Can Any Debt Relief Company Afford to Do The Right Thing for Consumers?

In some other comment threads on the site the issue has arisen that debt relief companies are doing the right thing for consumers by asking about their situation and getting budget numbers before qualifying the consumer for their program.

And over on this article, if you search through the long comments, I’ve engaged in comments with others if debt relief companies are more focused on business protection or consumer protection.

If companies are truly putting the consumer first are they evaluating the consumers situation and providing advice that is best for the consumer, regardless if they offer a solution to address the consumers concerns? If not, then how can the claim be made they are putting the consumer first?

This is not an argument against debt settlement specifically. Credit counselors are just as guilty of this. They qualify people for a debt management plan without considering debt settlement or bankruptcy as a solution many times.

I get the business practicals of running a debt relief company. I understand it takes revenue to make the wheels go around.

But if consumers are to be treated fairly, don’t the employees of those debt relief companies that triage consumers need to provide advice based on what is best for the consumer and not just qualifying the consumer for their widget?

A sales person, by their very job description is designed to make sales. But that’s not necessarily what consumers need. If the consumer is to be placed first they need someone to listen to their situation and signpost them to the most appropriate solution based on what is best for the consumer in a fiduciary capacity.

Fiduciary – A fiduciary duty (from Latin fiduciarius, meaning “(holding) in trust”; from fides, meaning “faith”, and fiducia, meaning “trust”) is a legal or ethical relationship of confidence or trust regarding the management of money or property between two or more parties, most commonly a fiduciary and a principal. One party, for example a corporate trust company or the trust department of a bank, holds a fiduciary relation or acts in a fiduciary capacity to another, such as one whose funds are entrusted to it for investment. In a fiduciary relation one person, in a position of vulnerability, justifiably reposes confidence, good faith, reliance and trust in another whose aid, advice or protection is sought in some matter. In such a relation good conscience requires one to act at all times for the sole benefit and interests of another, with loyalty to those interests.

A fiduciary duty is the highest standard of care at either equity or law. A fiduciary (abbreviation fid) is expected to be extremely loyal to the person to whom he owes the duty (the “principal”): he must not put his personal interests before the duty, and must not profit from his position as a fiduciary, unless the principal consents.


For example, two members of a band currently under contract with one another (or with some other tangible, existing relationship that creates a legal duty), X and Y, record songs together. Let us imagine it is a serious, successful band and that a court would declare that the two members are equal partners in a business. One day, X takes some demos made cooperatively by the duo to a recording label, where an executive expresses interest. X pretends it is all his work and receives an exclusive contract and $50,000. Y is unaware of the encounter until reading it in the paper the next week.

This situation represents a conflict of interest and duty. Both X and Y hold fiduciary duties to each other, which means they must subdue their own interests in favor of the duo’s collective interest. By signing an individual contract and taking all the money, X has put personal interest above the fiduciary duty. Therefore, a court will find that X has breached his fiduciary duty. The judicial remedy here will be that X holds both the contract and the money in a constructive trust for the duo. Note, X will not be punished or totally denied of the benefit; both X and Y will receive a half share in the contract and the money.- Source

If you are saying that the debt relief company does not have a fiduciary responsibility to the consumer then by definition the debt relief company is not putting the consumer first.

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By it’s very nature it could be argued that sales training for debt relief companies breaks the fiduciary responsibility of the debt relief company. If the training is based on scripts, techniques or tools that train staff to guide the consumer to the sale, seal the deal, or close the sale then have the consumers interests been placed ahead of those of the company?

I would like to see that happen, but it clearly does not. Just reflecting on many of the debt settlement sites I’ve seen, I can show you repeated examples where the sales pitch has been to use us to avoid bankruptcy because bankruptcy will hurt you. But that’s not a factual statement in many cases. The marketing message and sales staff have been trained to say that because it serves the needs of the company.

Simply asking a consumer for their budget numbers and adding them up does not lead to a fiduciary result alone. It might qualify someone to appear to afford solution X (be it a debt settlement program or a credit counseling solution) but for those of us experienced in helping people we know that a budget is not much more than a page of lies. It’s a guess on how money is spent by people who don’t track how they spend their money.

Besides, the greater factor over the calculation is that money problems are not about the money. The debt is the symptom of the underlying issues and not the problem itself. As long as you are only responding to the symptom you may not be acting in the best interest of the consumer.

If the debt is the result of a untreated spending addiction, how does the debt settlement program treat that?

If the debt is the result of under-earning and barely making it how does a debt management plan fix that problem?

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If the debt is the result of addictive day trading with funds drained from retirement accounts to fuel the addiction, how does a debt relief program fix that?

Debt relief companies need to be solution providers that act in a fiduciary capacity for the consumers that reach out to them for help. If a consumer needs solution Y to best meet their situation and the debt relief company does not offer that, they should direct the consumer to a company that does even if it means losing the sale.

Example: I once had this client that was struggling to make ends meet. She wanted to enroll in a credit counseling program to deal with her debt. As I talked to her I realized the issue was not that she had too much debt but that she was under-earning based on the area she lived in. She said she was only comfortable working at the overnight shift stocking shelves at Walmart.

When I asked why the conversation eventually wound it’s way around to her feeling very self-conscious about how she appeared on interviews because she felt she had big feet. I asked her if she had a new pair of shoes that made her feel special if she’d have more confidence to go on an interview. She said “yes” and I sent her money for a new inexpensive pair of shoes.

She called back later to let me know she got the first job she applied for and now made enough money with the increased salary to make ends meet and be able to save money each month.

“Money problems are not about the money. They are about the underlying issues and the debt is the symptom, not the problem.”

So what do you think? Can a debt relief company ever put the consumer first and act in a fiduciary capacity or is it an impossible task? Can more sales training overcome those issues? If not, what’s the solution?


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88 thoughts on “Can Any Debt Relief Company Afford to Do The Right Thing for Consumers?”

  1. Hi Matt. I think I know what you’re talking about and after reading my initial comment, I kind of both agree and disagree with myself also. (I’m allowed to change my mind, right?)

    For me to say that sales training “has nothing to do with it”, was kind of stupid actually. That’s not the case. The good sales people that do carry that “moral code” still need to be trained on what their fiduciary responsibility is, otherwise they’re not much better than the sales people that just don’t care. I wish now I didn’t say it that way, but sales training is far from the only solution to the lack of fiduciary responsibility in the debt settlement arena.

    I think we can both agree that the majority of the industry has not acted as a fiduciary over the past few years. Why is that? I believe because there was nobody watching over them, and no real set of rules to play by. It’s the same reason that steroids turned into an epidemic in baseball. They weren’t testing for it in 1998, so it was abused and turned into a new home run record followed by a decade and a half of congressional hearings and new strict rules.

    I stand by my statement that debt settlement companies must expand their offering of services in order to improve their ability to act as a fiduciary. In debt relief there is no such thing as a one size fits all solution. Yes a very small number of people are perfectly qualified to fall behind and settle all their debt, while an equally small number of people are perfect candidates for a DMP. What happens to those people that are stuck in the middle? They’re competed for and they are sold on why they should lean in one direction or the other.

  2. I’m not sure I would say my comments about bankruptcy were rosier, I’d say they were more like reality than assumption.

    See my other comment about paying back debt with bankruptcy.

    I don’t want to get lost in if bankruptcy would have been better for you. The issue to really consider is if a consumer turns to a debt relief company for help, do they have a moral or fiduciary duty to do the right thing even if it means not pushing their widget?

    It’s one thing if you are going in to buy a shovel but for people in desperate situations in a disadvantaged position who are looking to trust the rep as a debt advisor, should we expect anything less than giving the consumer the best advice regardless of the solutions the debt relief company sells when the wrong solution can screw up their life?

  3. Another something to ponder. Filing bankruptcy does not have to mean you screw your creditors. There is nothing that prevents someone from filing for the protections and benefits and still repaying their creditors.

    That’s what I did but that’s another story.

    There is no sense wasting a perfectly good mistake. The best you can do is learn from the experience and use that information to help others. Like me, your financial situation was a great learning and life experience.

    You were led to cross that bridge for a reason.


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