A friend and I were having a conversation several years ago about his and my companies approach to working with consumers who are struggling financially. The context of the discussion was centered on how we both approach consulting with potential customers. His company, like CRN, is direct and honest in their assessment of consumer’s options, nearly to a fault. At the time, the CRN business model was still relatively new and competitors would win over business by saying anything they needed to in order to close the sale (many still do). While expressing my frustration, my friend said something that I have not forgotten since:
“You Can’t Compete With Liars.”
The reality of that statement has persisted in the debt relief industry prior to his stating it and since. I have covered the topic at different times, in articles and interviews. Nothing I have done can compare to the content put out by Steve Rhode over on his blog: getoutofdebt.org
Steve puts out regular content about the debt relief industry. The theme of his coverage can be best described as “Debt Industry – The Good, The Bad, and the Ugly”.
When it comes to competing with liars though, his recent piece outshines anything I have heard or read to date – on tape even! He published an extremely well-put-together investigative piece about false and misleading claims and the straight up willingness to lie, by those offering debt settlement services for a large attorney law firm and some of its affiliate marketing partners.
You Can’t Make this Stuff Up!
He did not even have to try very hard. He batted 1000%. He only made 3 calls during peak hours to the sales reps and all 3 were willing to lie, deceive, and connive to make a sale. HAT TRICK! The fact that these sales reps are working for and/or fronting themselves in direct relation to a law firm provides even more of a “greasy” feel to the whole thing.
The practice of “say anything” to close a deal has been so wide spread, and the abuse now so well documented, that the FTC has published new rules to reign in the crazy profiteering. The new laws will be aggressively monitored for compliance as they become effective in the next 8-12 weeks. The attorney-modeled debt settlement companies are not exempted in the form many are known for today.
The industry gnashed their teeth and wailed about how the abuse and misrepresentations were the result of a few bad apples. They have only come off as disingenuous. What we have seen to date, and will continue to see for a while longer, may prove that this kind of “scammery” was more the norm for selling debt settlement. One thing for certain, the company(s) exposed in Steve’s piece likely have some “‘splainin to do”.
For the past many years (and through 10/27/10), Debt Settlement service providers have, in large part, been able to charge fees, whether they were helpful to consumers or not. With new rules issued by the FTC, companies offering settlement services will now have to earn their keep in all 50 states.
There are many attributes to the new rules that will benefit consumers looking for reputable and honest companies to assist them. I will cover many of these consumer protections, in detail, throughout the next several weeks, here on DebtBytes.
I want to expand on Block’s article where she quoted me from an earlier interview, saying:
‘Michael Bovee, founder and president of Consumer Recovery Network, a debt-settlement firm that doesn’t charge upfront fees, agrees. Many consumers who have signed up for debt settlement in recent years should have filed for Chapter 7 bankruptcy’, he says.
I meant what I said in this quote. It is as applicable looking forward as it is in the looking backward context delivered above.
Debt Settlement is not the right solution for everyone struggling to pay their unsecured credit card bills. Not by a long shot!
Nobody wants to file for bankruptcy. The debt settlement industry has been able to leverage this fact exceedingly well with over hyped and over the top claims that debt settlement is a panacea to the debt woes of middle class America. What the FTC found through the 2 year process of crafting these new rules, and from their own enforcement actions, as well as those by state regulators is; AT BEST, Debt Settlement has only worked for roughly 1/3rd of the people who try it. Some sham companies that have been shut down were shown to have only been successful with less than 5% of their client base!
Why?
Debt Settlement marketing has been designed to enroll the wrong people, along with the right people, because the fee model used by most companies allowed them to get paid, regardless if they delivered on their claims or not.
The FTC rule changes will chase away many of the “fee grab” marketers from the industry, as they will not be able to “sell” settlement as some easy, soft, “just send this less painful amount of money to a set aside account monthly and we will handle the rest” approach. They will be unwilling to wait to get paid their commissions from people they sign up who cannot fund settlements for sometimes 6 and more months (or at all).
WARNING: The soft sell of debt settlement, even with all of the new disclosures and the upfront fee ban, will still persist after all of the FTC rules take effect.
It may take a while for companies to realize they are shooting themselves in the foot by accepting clients who are ill suited to try to avoid bankruptcy through a debt settlement (often referred to as debt consolidation & debt negotiation) program. So, consumers are still going to have to be thinking through the math to see if they should try debt settlement. It is always the math that should determine whether settlement is right for you. Math & Timing… Math & Timing… If these two things do not sync, given your current finances, debt settlement is NOT right for you!
“Debt Settlement – The Math & Timing” will be Thursday’s post her on DebtBytes. Don’t miss it!
CRN Supports Changes to the Telemarketing Rule Just Announced by the FTC
Yesterday, the FTC announced important changes to the Telemarketing Sales Rule, http://www.ftc.gov/opa/2010/07/tsr.shtm. The changes are intended to protect consumers with too much credit card debt from abusive debt settlement practices. One of the most important changes is that settlement firms will no longer be able to charge consumers up-front fees to settle their debts as of 10/27/10.
Overall, I am thrilled that the FTC is reigning in abusive debt settlement firms. For too long, these firms have been allowed to prey on consumers with too much credit card debt. Sadly, in far too many instances, consumers who worked with such firms saw their financial situations grow worse, not better, because of the large up-front fees they had to pay, and many of those consumers eventually ended up in bankruptcy.
The rules will shape the industry and promote the best practices moving forward.
I am concerned that some settlement firms may charge a large fee at the back end of their work for consumers. I have always contended that the fee amount charged by a debt settlement service provider directly correlates to how long it will take an individual to be successful in settling all of their debts. Program duration is directly attributable to increased risk of aggressive collection efforts such as filing lawsuits against a consumer in order to collect.
When consumers are looking into debt settlement as one of the few legitimate options available to deal with crushing debt, it is IMPERATIVE that they still weigh the COST for the service.
I will be posting more detailed comments about the amendments soon. Stay tuned!
The Debt Relief Industry will be forever changed by the announcement and publishing of new rules from the FTC today. The rules are designed to protect consumers from those marketing and providing debt settlement services.
The most contested measure anticipated in the new rules is a ban on companies charging upfront fees. Upfront fees have been held up as necessary by the majority of debt settlement companies who have lobbied heavily to maintain the status quo. Consumer advocates and regulators have argued that upfront fees are the equivalent of an abusive business practice. We, at CRN and Debt Bytes, agree! Which is why CRN fees for full service debt settlement have always been based on SUCCESS, after the creditor is paid.
Stay tuned to Debt Bytes, as we will be covering the impacts of these changes in the coming weeks.
For Immediate Release
July 28, 2010 **MEDIA ADVISORY FOR TOMORROW**
FTC Chairman to Announce a New Debt Relief Rule to Protect Financially Distressed Consumers at Middle Class Task Force Event
WASHINGTON – Tomorrow, Thursday, July 29th, at 1:30 PM ET, Federal Trade Commission Chairman Jon Leibowitz will announce a new rule to protect consumers of debt relief services at a Middle Class Task Force event at the White House. Following the Chairman’s announcement, Vice President Biden will discuss the administration’s consumer protection agenda and the importance of consumer protection to middle-class families.
This event will be POOLED for TV cameras, and OPEN to print, online, radio and still photographers. An RSVP is required to participate.
WHAT: FTC Chairman to Announce a New Debt Relief Rule to Protect Financially Distressed Consumers at Middle Class Task Force Event
WHO: Vice President Joe Biden, Federal Trade Commission Chairman Jon Leibowitz
WHEN: Thursday, July 29, 2010, 1:30 PM ET
Gather time: 1:00 PM ET at the White House stakeout location
RSVP: Press who wish to cover this event should RSVP to press@ovp.eop.gov by tomorrow, Thursday, July 29, 2010 at 8:00 AM ET. **Press who DO NOT have a White House hard pass should include their Date of Birth and Social Security Number. All press must enter the White House at the Northwest Gate.**
“...and I came across a company called CRN. I talked with them and knew within 15 minutes of talking to Michael that this was the way to go."..."Their fee, being the most reasonable, made sense to me too. Most everybody wanted 20% of the total debt load; CRN wanted 15% of the debt reduced. Also, CRN sent me a whole debt settlement packet which included good information on DS as well as very informative CDs..! That information along with Michael's acute consultation helped me settle my debt of $60K in 6 months! Nobody I talked to was even close. Thanks to CRN, I have settled all 3 of my accounts for 30~35% on a total balance of almost $60K!”
“There is nothing like this feeling of being debt free. Free from the stress, the worry, the anxiety. All the folks at CRN have given me this freedom, you have given me the ability to enjoy my life again. Thank you again, so much for all that you guys have done for me.”
Debt Settlement is not the right solution for everyone struggling to pay their unsecured credit card bills. Not by a long shot!
