Over the past few years I have heard non-stop stories from consumers who were taken for costly rides by debt settlement scams. While it is true that there are a few good and well intentioned programs available that provide real debt solutions, my experience shows that a vast majority of these outfits are simply money grubbing nightmares for cash strapped consumers.
The debt relief world can be a very confusing place, especially when people are in a seemingly desperate financial situation. With that in mind I would like to shed a little light on this industry and present:
10 Stupid Simple Ways to Get Burned by Debt Settlement Scams
1. Don’t research every option before hiring a debt settlement company. You need to explore consumer credit counseling, debt consolidation loan options, credit card debt settlement, bankruptcy, and many other variations of those strategies, including working directly with the creditors and even just potentially ignoring the debt. (Yes, sometimes that is the best option)
Nobody cares more about your financial situation than you do. Roll up your sleeves and do some research. Debt relief scams are everywhere and you must be able to recognize when a sales affiliate is telling you the truth and when they are bending it like Beckham.
2 Don’t get a second opinion from a trusted source. Many consumers fail to get a second opinion because they are embarrassed and don’t want friends or loved ones to know about their financial situation. It is this very reason that most debt settlement scams can get away with what they do for so long. Not only do people not ask for independent advice before they enroll, but they are also reluctant to tell anyone when they get burned.
At minimum you should speak with at least 1 independent voice that is knowledgeable about your financial situation and the general options available to you. For many, this can be a very emotional time and having an objective sounding board to provide feedback is essential.
3 Don’t remind yourself that the sales affiliate is likely no Dave Ramsey. We have a tendency to seek and act on advice from people that tell us what we were hoping to hear instead of what we really need to hear. If the program sounds like Manna from Heaven, just be sure to filter that information through the knowledge that debt settlement sales affiliates typically do not have the background to objectively advise you of the best strategy to resolve your financial situation, nor are they paid to do so.
4 Don’t consider several companies before making a final decision. If you think your creditors call you all the time, just wait until you have a consultation with a sales driven debt settlement company. They want pen to paper on that contract before you even get off the phone. Like in every other industry, no two companies are the same. Some are good, some are bad, and some do nothing but collect your fees. It is important for you to interview several companies to compare and contrast the things that are important to you.
5 Don’t do a Google search. Google is to a debt relief scammer what Kryptonite is to Superman. Never before has it been this easy for consumers to share information and experiences with millions of others. At minimum you should type a company’s name into Google and look through the first few pages. You can also do searches for things like (company name complaints) and (company name scam.)
6 Don’t check with the BBB. How many complaints do they have on file with the BBB? Were those complaints resolved? What is their client to complaint ratio? If they have 5,000 clients but only 10 resolved complaints in the last 3 years, how would that compare to a company with the same number of complaints but only 200 clients?
7 Don’t research the debt settlement company at the GetOutOfDebt.org website. My friend Steve Rhode runs the site and teaches you how to get out of debt for free. He is without question, the “go to” source for researching debt settlement scams. Consumers constantly write in to share their experiences or ask him to research a debt settlement company they are considering. If you do a search on his site and you don’t find a review of a specific company, you can just ask him to do one for free.
8 Don’t read the contract carefully. If the sales presentation was indeed your Manna from Heaven, then don’t be surprised to find an angry Devil in the details. Often times the sales affiliate will tell you what he thinks you want to hear and then the contract will attempt to CTLA (cover their lying …)
9 Don’t question them if they attempt to illegally charge you fees before they settle your debts. The debt settlement scams had gotten so bad that the FTC finally stepped in and made it illegal in October 2010, for debt settlement companies to charge fees before they settled their client’s debt.
Since the passage of that law, many scammers have left the industry. However some have stayed and continue to illegally charge fees to consumers before the debt is settled. Most often they identify themselves as “law firm” models. They claim to have found a legal loop hole in the law that allows them to continue charging upfront money even if they never perform the service. They say loop hole, I say total scam.
Either way, why would you want to pay a company all your fees upfront when you can look at other companies who will actually perform the service before charging you? Whether or not their loop hole theory will hold up in court is their problem. Since you aren’t going to get any benefit by giving them your money upfront, don’t make it your problem if they eventually get shut down by regulators.
10 Don’t politely decline their offer to meet with you face to face. If a sales associate from the law firm of Doowe, Cheatem and How (fictitious name) pitches you on their program for 45 minutes and then asks to set up a face to face meeting, you can bet dollars to donuts that they charge upfront fees and are of the “loop holer” persuasion mentioned in number 9.
There might be a rare exception for a small local firm, but for the most part, the face to face meeting is a dead giveaway. The “loop hole” theory is that the sale was not made during the 45 minute sales presentation with the sales affiliate, but with the Notary or local Paralegal they sent over to get the papers signed. An observant person might question the 45 minute call where the selling and convincing was actually done. There is that Devil in those details again.
So there you have it. 10 stupid simple ways to get burned by debt settlement scams.
Reader Take Away:
Jeff Rose is a certified financial planner and U.S. combat veteran. He blogs at Good Financial Cents and Soldier of Finance.
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Imagine the people you write this article for: they are in a different world than you and me. You see, they are in need of help. They are looking for a hand to pull them out of their bottomless pit ofproblems. They hear noise everywhere until the right person with the right promise gets their attention. And BOOM. They are finished. Combined with the evolution of the sales approach, sales agents may not know a thing about debt settlement, but the quick app or the CRM can handle that. All the agent needs to be trained on is extracting painful information from the debtor.A person is drowning right in front of you. You throw them a rope. You think they are going to Google the manufacturer of the rope, ask a friend if the rope is strong enough to hold their weight, ask for asecond rope to be thrown to them just to compare… you get my point.
What exactly am I referring to? See below:
1 – Don’t research every option before hiring a debt settlement company. OK, they research Credit Counseling, DMP, DS, Consolidation, BK, etc. Our country, in general, is a proud people who want to pay their bills. They don’t want to just file BK and give up. So they look for the best alternative to help them get out of debt. How long does it take to get to an advertisement that has some lady holding her three year olds hand jumping into the backdrop of a beautiful sunset promising financial freedom? “Oh look honey, we can be debt free with XXX Debt Solutions in just 2 and a half years, and we will only have to pay 50% of what we owe… that sounds great. Let’s call them…” Sold.2 Don’t get a second opinion from a trusted source. Anyone in debt any significant amount will tell you they don’t talk about it with their friends or families; usually that is the “trusted source.” So, they findsomebody they can really trust. Remember Mr. Reynard in Boiler Room? Never met his stock broker.. “He is a really nice guy.. He has two kids just like me…” People desperate for help will find a person they feel they can trust and go with them. Desperation is an invitation for lies to close the deal.. As for the independent voice, I too agree. However, the embarrassment factor far outweighs these people’s abilities to step up to the plate and admit to somebody they have a debt problem. 3 Don’t remind yourself that the sales affiliate is likely no Dave Ramsey. Really? Even Dave Ramsey is no “Dave Ramsey.” He isn’t on the front lines of debt relief. He is a speaker, not necessarily a doer. Not insulting him either. Just that he is in a different space than most- that’s like saying “Don’t remind yourself that Obama is no General Schwarzkopf. One is the president, the other a general. Presidents don’t have much experience in leading troops into battle and generals would likely not be able to handle peace talks with North Korea. It’s just a totally dissimilar comparison to make. 4 Don’t consider several companies before making a final decision. Consider nine hundred of them if they want. In fact, they probably saw 900 advertisements over the 6 month downturn in their financial situation. Radio commercials, TV commercials, friends in the break room at work. They heardabout a lot of companies. They chose one company over the rest because that company extracted enough painful information from them, turned the tables and created enough urgency in that person without scaring them off. It’s an art, truly. Just misused in this industry… 5 Don’t do a Google search. Google Walter Ledda. #1 result at time ofposting this: http://network.ocmetrobusiness… an OC Metro page talking about the CEO’s philanthropy. Raising money for cancer, for charities, etc. What is less easily found is http://www.ftc.gov/opa/2005/03… showing he had an 84.3Million dollar judgment from having a conglomerate of companies posing as a nonprofit and getting shut down by the FTC just 6 yearsago. A name change or PR person can hide a lot on the search engines. Who is Walter Ledda? He is the owner of Morgan Drexen. If you don’t know who they are, look around this site, or others. They have three times the customers now as they did in 2005 when they were shutdown. And now they are “Attorney’s” so of course they are legit, right? Not always easy to find the truth on the internet. 6 Don’t check with the BBB. “Yes ma’am, I know we are given a rating of F at the BBB. What you probably didn’t know is that the BBB is a privately ownedcompany, for profit, and is not government sponsored at all. That means that many companies pay the BBB to say good things about them. We don’t need to do that. Read our testimonials on our website. That will show you we have helped people just like you.” If needed: “Ma’am, did you also know that the owner of the BBB southland has his own debt management company and that he gives his competitors an f rating so people will use his company instead?” 7 Don’t research the debt settlement company at the GetOutOfDebt.org website. Don’t get me wrong. This is a great website. But only a small fraction of the companies are listed on this site. Let’s do all we can to continue growing the awareness just as we are doing in articles like yours and responses like mine!8 Don’t read the contract carefully. AKA don’t have a lapse in good judgment.9 Don’t question them if they attempt to illegally charge you fees before they settle your debts. “Yes ma’am, I know the law you are referring to. However, we are attorneys, so that really isn’t a law that applies to us. Any attorney will charge a retainer fee. And of course, that law is in place to protect you from companies who wouldn’t be able to do for you what we can… As attorneys, we can stop those harassing creditor calls. We can get your debt cut in half. Now that $1,500 retainer fee broken down to 5 monthly installments of $300 doesn’t sound too bad, does it? Don’t worry ma’am. We are your attorneys and we will protect you.” Sold.10 Don’t politely decline their offer to meet with you face to face. Buddy, a nice suit goes a long way. Remember, these people are SALES people. They are good at what they do. And I have seen more documents signed at Starbucks lately than in a conference room. And the big boys have real nice conference rooms that just beg for the face to face meetings anyway. Money sells an image. Desperation buys it. In short, I agree there are common mistakes to avoid. But reality is, people need to wise up. The scams haven’t changed. The presentations may have improved. They language used may be different now than two or three years ago, but it’s still a DEBT RELIEF SCAM and most don’t work.Some do. Most don’t.
So what has happened that people are still falling victim to all these scams even after FTC implemented the TSR amendments? Desperation has increased. It’s sad, but we will never be able to conquer the lapses of good judgment when people get sold a dream when they are desperate for help.
Great post Jeff, but may I point out a few things?
Imagine the people you write this article for: they
are in a different world than you and me. You see, they are in need of help.
They are looking for a hand to pull them out of their bottomless pit of
problems. They hear noise everywhere
until the right person with the right promise gets their attention. And BOOM. They
are finished.
Combined with the evolution of the sales approach,
sales agents may not know a thing about debt settlement, but the quick app or
the CRM can handle that. All the agent needs to be trained on is extracting
painful information from the debtor.
A person is drowning right in front of you. You
throw them a rope. You think they are going to Google the manufacturer of the
rope, ask a friend if the rope is strong enough to hold their weight, ask for a
second rope to be thrown to them just to compare… you get my point.
What exactly am I referring to? See below:
1 – Don’t research
every option before hiring a debt settlement company. OK, they research
Credit Counseling, DMP, DS, Consolidation, BK, etc. Our country, in general, is
a proud people who want to pay their bills. They don’t want to just file BK and
give up. So they look for the best
alternative to help them get out of debt. How long does it take to get to an
advertisement that has some lady holding her three year olds hand jumping into
the backdrop of a beautiful sunset promising financial freedom? “Oh look honey,
we can be debt free with XXX Debt Solutions in just 2 and a half years, and we
will only have to pay 50% of what we owe… that sounds great. Let’s call them…”
Sold.
2 Don’t get a second opinion from a trusted source. Anyone
in debt any significant amount will tell you they don’t talk about it with
their friends or families; usually that is the “trusted source.” So, they find
somebody they can really trust. Remember Mr. Reynard in Boiler Room? Never met
his stock broker.. “He is a really nice guy.. He has two kids just like me…”
People desperate for help will find a person they feel they can trust and go
with them. Desperation is an invitation for lies to close the deal..
As for the independent voice, I too agree. However,
the embarrassment factor far outweighs these people’s abilities to step up to
the plate and admit to somebody they have a debt problem.
3 Don’t remind yourself that the sales affiliate is likely no Dave
Ramsey. Really? Even
Dave Ramsey is no “Dave Ramsey.” He isn’t on the front lines of debt relief. He
is a speaker, not necessarily a doer. Not insulting him either. Just that he is
in a different space than most- that’s like saying “Don’t remind yourself that
Obama is no General Schwarzkopf. One is the president, the other a general.
Presidents don’t have much experience in leading troops into battle and generals
would likely not be able to handle peace talks with North Korea. It’s just a
totally dissimilar comparison to make.
4 Don’t consider several companies before making a final decision. Consider
nine hundred of them if they want. In fact, they probably saw 900
advertisements over the 6 month downturn in their financial situation. Radio
commercials, TV commercials, friends in the break room at work. They heard
about a lot of companies. They chose one company over the rest because that
company extracted enough painful information from them, turned the tables and
created enough urgency in that person without scaring them off. It’s an art,
truly. Just misused in this industry…
5 Don’t do a Google search. Google Walter Ledda. #1 result at time of
posting this:
http://network.ocmetrobusiness.com/profile/WalterLedda
an OC Metro page talking about the CEO’s philanthropy. Raising money for
cancer, for charities, etc. What is less easily found is
http://www.ftc.gov/opa/2005/03/creditcouncel.shtm
showing he had an 84.3Million dollar judgment from having a conglomerate of
companies posing as a nonprofit and getting shut down by the FTC just 6 years
ago. A name change or PR person can hide a lot on the search engines.
Who is Walter Ledda? He is the owner of Morgan
Drexen. If you don’t know who they are, look around this site, or others. They
have three times the customers now as they did in 2005 when they were shut
down. And now they are “Attorney’s” so
of course they are legit, right? Not always easy to find the truth on the
internet.
6 Don’t check with the BBB. “Yes ma’am, I know we are given a rating of F
at the BBB. What you probably didn’t know is that the BBB is a privately owned
company, for profit, and is not government sponsored at all. That means that
many companies pay the BBB to say good things about them. We don’t need to do
that. Read our testimonials on our website. That will show you we have helped people
just like you.”
If needed: “Ma’am, did you also know that the owner
of the BBB southland has his own debt management company and that he gives his
competitors an f rating so people will use his company instead?”
7 Don’t research the debt settlement company at the GetOutOfDebt.org
website.
Dn’t get me wrong. This is a great website. But only a small fraction of the
companies are listed on this site. Let’s do all we can to continue growing the
awareness just as we are doing in articles like yours and responses like mine!
8 Don’t read the contract carefully. AKA don’t have a lapse in good judgment.
9 Don’t question them if they attempt to illegally charge you fees
before they settle your debts.
“Yes ma’am, I know the law you are referring to.
However, we are attorneys, so that really isn’t a law that applies to us. Any attorney
will charge a retainer fee. And of course, that law is in place to protect you
from companies who wouldn’t be able to do for you what we can… As attorneys, we
can stop those harassing creditor calls. We can get your debt cut in half. Now that $1,500 retainer fee broken down to 5 monthly
installments of $300 doesn’t sound too bad, does it? Don’t worry ma’am. We are your attorneys and we will protect you.” Sold.
10 Don’t politely decline their offer to meet with you face to face.
Buddy, a nice suit goes a long way. Remember, these people are SALES people.
They are good at what they do. And I have seen more documents signed at Starbucks lately than in a conference room. And the big
boys have real nice conference rooms that just beg for the face to face meetings anyway.
Money sells an image. Desperation buys it.
In short, I agree there are
common mistakes to avoid. But reality is, people need to wise up. The scams haven’t changed.
The presentations may have improved. They language used may be different now
than two or three years ago, but it’s still a DEBT RELIEF SCAM and most don’t work.
Some do. Most don’t.
So what has happened that people are
still falling victim to all these scams even after FTC implemented the TSR amendments?
Desperation has increased.
It’s sad, but we will never be able to
conquer the lapses of good judgment when people get sold a dream when they are
desperate for help.
Great post Jeff, and thanks for serving!
MR…USMC 1979-82
Glad you liked it, actually Damon wrote it for Jeff’s site.
It’s a good piece but I’m puzzled, why does it say “By Jeff Rose”. Makes me wonder how many other items/stories/post I’ve read are not as they appear. Kinda silly if you ask me.
Jeff got permission from Damon to submit it as his syndicated article on my site for that week. Damon was gracious enough to give him permission to do that. Damon wrote it for Jeff as a guest post there. Jeff thought it was relevant and well done and readers here should see it. Thus, it became Jeff’s guest post. There’s just no function to show two authors for one article.
Glad you liked it.
I’d be interested in Damon’s response to my above post… let’s find a true solution to helping consumers avoid the bad companies as opposed to how to get out of the situation once they are already enrolled!