The following guest post was contributed by Andrew Houser.
Andrew Housser is co-founder and co-CEO of Freedom Financial Network, LLC, the parent of Freedom Debt Relief, which has settled over $1 billion in debt for its customers in the past 8 years. He sits on the executive board of the American Fair Credit Council (formerly TASC), a position he has held since 2006. Andrew received his MBA from Stanford Business School, where he was an Arjay Miller Scholar and he received a B.A. from Dartmouth College Summa Cum Laude and Phi Beta Kappa.
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Debt relief companies across the US have had quite a wild ride the last couple of years. Changing state regulations, federal legislation proposed by Senator Schumer last year that could have crippled our industry, and the new FTC debt relief rules, including the advance fee ban, have made for a stressful year. Combine that with lower aggregate levels of consumer debt nationwide and we are seeing the most rapidly changing business environment in our industry’s short history.
There are so many changes it could make your head spin. But one thing hasn’t changed. It’s the needs of the people using our services. We’ve been listening to our customers for years- and what they’re saying has been pretty constant. They care about solving their debt problems. They care about getting back on solid financial footing for themselves and their families. They care about trusting the companies they do business with and finding a real advocate who will stick up for them. Do consumers care about the problems currently facing debt relief companies? Not really.
But we have always known that meeting our customers’ needs is what makes us successful. That is why we are supporters of the FTC rule – the regulations finally create an environment that forces companies to buy into this viewpoint. Because if you are not meeting your customers’ needs in the post-FTC world, you won’t be in business for long. Furthermore, the new regulations finally give consumers the confidence to know that they will only pay for results, and that confidence can only help our industry in the long run. It’s this focus on the consumers we are serving, and the bright line distinction between compliance and non compliance with the FTC rule that led TASC to change its name to the American Fair Credit Council, with a new mission focused on the consumers we serve and on compliance with the FTC rules.
But, to be sure, it is going to be a lot of work in the years ahead for debt relief businesses. What does it mean to the businesses struggling for success in this new post-FTC world?
The first big challenge is continuing to invest in customer service and negotiations at a time when no revenue is coming in the door. Efficiency is key, and providing high-quality service in the most efficient manner is certainly a challenge. At the same time you are driving for efficiency in your organization, you cannot lower the levels of service you are providing to your customers. This is an emotional, high-touch program – and your customers demand a high level of service. You need to have the staff to answer the phone when they call you, and to negotiate resolution on their debts quickly. This requires investment – both time and money. This industry is no longer for short-timers. You have to be willing to invest a ton of effort, and be willing to run a business that loses money for at least a couple years in order to build a long-term sustainable no advance fee company. Having an industry filled solely with companies that are taking a long term view can only be good for consumers as well.
Another challenge we face is how do you keep customers committed to the program when they have no “skin in the game”? Providing successful resolution as early as possible in the program and keeping steady contact with your customers as they progress through the program is key. The good news is that in a no advance fee world, you should be able to negotiate accounts earlier in the program and give your customers some early wins. The bad news is that the old reasons why customers drop from programs still remain- such as difficulty making program payments. Appropriate screening up front (what many in our industry call underwriting) is something we have always advocated, and it is now more important than ever.
And, as to the future legislative focus of the new AFCC? We believe that new legislation (both state and federal) should focus on closing FTC loopholes/exemptions, not on adding additional burdens on the good companies trying to do the right thing. The “loopholers” are making it more difficult for the good companies by continuing to drive sky high customer acquisition costs and by continuing to paint our industry in a negative light. The good companies that are living within the constraints of the advance fee ban are struggling with delayed revenues and are reducing costs, and they are committed to helping consumers in need over the long term. We firmly believe that adding burdensome state regulations and arbitrary fee caps on top of the FTC Rule at a time when good companies are struggling to live with the guidelines is counter-productive and bad for consumers. Doing full service debt settlement right requires a high caliber workforce, and a significant amount of labor. The FTC did recognize this, and despite their decision to regulate the way in which our industry charges fees, they also recognized the benefit of consumer choice in the marketplace. If consumers want to pay more for a higher level of service, or less for a “self directed” settlement model, they should be able to make the choice for themselves, as long as the company is only charging a fee after getting results. Fortunately, in the wake of the FTC regulations, several states seem to agree with this sentiment and have enacted laws that do not cap fees for companies that are operating within the constraints of the FTC rules.
At the end of the day, serving customer needs is the key that unlocks the door for all good debt relief companies. Our customers care about whether we’ll defend and protect them from others. They care about the services available and whether they will be successful in getting their debts resolved. They care that we’ll be their advocates. That’s what they care about and it’s what we need to care about too.