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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Damon Day - Pro Debt Coach

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

  1. Sure, Steve – I certainly understand.  I enjoy such interactions, and am afraid I came on too strong in the beginning of the discussion.   If we had talked at that decision point back in 2009 and you told me those things about bankruptcy, you certainly would have caught my attention.  However, again – as I mentioned above I could not move forward with peace of mind if I just stopped paying my creditors and not given them every penny I owed them – especially if I had the means to do so (and by being successful in the DMP for close to 2 years now I think I’ve proven that I do indeed have the mans to do so).

    I don’t second guess my decision – not for a second.  And that is for more reasons than just the DMP program itself.  Had I filed for bankruptcy, I would have have re-discovered my love of writing, started blogging, and gained that second income stream.  I would not have met all the wonderful people that I have by becoming active in Twitter.  I would not have gotten the education on how to become more financially responsible through the tools I have engaged since enrolling in the DMP. 

    I look back at where I came from, where I am now, and where I’m headed and am totally at peace with my decision.

  2. I really like your thought process here, Steve – really made me think.  I was out of town today chaperoning a field trip for my son and thought long and hard about this.   At first, I found it hard to compare what has been with the DMP with what could have been with Bankruptcy given that I don’t know anything about Bankruptcy. I think that maybe there are some serious downsides to Bankruptcy that you didn’t mention, and thus make it seem rosier than it really is most of the time.  However, when it comes right down to it, being the person that I am, I could not move forward making the future better without first taking care of the past.  It’s not that I can’t move forward, it’s just that when I opened my credit accounts, and started using them I agreed to pay them the money owed.  If I moved through bankruptcy and didn’t pay back every penny…well, that is essentially stealing – and I can’t live with that.  Given what I thought I knew about bankruptcy (whether wrong or right), I felt that the DMP allowed me to make peace with my past (by paying my debts in full), while allowing me to move forward.  Additionally, after five years on a DMP, I believe not only would I be credit card debt free, but my credit would also be in great shape.  I don’t think that would necessarily be the case with Bankruptcy after just 5 years.  I could be wrong, or maybe I’m not – maybe something just for my own curiosity to investigate for educational purposes.

    Back to your original question though…..does a debt relief company have the responsibility of telling me whether bankruptcy is the best option, even if they don’t assist with such a process?  After our discussion here, that question seems much harder to answer.  As a consumer I would say, “yes.”  I dunno if I would answer the same if I owned a debt relief company.  But then again….as a debt relief company, knowing this may be the case some of the time, why wouldn’t I have some association with a national law firm, or major firms in major markets to somehow handle all cases (DMP, DSP, bankruptcy)? 

  3. Their non response and avoidance of the key questions is their response. 

    It is difficult, or some would argue impossible to effectively serve two masters.

  4. I got to admit to some disappointment in not hearing more responses from DSCs to these questions central to their practices. Consumer thoughts are great, but what does the DSC CEO have to say?


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