A reader sent me a link to the Superior Debt Relief Services page on “Past Settlement Averages” and wanted my opinion on what it presented.
Well if we were looking for a good example of what not to do in presenting fair and balanced information to consumers, this would be it.
I’ll give them a half prop for trying to present information but that’s about as far as I can go. And here is the problem.
Superior Debt Relief Services presents averages to consumers and says their average settlement in 2011 was 36.5%. But then they also say, “The settlement results shown above reflect actual settlements negotiated with our customers’ creditors and debt balances at the time of settlement. They do not include the fees paid by our customers for our services or the services of third party administrators.”
If I read their facts and disclaimer correctly the figures presented are the averages of settlements obtained, only. That approach falls far short of the FTC guidance on presenting performance facts to consumers.
The FTC says:
May I base my advertising claims on the experiences of some previous customers?
Yes, but your sample must be representative of the entire relevant population of your past customers. To accomplish this you must, among other things, use appropriate sampling techniques, proper statistical analysis, and safeguards for reducing bias and random error. You can’t cherry-pick the most successful examples to inflate your results.
If you advertise or represent that your customers will save a certain amount of money or reduce their debt by a certain percentage – for example, “We can settle your debts for 40% to 60%” – your statements must be truthful, and you must have objective proof to back them up. Your claims must accurately reflect the results you’ve achieved for previous customers. It’s important to consider the message your claims convey. Under the law, the FTC looks at claims from the point of view of reasonable consumers. Therefore, what matters isn’t the literal accuracy of the words you use, but rather your proof to support the “net impression” your message conveys. For example, claiming that your past customers have achieved “up to 60% savings” is likely to convey to new customers that they, too, will get savings of around 60%. If you don’t have solid proof to back that up, the claim is deceptive.
Include the impact of your fees on the claimed savings. You may not inflate your savings claims by excluding the fees your customers paid you.
Example 9: Betty owes $10,000 on her credit card, and signs up with Company J’s debt relief service. Company J gets a settlement allowing Betty to pay $5,000 to resolve the debt. However, at the time of settlement, Company J charges Betty a $1,000 fee for its work. It would be deceptive for Company J to claim to have saved Betty $5,000 – or 50% of her debt – because Betty also had to pay $1,000 in fees. Instead, Company J may truthfully state Betty’s savings as $4,000 ($5,000 minus $1,000) or 40% of Betty’s debt.
In calculating the results you’ve achieved over time, you must include customers who dropped out or otherwise failed to complete the program. Don’t base your savings claims only on customers who successfully completed your program.
Example 10: Company K had 10 customers signed up for its service. Each one had $10,000 in unpaid credit card debt for a total of $100,000. Five of the customers completed the program, and each saved $5,000 – for a total savings of $25,000. The remaining five customers dropped out of the program, each one still owing the $10,000 they owed when they signed up with the program. Taken together, Company K has saved its customers $25,000 – or 25% – of the total $100,000 debt they had when they signed up with the program. It would be deceptive for Company K to exclude the drop-outs and claim that it saved its customers 50% of their debt.
Include all debts enrolled by your customers, not only those that have been settled successfully. In calculating your savings claim, you may not exclude accounts you failed to settle, even if the failure was due to customers dropping out of your service.
Example 11: Company L has 10 customers, and each of them enrolls two $1,000 debts in the program – totaling 20 debts or $20,000. Company L is able to settle 10 of the 20 debts, each for $500. However, it was unable to settle the remaining 10 debts before those customers either completed or dropped out of the program. Thus, Company L has saved its 10 customers $5,000 or 25% of their debts in the program. It would be deceptive for Company L to exclude the 10 accounts that weren’t settled and claim a savings rate of 50%. – Source
Superior Debt Relief Services then goes on to show “real debt settlement averages from our program taken over the years.” – Source. But they only show one for each month. The average consumer may interpret this as an average representation of what to expect.
I see it as the best settlement they got for that month. It is not clear what this figure includes in its calculation.
I don’t bring this up as a point of attack against Superior Debt Relief Services, but as an issue serious debt relief companies need to be paying attention to in this post FTC Telemarketing Sales Rule world. It appears the boundaries are very clearly laid out about what is fair and acceptable for performance claims and this does not appear to be it.
In fact I think Superior Debt Relief and John Wilson have done an incredible amount of positive things for the debt settlement industry. This is not an attack on Superior Debt Relief but the basis for a discussion of what constitutes the highest level of transparency and the totality of information that should be presented to consumers to make a fully informed decision.
If you are using or presenting information in a similar fashion on your site, it’s time to revaluate that approach and make the information more inclusive of total performance.
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John Wilson of Superior Debt Relief Services has sent in the following statement.
- First, let me point out that the statistics posted our the Superior Debt website are actual averages of all settlements done for the indicated period, not “the best settlement they got for that month”! This includes legal accounts which typically settle for much higher percentages and are a true reflection of actual settlements. We don’t massage the data or “cherry-pick” the most successful examples to inflate our results. We are completely transparent about our numbers and will furnish our raw data for proof of the published numbers.
- The settlement percentages published on our website are just that – settlement percentages. The FTC’s statement to the question about basing advertising claims on previous customer experience says, “Yes, but your sample must be representative of the entire relevant population of your past customers.” Not only is our sample representative, it includes the entire relevant population for the stated periods. The statistics published on our website are not claims about program savings. We even contacted the FTC before we changed our website to publish those numbers. Their response was that we just needed to have proof supporting what we put on the website. Again, the raw data is available as proof of the statistic on the website.
- Not sure I understand your statement in the third paragraph from the bottom of your article: “I see it as the best settlement they got for that month.” For example, January 2012: $4,697,219 settled for $1,771,027 – 37.70%. Obviously to any reasonable consumer, $4,697,219 includes multiple settlements, not “the best settlement they got for that month.”
- All your examples refer to claims of program savings. The Superior debt website makes no claim about savings or anything else. We publish the factual statistics of our average settlements over certain time periods. We also are very clear about what these statistics represent.”