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I Love the Debt Relief Industry But Why It’s Hard to Say Good Things

By on July 1, 2011
I Love the Debt Relief Industry But Why It’s Hard to Say Good Things

It’s time I address a repeating criticism of this site. The claim is frequently made that somehow I am against the debt relief industry or I target it for bad publicity. The reality is nothing could be further from the truth than those statements or beliefs.

“But Steve, all you say are bad things.” Well that’s not quite true. I’m eager to praise important moments and I’ve not only had good things to say now and then but I even have an open door policy and invitation for guest posts of good things others want to share.

I live every day to help people struggle with bad debt and find good solutions that allow them to solve problems and set off on a path for a better life.

What I absolutely don’t do is scheme and plan how to fool people into buying something for financial gain. I never want to sell someone something just to make the sale. My belief is that good debt relief providers feel a strong fiduciary duty to always try to do the right thing for the consumer in trouble.

Their are good people in the debt relief world that feel I’m too harsh and critical. I hear you and I understand. But for far too long the debt relief world has done nothing to police themselves against bad actors and bad players in the debt relief industry.

I’ve said it before but the debt relief industry of recent past has been infiltrated by opportunists, scammers, ripoff artists, and even organized crime. And by not speaking up we’ve all allowed that to happen.

So How Do You Spot The Good Guys

Even in my days of running a credit counseling agency I was often asked about measurements and data to support the good work we did. At the time I frankly could not see or understand how important reporting performance data was and still is. I was wrong, it is of critical importance.

Today only a few companies debt settlement or credit counseling groups publicly disclose their performance numbers. Members of the AACC have committed to do so and that’s why I recommend them to consumers.

On the credit counseling side I can think of no other nonprofit group that has embraced openness and transparency as much as Cambridge Credit Counseling has. See this recent article, Cambridge Credit Counseling Releases Latest Performance Report.

READ  Debt Relief Search Trends Continue to Show a Downward Decline

Without performance numbers to stand behind it is frankly impossible to differentiate good companies from any other player. Ultimately having a few good testimonials is not enough to convince me of the true value of a company.

The ultimate measurement of the quality of a debt relief company is how much value in good service and professional intervention they provide the consumer. To coin a UK phrase, “value for money” must be of paramount importance.

In the future the top rated debt relief groups will be measured by the highest value they bring to consumers at the lowest price. Good companies should focus on collecting and supporting metrics to report publicly.

But price alone should not be the limiting factor. A bunch of low priced companies that don’t deliver exceptional service doesn’t do anybody any good. A higher priced debt relief provider that delivers exceptional service, great consumer support, professional intervention and great verifiable metrics should be allowed to thrive and rewarded for that effort.

Any company, credit counseling or not, should not be hesitant about contacting Christopher Viale at Cambridge Credit Counseling (cviale@cambridgecredit.org) and talk to him about data gathering and measurement. Christopher will be happy to be open, honest, and sharing about his efforts at data collection and being brave to be open.

I Have a Dream

Okay, so I didn’t have that dream but I do have a dream where the debt relief industry unites to reward companies of any tax status that strive to do the right thing for the consumer first. A world where credit counselors and debt settlers can come together and work for the benefit of the consumer and represent the consumer above all others. Where all branches of debt relief can work collaboratively to put the person in trouble first.

But to borrow from Dr. King, let me say:

But fifty years later, the credit counselor is still is not free. Fifty years later, the life of the credit counselor is still sadly crippled by the manacles of creditors and the chains of control. Fifty years later, the credit counselor lives on a lonely island of modern poverty in the midst of a vast ocean of material prosperity. Fifty years later, the credit counselor is still languished in the corners of American society and finds himself an exile in his own land. And so we’ve come here today to dramatize a shameful condition.

But we refuse to believe that the bank of justice is bankrupt. We refuse to believe that there are insufficient funds in the great vaults of opportunity of this nation. And so, we’ve come to cash this check, a check that will give us upon demand the riches of freedom and the security of justice.

The marvelous new militancy which has engulfed the credit counseling community must not lead us to a distrust of all debt settlement people, for many of our debt settlement brothers, as evidenced by their presence here today, have come to realize that their destiny is tied up with our destiny. And they have come to realize that their freedom is inextricably bound to our freedom.

I have a dream.

I Want to Say Great Things About the U.S. Debt Relief Industry

I truly want the U.S. debt relief industry to be a global example of how companies can do good things, make a good living, and help good people deal with bad money troubles.

READ  Further Evidence Pool of Debt Relief Consumers is Shrinking

But until we can mend fences between credit counseling and debt settlement, and bring those groups together under one label called debt relief, and until we can squeeze out the bad actors of any tax status, the debt relief field will not get the respect or admiration from the general public and regulators that it is capable of achieving.

Lasting freedom in debt relief will come from doing good things and doing the right thing. Until that day happens, I’m going to keep on doing what I do. I’ll praise the good when I find it and I’ll confront the bad.


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About Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

19 Comments

  1. Steve Rhode

    July 5, 2011 at 12:49 pm

    It does create a perplexing liability.

  2. Julian

    July 5, 2011 at 12:20 pm

    The CCC’s should be concerned with not changing how they do business. We are just starting a new debt relief company that will include CC/DMP’s and DS and have taken the IAPDA certifications for both.
    We have consulted with our attorney and she has advised that we would be susceptible to a lawsuit if we did not provide our clients with an analysis and advice on every debt relief option available to them. We were advised that we should have a solid working knowledge of each of the debt relief options which is why the certifications for each of us is important. This has been the easy part compared to everything else that goes into starting a new debt business.
    I don’t know why CCC’s would resist learning the other side of the industry, making them less competative by not offering all options and at risk of a lawsuit from a client who feels they were led in the wrong direction.

  3. Errick

    July 1, 2011 at 4:54 pm

    Yes it is.  And I hope I can take him up on it someday.

  4. Errick

    July 1, 2011 at 4:52 pm

    Thank you and Happy 4th.  I thought where we left off, I declined your very reasonable offer because I believed you when you said you that you had many satisfied clients.  I believe it because you only require clients to pay 1 to 3 percent in fees for a hybrid “self-help” service and are not in too direct a competition with the creditors for the debtor’s money.

    But I strongly disagree that the TSR changes anything about the “50+15=55” scam fundamentally.  In fact, the competition for the debtor’s money becomes even keener. 

    Let’s look at say Care One, who charges 30 percent of preplan debt savings now, in perfect compliance with the TSR, where before they were charging 15 percent of preplan debt.  Under the old system, an awesome 10% settlement used to cost the client $0.25.  Now the fee on a 90% discount is 27%, and that settlement costs the victim $0.37!  Holy golden fleece Batman, the price of success nearly doubled!

    Now on average under TSR, settling at 50% costs exactly as much as it did before, $0.65 for every dollar of preplan debt. Their position with respect to their debts has not actually changed one penny!  And since almost nobody pays enough to ever get to 65 percent in a reasonable time frame (36-60 months), nobody gets to the finish line!  Either way it was over before it started.

    And do you think the banks haven’t figured this out yet?  You betcha they have!  They settle more and more on installments, betting on the victim to fail to get to the last installment.  They get some of their money, then void the deal.  Everyone wins!  Oh wait I forgot the victim is still tooled.

    But wait you say, the TSR benefits the client because the total fees are lower.  Really?  This brilliant deduction assumes that the client fails.  He pays less because he doesn’t make it!  It’s the scam victim discount.

    Oh, what you actually said is the client benefits because the settlement has to be made before the fee is earned?  Really?  Remember those testimonials you related to me?  As I recall, you failed to make those folks “debt free” although I admit you did a lot of good.  Why is that?  Because settling all of someone’s debt is HARD.  It is much easier and cheaper to settle part of a whole lot of people’s debt.  The trick is, you have to get out before it gets hard.  So, you get the creditors to do your dirty work.  Everyone wins!  Oh wait, the victim.

    Are we getting it yet?  There are no real testimonials, because you can’t pick winners when you’re running the 50+15=55.

  5. Steve Rhode

    July 1, 2011 at 4:24 pm

    John,

    Thanks for the comment.

    It appears the ball to unite the industry rests on the credit counseling side of the court today. Let’s see if they can manage to do the right thing by working towards common ground rather than just trying to charitably stamp out perceived competition at the detriment of the consumer.

  6. Steve Rhode

    July 1, 2011 at 4:08 pm

    Certainly a fair offer.

  7. SeanDSLegalPlan

    July 1, 2011 at 3:24 pm

    Errick- Again, I worked for & maintain a relationship with Active Debt. Active has always been a performance based company & the clients are satisfied. Active has never been paid unless they actually settled the client’s debt. You are invited to come to the office, randomly call 10 clients and ask for yourself. This has been an open invitation to you for nearly a year now.
    I am certain that would not be the case were Active in the business of charging clients without doing anything, so, I agree that any company still charging fees without performing that they will have terrible numbers and few satisfied clients. But can’t you agree that the companies now following the TSR & NOT charging “retainers” or other fees before earning them actually have a service that drives success? I can’t speak for any other companies but Active- but Active has only success stories- Anyone who decides settlement was not for them at some later date, has simply cancelled & not been taken for any money where service was not provided.

    Come on down. I’ll open the books for you & you can see it 1st hand. The weather is great… Happy 4th!

  8. Errick

    July 1, 2011 at 2:23 pm

    I wonder what Mr. Scott (of Scott Law Group in Washington State) would have to say about this.  If he manages to prove half of what he is alleging against what appears to be every big name in debt settlement, then there is no redemption. They are all scammers.

    For may part, I will repeat what nobody has been able to refute.  If debt settlement has helped so many people, where are the success stories?  Why won’t one single person step forward and show how it really worked for them?  There are ZERO first-person testimonials of success.

  9. Errick

    July 1, 2011 at 6:23 pm

    I wonder what Mr. Scott (of Scott Law Group in Washington State) would have to say about this.  If he manages to prove half of what he is alleging against what appears to be every big name in debt settlement, then there is no redemption. They are all scammers.

    For may part, I will repeat what nobody has been able to refute.  If debt settlement has helped so many people, where are the success stories?  Why won’t one single person step forward and show how it really worked for them?  There are ZERO first-person testimonials of success.

    • Anonymous

      July 1, 2011 at 7:24 pm

      Errick- Again, I worked for & maintain a relationship with Active Debt. Active has always been a performance based company & the clients are satisfied. Active has never been paid unless they actually settled the client’s debt. You are invited to come to the office, randomly call 10 clients and ask for yourself. This has been an open invitation to you for nearly a year now.
      I am certain that would not be the case were Active in the business of charging clients without doing anything, so, I agree that any company still charging fees without performing that they will have terrible numbers and few satisfied clients. But can’t you agree that the companies now following the TSR & NOT charging “retainers” or other fees before earning them actually have a service that drives success? I can’t speak for any other companies but Active- but Active has only success stories- Anyone who decides settlement was not for them at some later date, has simply cancelled & not been taken for any money where service was not provided.

      Come on down. I’ll open the books for you & you can see it 1st hand. The weather is great… Happy 4th!

      • Steve Rhode

        July 1, 2011 at 8:08 pm

        Certainly a fair offer.

        • Errick

          July 1, 2011 at 8:54 pm

          Yes it is.  And I hope I can take him up on it someday.

      • Errick

        July 1, 2011 at 8:52 pm

        Thank you and Happy 4th.  I thought where we left off, I declined your very reasonable offer because I believed you when you said you that you had many satisfied clients.  I believe it because you only require clients to pay 1 to 3 percent in fees for a hybrid “self-help” service and are not in too direct a competition with the creditors for the debtor’s money.

        But I strongly disagree that the TSR changes anything about the “50+15=55” scam fundamentally.  In fact, the competition for the debtor’s money becomes even keener. 

        Let’s look at say Care One, who charges 30 percent of preplan debt savings now, in perfect compliance with the TSR, where before they were charging 15 percent of preplan debt.  Under the old system, an awesome 10% settlement used to cost the client $0.25.  Now the fee on a 90% discount is 27%, and that settlement costs the victim $0.37!  Holy golden fleece Batman, the price of success nearly doubled!

        Now on average under TSR, settling at 50% costs exactly as much as it did before, $0.65 for every dollar of preplan debt. Their position with respect to their debts has not actually changed one penny!  And since almost nobody pays enough to ever get to 65 percent in a reasonable time frame (36-60 months), nobody gets to the finish line!  Either way it was over before it started.

        And do you think the banks haven’t figured this out yet?  You betcha they have!  They settle more and more on installments, betting on the victim to fail to get to the last installment.  They get some of their money, then void the deal.  Everyone wins!  Oh wait I forgot the victim is still tooled.

        But wait you say, the TSR benefits the client because the total fees are lower.  Really?  This brilliant deduction assumes that the client fails.  He pays less because he doesn’t make it!  It’s the scam victim discount.

        Oh, what you actually said is the client benefits because the settlement has to be made before the fee is earned?  Really?  Remember those testimonials you related to me?  As I recall, you failed to make those folks “debt free” although I admit you did a lot of good.  Why is that?  Because settling all of someone’s debt is HARD.  It is much easier and cheaper to settle part of a whole lot of people’s debt.  The trick is, you have to get out before it gets hard.  So, you get the creditors to do your dirty work.  Everyone wins!  Oh wait, the victim.

        Are we getting it yet?  There are no real testimonials, because you can’t pick winners when you’re running the 50+15=55.

        • Cupid

          October 21, 2011 at 9:00 pm

          Errick, my assumption is that you work in credit counseling
          at an executive level. Unless you reply that you are an attorney practicing
          debt collection or bankruptcy, it would be hard to shake me off of this.
          You have posted continuously on Care One threads on this site and rail against
          debt settlement. You never mention that CareOne also provides debt management
          plan services. Why is that?
          CareOne offers DMP’s as a for profit company. One of the few who do. They do
          not accept fair share or grant contributions from creditors to my knowledge,
          unlike the non profit DMP providers who, for the most part, are beholden to
          creditors and their whimsies because without the revenue from creditors they
          would fail as going concerns. Why is it that CareOne can do what non profits can’t?
          Are they more efficient than non profits? Probably, but let’s be real here. It
          costs less than 10 bucks a month to service a DMP client. For some I bet the
          costs are less than that. If the average monthly fee is $30 that’s at least a
          200% return! With that kind of margin, why do non profits even need fair share
          or grant money from creditors? What well run company cannot do well with a 200%
          monthly operations budget?
          I did not account for marketing. To do so would be to admit that nonprofit DMP
          providers have to market. All the stuff I see presents nonprofits as some
          benign help the community -help the people – type of set up. They are not. They
          are companies just like any other. They just don’t pay tax and have to comply
          with certain things as a result. They are to provide education. Big whoop!
          There are many free sites with constantly updated money, budgeting and finance
          education and advice that blow doors on the education offered by most non
          profits. That being the case, non profits appear to not have to pay tax for
          next to no good reason. If free sites can provide the same and better education
          to consumers at no cost and pay tax on whatever revenue they generate, why cut
          the nonprofits a tax break? Because they do the educating live in office or in
          the local community, in schools and such? Maybe, but how many of the non
          profits do that really? Could nonprofits who do not engage in DMP services do
          the same and non profits DMP-ers pay tax? Yes indeed. Would creditors cut fair
          share and grants even more because the “donations” would no longer be
          a tax write off for them? You betcha! Nonprofits may take exception to my
          stating this so simply, but it’s just not complicated.
          So, non profits market. Is that why they need grant and fair share money? The
          marketing and acquisition costs? Probably partly. I think its more a fact of
          customer attrition though. What is the success rate of a DMP client? How many
          people drop from a DMP in 3 to 12 months. Determining that number is important
          for the American public to know. If the attrition is high, it means non profits
          enroll people who should have been referred straight to bankruptcy. That’s the
          only next step according to your answer. Why take on people who cannot finish?
          For revenue and to serve the nonprofits true master, the banks. If nonprofit
          DMP providers truly serve the consumer, and given your position that its either
          DMP or BK than the only people who should ever be referred to nonprofit DMP
          providers would be because of the BAPCPA. Following your logic it’s just that
          plain and simple.

          People should TRY EVERYTHING and when failed then to bankruptcy
          is what you said above. Why Errick? Because its the moral thing to do? Because
          it generates revenue for non profits? Because it serves banks?

          So, what’s your opinion on CareOne’s DMP service they offer
          while not accepting funds from creditors? Any feedback? I know mine. Its Kudos
          to CareOne for being positioned to represent consumers more than banks.
          Nonprofit DMP-ers cannot say they represent consumers more than banks with a
          straight face.
          I guess there are some states that require a nonprofit deliver a debt
          management plan. So non profits should only exist to serve those states. I
          think those laws should be changed to allow for profit companies who can do it better
          and for less cost than the non profits and who pay tax to the treasury that
          supports this country in its current troubled economy. Why the hell should
          nonprofit DMP-ers be getting the tax break on DMP revenue when there is not
          enough in the coffers to prevent severe poverty in this nation?

          Errick – You favor DMP’s and I assume you work in the
          nonprofit sector at a high and well informed level. How consumer focused are
          the DMP-ers when 2 years ago one of the largest credit card issuers and another
          one in the top 12 were offering account holders to settle their accounts at 15%
          of the balance pre charge off? Were the DMP-ers “educating” consumers about
          that? Bet not. For me, that would mean they are not interested in helping
          consumers, just themselves and the banks they serve. Banks that, need I remind
          you, have and will continue to pay out BILLIONS of dollars for their wrong
          doing. That’s what you support Errick. A system that brought this nation to its
          worst economic condition since the great depression.

           “Now get in the pit
          and try to love someone.”

          P.S. I don’t work for CareOne or company related to them. I
          am not related to anyone who does work for them nor any contractor for them
          etc. I am just kinda sick of the Erricks and the holier than thou attitude they
          have about debt management plans that are mostly offered by nonprofits. CareOne
          is an exception and a good one for the DMP.

  10. John

    July 1, 2011 at 1:09 pm

    Good article and fair comments Steve, I think the industry is moving in the direction you wish it would. You have had comments on different articles lately where people have acknowledged their fiduciary responsiblity to the consumer and others commenting have made the effort to train and certify in other debt relief options that they did not always offer but now do. This is very encouraging and if this continues the industry you wish for is not far away.

  11. John

    July 1, 2011 at 5:09 pm

    Good article and fair comments Steve, I think the industry is moving in the direction you wish it would. You have had comments on different articles lately where people have acknowledged their fiduciary responsiblity to the consumer and others commenting have made the effort to train and certify in other debt relief options that they did not always offer but now do. This is very encouraging and if this continues the industry you wish for is not far away.

    • Steve Rhode

      July 1, 2011 at 8:24 pm

      John,

      Thanks for the comment.

      It appears the ball to unite the industry rests on the credit counseling side of the court today. Let’s see if they can manage to do the right thing by working towards common ground rather than just trying to charitably stamp out perceived competition at the detriment of the consumer.

      • Julian

        July 5, 2011 at 4:20 pm

        The CCC’s should be concerned with not changing how they do business. We are just starting a new debt relief company that will include CC/DMP’s and DS and have taken the IAPDA certifications for both.
        We have consulted with our attorney and she has advised that we would be susceptible to a lawsuit if we did not provide our clients with an analysis and advice on every debt relief option available to them. We were advised that we should have a solid working knowledge of each of the debt relief options which is why the certifications for each of us is important. This has been the easy part compared to everything else that goes into starting a new debt business.
        I don’t know why CCC’s would resist learning the other side of the industry, making them less competative by not offering all options and at risk of a lawsuit from a client who feels they were led in the wrong direction.

        • Steve Rhode

          July 5, 2011 at 4:49 pm

          It does create a perplexing liability.

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