at an added hourly rate of $200 per hour.

   Because this is such a big part of the sales affiliates’ presentation, let me break this down based on my understanding of the contract. If I am incorrect, I would appreciate if Legal Helpers would point out my error and I will make a correction.

   If I am a client and I am sued, then the only thing LHDR is required to do is get me a 35% reduction from the inflated debt balance? As you can see from the above example, that would not be an impressive settlement offer and certainly not like what is being promised during the sales pitch for the program.

   Do You Have a Question You'd Like Steve to Answer? Click Here.

   Follow me on this point now because it is important.  If I enroll with Legal Helpers and have to pay almost all of my fees in the first half of the program, as required by the contract, how am I going to be able to afford to pay a settlement that is only a small reduction of my original debt? Since Legal Helpers charges all my fees upfront, they make it very likely that if I get sued, I will not have the money to settle, and then according to their contract they will not have to represent me since I was not able to accept the settlement offer.

   So all they seem to be obligated to do is obtain a mediocre settlement offer.  If I don’t take it, I don’t get any litigation help on that account.  If I do take it, the case is settled at an awfully high number and they don’t have to represent me in court either, plus I still have to pay them the 15% settlement fee. So under what likely and realistic scenario would Legal Helpers actually represent me in court? It looks to me like Legal Helpers is making a lot of promises during the sales pitch that they are not likely going to be obligated to deliver given the conditions they provide for in the contract.

Sales Person – Legal Helpers offers a money back guarantee.

Contract – The refund is pro rata to a specific account and only applies if they are not able to obtain the same mediocre settlement offer that was mentioned above. (Likely only a 20% reduction in original balance plus all of the fees).

When you really add up the numbers, and include all of their fees, their minimum performance requirement works out to the client paying about 90% to 100% of the original debt in many cases.  A money back guarantee doesn’t look so hot now that we read the contract.

Now, since I am likely going to be attacked by an army of LHDR’s sales affiliates for trying to put the brakes on their gravy train, let me just highlight some of the things the Attorney General of Illinois has recently alleged in a lawsuit filed against LHDR.

Among other things, it is alleged…

1. LHDR contracts out virtually all debt relief services to a third party operated and staffed by non-lawyers.
2. LHDR lures consumers through multiple marketing methods and claims its services, via a law firm, are superior to other debt settlement services.
3. LHDR makes numerous claims that a law firm will be handling consumers’ debt resolution but that is not true.
4. Once the consumer signs the agreement with LHDR, all debt resolution services are provided by a third party.
5. Consumers report they have no contact with a lawyer after enrolling.
6. This advance fee structure makes it difficult for consumers to save funds for anticipated settlement offers.
7. LHDR rarely, if ever, negotiates settlements with all consumer’s creditors.
8. In numerous instances consumers are sued by one or more of their creditors or by one or more debt collection agencies
9. Many consumers drop out of the program after they have paid most or all of their fees to defendant, but before defendant, or more accurately, the third parties they have agreements with, performs any debt settlement or debt mediation services.

In closing, based on several years of watching LHDR operate, the stories and experiences former LHDR clients have shared with me and the actual contract I now have in my hands, it is my opinion that enrolling with LHDR in the hopes of settling your debts is an expensive and unnecessary gamble. I would encourage consumers to take some time and look at all options available before taking the advice of a commissioned sales person looking to make a few thousand dollars in the first few months of your enrollment.