Most of the news coming from the debt settlement industry these days is either about how the sky will fall if the new Federal Trade Commission guidance goes into place to control the debt settlement industry, or how it is needed.
Well here is an interesting press release just out from the folks at the debt settlement company Morgan Drexen.
Morgan Drexen Calls for Federal Regulation of Debt Settlement Industry
Morgan Drexen, Inc. outlines the need for federal oversight of debt settlement industry and proposes new legislation to protect consumers
FOR IMMEDIATE RELEASE
PRLog (Press Release) – Nov 16, 2009 – Anaheim, CA… It’s not often that a company petitions Washington to create and implement federal regulations constraining the industry in which the company works. Then again, in the world of debt settlement, Morgan Drexen, Inc. (www.morgandrexen.com) has always done things differently. Choosing professionalism over profit, ethics over earnings, Morgan Drexen has set a standard of integrity that is, unfortunately, far from the industry norm. But as Congress prepares to examine debt settlement, the company has issued a comprehensive, written Comment outlining the need for federal oversight and proposing several new regulations to protect consumers from unethical debt settlement companies.
These regulations, if enacted, would be the first to bring the debt settlement industry under the eye of Washington, rather than the “patchwork” of easily circumvented state regulations that are now in existence. Until there is federal oversight, it’s likely that many desperate consumers will be misled, falling into schemes that will bleed dry already limited finances.
As part of the proposed regulations, Morgan Drexen offers a list of new industry standards, including:
- An assurance that each prospective client will undergo a comprehensive analysis to ascertain whether a true hardship exists and to estimate what reasonably can be afforded to build-up a fund of money to pay-off debts at a discount;
- An assurance that no client will be charged any inception, start-up, or initiation fee prior to settlement of a debt, more than to set-up files and pay the average variable cost of the client procurement, qualification, and intake functions;
- An assurance that every client will be disclosed the limitations of what the debt settlement provider can achieve;
- An assurance that every client will receive a contract written in plain language which sets forth the scope of services, the potential limitations of what may be achieved, the true cost of the services on an on-going basis, and detailed monthly statements;
- An assurance that after settlement of each debt, every client will receive a complete recap of all fees and costs paid to the debt settlement company and the amount of the debt extinguished.
“We view these kinds of regulations as essential to guarantee consumer protection at every point along the way,” explains Walter Ledda, founder of Morgan Drexen. “Debt settlement companies provide a valuable service; that is, helping consumers get out from under crushing credit card and other unsecured debt without the scar of bankruptcy. But the debt settlement industry has gotten a bad rap because state-by-state regulations have not been enough to establish solid industry standards. This lack of uniformity is why we need federal regulations. Until consumers can trust that their debt settlement plan is fair, cost-effective and in their own best interests, the industry will continue to suffer from negative press, and vulnerable consumers will still be prey to false promises.”
Morgan Drexen has gone on record stating, “We look forward to working with Congress to create and enforce a national standard that will ensure that consumer debt settlement needs are being served with integrity, honesty, efficiency, and without fraud, deception, or unfairness.”
But on my second pass through the release I got stuck on this:
An assurance that no client will be charged any inception, start-up, or initiation fee prior to settlement of a debt, more than to set-up files and pay the average variable cost of the client procurement, qualification, and intake functions;
What concerns me is that the client acquisition costs for debt settlement companies can be huge. Some have even told me it can cost as much as $800 for a new and qualified debt settlement customer. The Morgan Drexen statement seems to lump these “client procurement” fees into the money that can be collected up-front.
Nice try Morgan Drexen but my bet is that’s not going to fly. It seems the cost of doing business and feeding the pipeline of business is not one to be shouldered by the client but paid for over time by providing quality services and through a monthly fee not to exceed about $50 while the client is trying to accumulate funds.