Recently I exposed the debt restructure sales effort in Consumer Debt Restructuring 101: What It is and Why You Should Avoid It. Consumer debt restructure is going to become the next wave of marketing efforts for old advanced fee debt settlement sales operations.
Following that article a tipster (send in your tips here) sent me a mandatory disclosure statement from the training group MSTARS and asked me how the debt restructure program stacked up with the mandatory disclosures as specified by the MSTARS State and Federal Transparency Initiative (SAFTI).
The MSTARS checklist provides a list of mandatory disclosures and states they are “the most comprehensive list available in the industry.”
While the list appears to have been written for debt settlement sales people the sound advice applies to the debt restructure market as well.
“Nearly all of the actions taken against our industry have been related to the impressions that the front-line agent gave to the consumer about the debt settlement program. The FTC believes that what your front-line agent says to the consumer supersedes even your service agreement and contracts.” – Source.
That’s a factual statement by MSTARS and good advice for all debt relief companies to listen to.
Using the MSTARS 20 Mandatory Disclosures list I went back and evaluated the debt restructure program sales scripts as promoted by Cyrus Global and the Amerizon Group material I previous covered here.
MSTARS 20 MANDATORY DISCLOSURES / CONCEPTS FOR EVERY CALL
- Complete fee disclosures and administration of the details to the penny. (How much are fees, when will they be paid, and what are they for).
FAIL – Fails to tell consumer fees will be paid out first to legal plan rather than accrued. Fails to mention additional monthly fees or limited refund policy.
- Full and accurate credit impacts of the debt settlement program for the client.
FAIL – Fails to cover the impact of late payments on credit and reporting of charge offs.
- Accurate percentage of savings, based on your actual internal client‟s experience with your program. (Remember, there are many variables involved that will affect this. If you can‟t substantiate it with every client, don‟t say it.)
FAIL – States debts will be repaid at 40 percent but fails to say what the overall percentage of repayment is based on historical data of previously enrolled clients when factoring in all their data.
- Card closure and non-use of credit/credit cards (How and why the cards get closed. Cannot keep and use cards out of the program. This is not specific to your underwriting guidelines.)
Not mentioned in sales script.
- All creditor legal remedies and legal risks associated with the debt settlement program. (And without giving legal advice, see below.)
FAIL – While the script says creditors may sue it says it is in rare cases. The script is silent on other legal remedies creditor may attempt to pursue. But then the script pushes a legal protection package to protect the consumer against legal action. If legal action is rare, what is the need to purchase a legal protection plan?
- Creditor calls disclosure. (They can and will call even if you have the LPA/PA and serve C&D. If you say they won‟t and they do, you have lied.)
FAIL – While the script says consumers will need to stop paying their debts, it does not say it will trigger collection activities and calls that can’t be stopped. Creditor calls are only mentioned in a rebuttal statement and then says “they are nothing to worry about.”
- Number of months in the program accurately described. (Must be substantiated. If you say 36 months and variables prevent this, you have lied. This cannot be based on industry statistics; it must be accurate to your average client and substantiated.)
FAIL – The sales pitch gives the consumer the impression the program will take two or three years and even says “we can actually mark that date on your calendar” but fails to inform consumer that is only possible if all debt is purchased by a debt buyer, which they don’t guarantee.
- Accurate timeframe to creditor contact on their behalf.
FAIL – No mention.
- Accurate timeframe to first settlement.
FAIL – No mention.
- Tax consequences and how to handle them (Without giving tax advice.)
FAIL – No mention.
- Accurate description of alternative debt relief options.
FAIL – No mention.
- No trigger words or deception. (“Pennies on the dollar”, “Secret program”, “Obama plan” “Loophole”, etc…)
FAIL – Gives the impression all the debt will be resolved for “40 cents on the dollar.”
- No legal advice may be given or insinuated unless the agent is an attorney licensed to practice law in that state.
Program sells legal protection plan but that plan does not provide for calls to an attorney to discuss the consumers situation.
- No tax advice may be given or insinuated unless the agent is a licensed CPA.
The script already failed because no information was given about the tax consequences of debt restructure.
- Must not advise the client to stop paying their creditors directly.
FAIL – The script and rebuttal tells the consumer to fall behind.
- Must not advise the clients to avoid contact with the creditors.
The script is silent on this.
- No promise of when credit will become “remedied‟ or usable. No future scores quoted.
FAIL – Script says “we can get your debt off your credit BEFORE you finish paying back what you owe.”
- Full explanation of how the program works. (What it is and isn‟t, what your role is vs theirs.)
FAIL – The script omits a large amount of facts about this program. There is no open discussion of consequences and verified results.
- No overpromising and/or exaggerating the program effectiveness or results therein.
FAIL – The sales script makes it appear all the debt will be purchased and the consumer has no worries about that.
- No emotional enrollments. Clients must make an educated decision based on sound advice and facts to enroll in the program.
FAIL – The sales pitch is full of emotional triggers and not on a comprehensive review of the consumers situation to identify the best solution based on their situation.
Overall the program is a massive failure when you compare the Cyrus Global and Amerizon Group marketing material distributed for use by sales agents and companies.
This just reinforces why the debt restructure program should be avoided by consumers and debt relief companies that want to stay out of trouble.
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