This is the story I wasn’t going to write.
It’s been mulling about in my head for a few days but now it just has me irritated.
A little history first. Back in May, TASC, The Association of Settlement Companies, announced they were changing their name and organization to the American Fair Credit Council (AFCC). Part of this effort was to change their branding and to shuffle away from the past issues surrounding TASC.
The big idea from the rebranding attempt was to make the new incarnation of the AFCC to be focused on the consumer and doing the right thing.
The AFCC website even says:
CONSUMERS • Our primary focus is on the consumers we help. Their story – the suffering of good people drowning in credit card debt, in need of an advocate – has not been told well and is often misunderstood.
FAIRNESS • We fight for fair treatment for our customers by their creditors, and we provide fair services to the customers we serve. We only accept fees after we have successfully resolved a debt.
ADVOCACY • We are a champion for consumers, sometimes the only one they have. We are aggressive advocate – for the industry, our members and our clients. – Source
In an attempt to help them show their new consumer advocacy legs I tossed them a soft pitch to hit out of the park.
Not long ago I reveled a new effort to sell consumers something called debt restructuring. See Consumer Debt Restructuring 101: What It is and Why You Should Avoid It.
In a “welcome to the world as consumer advocates” effort I wrote to the AFCC and asked them to provide a statement on why the AFCC felt the debt restructuring approach was bad for consumers.
On the face of it the debt restructuring approach, as I laid out, was clearly going to harm consumers. And as debt settlement industry experts the AFCC should clearly see the pitfalls and how people are going to be hurt.
This was an opportunity to strongly flex the new consumer advocacy pants and show them off.
I could not have teed it up any better for the AFCC.
My email to the AFCC said:
Here is a great issue for the AFCC to come out against as advocates.
This stuff will blow up and rain down on DS if left unchecked.
Please forward me a strong AFCC policy statement on this and I’ll publish it.
In my article, which i sent them the link to, I laid out everything including the lying sales script, false promises, hidden fees, marketer pushing of the legal protection program, unsupported success claims, etc.
I even bullet pointed the problems:
Consumers that participate in this approach will still face:
- continued collection calls from the original creditor and possibly the debt buyer if they fail to pay;
- lawsuits from the original creditor before charge off;
- lawsuits from the debt buyer if they don’t pay;
- no guarantee their debt will be purchased by a debt buyer at all;
- an incomplete solution if some or none of the debt is available to be purchased or purchased by a debt buyer;
- no solution if the original creditor decides to hold and collect on the debt after charge off;
- the real possibility of lawsuits, judgments, and wage garnishments;
- possible income tax consequence from the forgiveness of the charged off debt;
- participating in illegal credit repair by removing any accurate but negative information from their credit reports;
- no independent financial analysis by the sales representative regarding best overall solutions for their debt problem. The goal is to make the sale;
- monthly fees for software and NoteWorld service that are not refundable;
- a violation of fiduciary duty and UDMSA guidelines when the marketer is also the debt buyer;
- a weak refund policy of no refunds after 60 days; and,
- no data transparency. There appears to be no data regarding how many consumers have successfully completed the program by resolving all debts with debt buyers, how many have enrolled, failure rates, etc. Without this data consumers can not make an educate and informed decision.
The response I got from AFCC was so poor I was not originally going to publish it. I even gave them four days to go back and try again but I got nothing else. So in light of the fact they are not going to give me a second statement I’m left with publishing their first.
Here is how outraged the new AFCC as consumer advocates are over debt restructuring sales approach that is going to harm consumers, ready?
AFCC only supports and recognizes companies that respect the letter and the spirit of the FTC’s no advance fee requirement for debt relief service providers. Any fee for debt relief services prior to the resolution of debt for a consumer, including monthly fees for the alternation of any debt through “debt restructuring” programs is inconsistent with AFCC’s code of conduct and undermines the consumer protection goals of the Advance Fee Ban. – Source: AFCC
I’ll give them the fact that the monthly fee is a problem but that’s the least important problem in the entire approach. Why they were not more shocked and outraged at this approach is beyond me.
When I received their weak response I wrote back to give them a second chance.
I realize you are new to this consumer advocate stuff but come on.
The big problem with the program is not the $49 fee isn’t complaint, it’s the fact it is based on a slippery slope of lies that are intended to make the sale, not help the consumer.
Please try again.
And the response…nothing. Cricket, cricket, cricket.
There will be more attempts in the future for the AFCC to be consumer advocates but I’m going to have to label this attempt by the AFCC to stand up for consumers as one big and utter FAIL.
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I have heard back from an AFCC representative on this and I’m still not sure if an additional statement is coming from them about debt restructuring but I will update this article if I receive one.
AFCC only supports and recognizes companies that respect the letter and the spirit of the FTC’s no advance fee requirement for debt relief service providers. Any fee for debt relief services prior to the resolution of debt for a consumer, including monthly fees for the alternation of any debt through “debt restructuring” programs is inconsistent with AFCC’s code of conduct and undermines the consumer protection goals of the Advance Fee Ban. – Source: AFCC
I mean- They are saying that if advance fees are taken, companies may not join. It may not denounce a particular model but so long as their membership does not take advance fees and, as an organization, they denounce those that do, it’s a far cry from TASC!
Where is the missing consumer advocacy? Or are you saying their advocacy only extends to membership?
I’m confused.
I totally agree that they can have strict membership standards but they claim to be consumer advocates that stand up for consumers and fair practices. Is debt restructuring fair?
If they can’t speak up boldly about debt restructuring as shown then what protections are they advocating strongly on behalf of consumers for? Just advanced fees?
Personally, debt restructuring seems like smoke & mirrors to me. I don’t get it! So we agree. I simply think that by restricting membership to a strict reading of The FTC Rule, i.e., no advance fees, no matter what, that, in itself is (indirectly) looking out for consumers best interests. If the company cannot make their fees until they provide a service and the typical debt restructuring model charges advance fees, by default, AFCC does not support it.
I don’t see where “debt restructuring” falls outside the FTC Rule or can even claim a loophole at all! To me, it appears to fall right into the FTC definition of a “Debt Relief Provider”! Therefore, charging upfront fees will put any company running that model at risk of a lot of regulatory issues!
Do you know, specifically, what that model is claiming as “the exemption” to the TSR?
Only that they are altering the debt rather than settling the debt.
I think we are on the same page, this stinks and in their new role as consumer advocates AFCC should be more vocal about bad practices like this in order to help protect consumers in general rather than just one slice of the debt relief pie.
Claiming to be a consumer advocate that defends consumers comes with responsibilities. It’s not just a rebranding statement.
This is from the TSR definition-
defines a “debt relief service”
as a program that claims
directly, or implies, that it can renegotiate, settle, or in some way change the terms of a
person’s debt to an unsecured creditor or debt collector.
I don’t see the exemption! “In some way CHANGE THE TERMS”
Me either.
I hate to paint with such a broad brush, but time and time again all I see with these debt settlement trade associations is a primary focus on marketing and sales and enrollment and lead generation and and and…. I suppose compliance is finally getting some attention. When is the debtor’s battle with creditors going to be the primary focus? Debt restructing through debt buying? What a joke. Keep up the good work shining a light on these dubioius “services” and calling out those “industry leaders” that should, but wont, denounce them.