We’ve certainly been through a lot over the past few years. We’ve watched the debt settlement industry go absolutely crazy, opportunists invade, regulators need to step in, and now we’ve reached a low. But the good news is, it’s time to rebuild, but wisely.
In my talks with state and federal regulators and the CFPB it is clear that debt settlement has a bad name but that’s really just the tail end of all of the bad stuff that went on.
Debt settlement as an industry was hurtling towards death and it needed regulation for the necessary changes to take place. Up until the TSR the approach had been to lobby against all legislation which was not a sustainable position.
The reality is that while regulators and enforcement officers are left with a lingering bad taste about debt settlement, the tremendous bad stuff has significantly decreased from it’s downward terminal decent.
Sure, there are still lawsuits and cases coming out, but if you look closely, that’s all old stuff from the opportunistic days when advanced fees came first and provide value for money to the consumer was a secondary concern.
From what I see, those days are for the most part over. Well that is except for the attorney loophole models which are still ongoing and the subject of continued enforcement investigations. The key case is the Legal Helpers Debt Resolution case in Illinois brought by the Attorney General.
But debt settlement needs to grow and evolve from it’s lone niche of one solution to a broader approach of debt relief.
What is Debt Relief?
Debt relief encompasses a wide variety of solutions to help consumers in financial trouble. It’s not a one trick pony industry. In my vision debt relief encompasses all the best practices under one roof to collaboratively find the most appropriate solution for consumers in trouble. Those solutions should include:
- credit counseling;
- debt settlement;
- bankruptcy referrals;
- educational assistance with budget coaching;
- logical credit rebuilding assistance (not bogus credit repair or trade line junk);
- debt consolidation loans; and,
- hybrid approach of a combination of the above;
There may be other less mainstream solutions floating about but to date, they are not safe or proven for consumers.
In the broader debt relief arena debt settlement has a role when it is appropriate. In the bad days of the past it was sold as a one-size fits all solution. It never was. That was just crazed marketers run amuck and we all can see the damage that was done.
Even TASC / AFCC Agrees
Even the association once known as TASC, that fought so hard to continue those bad practices now sees a better way forward by doing the right thing. Their new name and mission appears to be dedicated towards stamping out advanced fee debt settlement services.
The AFCC founders realized that the former trade association, The Association of Settlement Companies (TASC), did not fully represent the wave of change that has swept through the industry, and that the American public deserved a clearer, more forward-looking approach to consumer credit advocacy. TASC no longer exists. We are now the American Fair Credit Council (AFCC). We have a new vision and a new mission that focuses on the people we serve. – Source
What You Don’t Know
I’ve taken a whole lot of heat from the debt settlement industry for the work I’ve done over the past couple of years in outing bad actors. That work will continue when I run across any bad actor in the larger debt relief world.
But what you don’t know is that in my talks with reporters, regulators, legislators, advocates and the FTC and CFPB, I’ve been educating people on how the industry has turned around and supporting the need for legitimate debt settlement as part of a larger debt relief approach.
I make no room for bad actors that harm consumers in debt relief and I do champion people doing the right thing for people in trouble.
My ultimate goal is to champion the rights, solutions, and options of consumers at a time they are facing difficult obstacles. I always try to put myself in their position and do the right thing. And that’s how the larger debt relief industry will survive. It needs companies that can earn a fair profit from their services of providing best advice for people in a difficult situation.
Debt Relief Needs to Place the Consumer at the Center and Surround
Them With All the Best Options. Not Just sell the Widget of the Day.
But debt settlement is still not out of the woods entirely, there is still some more garbage to clean up.
- Don’t Let the Bad Guys Thrive – While the descent has tremendously slowed for debt settlement the greatest threat I see on the horizon is allow bad actors to wander back in and start harming consumers.
- Keep Your Eyes Open and Out Them – If you spot any bad actors, let me know immediately and I’ll report on them.
You can let me know using the confidential tip form. If we don’t work hard to keep the bad guys out, we let them in.
- Make Sure Claims are True – Watch for things that don’t add up, are unrealistic claims from lead vendors, affiliates, and agents.
Here is an example of a press release that hit my desk the other day from a tipster (send in your tips here). And for the record I reached out to the company for clarification and never received a response. Messages like this concern me and raise my radar.
Integrated Direct sent out a press release for something called Peak Leads. Chief Marketing Officer, Chris Consorte, said “We needed more debt settlement leads – at a lower cost per lead – so we decided to test co-registration for debt settlement lead generation and it really paid off!” They are claiming to generate “20,000 fresh debt settlement leads daily.” – Source
When I asked Consote if he was seeing 20,000 people a day with the capacity to settle their debts rapidly, there was no response.
People who receive information and pitches they are not looking for through a “co-registration” lead can hurt the reputation of the debt settlement industry and results consumer complaints.
- Work Closely With Regulators – Regulators and consumer advocates need more transparency from the industry to understand it. When you receive a request for data or information, cooperate with a smile.
I’m currently working with the Center for Responsible Lending to develop specific data points they want to see to measure the effectiveness of debt settlement as a solution. This is a positive step to prove with real data what the benefit to consumers is. There are already companies that are willing to provide data to them.
- Compliance, Compliance, Compliance – To borrow a phrase, “It’s all about compliance stupid.” There is no shortcut moving forward for companies that are operating outside of compliance in an state. It leaves you as an easy target and tarnishes the industry each time someone is nailed for operating illegally. If you want more information on current state laws then I suggest the free compliance tracking from USDR Compliance.
- Refunds – Companies need to be prepared to offer full refunds to any consumer for any service they charged for but were unable to deliver on. A continued policy of no refunds is silly. Refunds prevent complaints, complaints prevent regulators and enforcement officers from taking action, a lack of action increases the perception of the industry. If you were selling boats, maybe that’s a reasonable approach. But the debt relief world sells products and services to consumers that are perceived to be part of a disadvantaged class.
Debt settlement providers can find their place in the larger debt relief industry and survive. Companies that try to hold on to what debt settlement was before, a lone widget, will find a tough go of it. It’s time to grow into a broader debt relief industry.
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