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.**
You have the right to life, liberty and the pursuit of happiness.
When struggling to manage your debt, however, it often seems as though those rights have been suspended!
The struggle to pay bills can make you feel as though you don’t have a life. If it seems as though all you are doing is working to pay the bills and getting nowhere, you could feel imprisoned. If you are buried under a mountain of debt, a sense of gloom will sometimes permeate your thoughts. That sense of gloom can turn into DOOM if you have fallen behind in payments.
Enter the Debt Collector
{cue scary suspense theme music here}
Dealing with tough financial times is hard enough as it is. When debt collectors start ringing your phone at 8 am and do not stop until 9 pm, your phone begins to resemble something with scales and sharp teeth!
When you pick up the phone and speak to whoever is on the other end, you will experience different types of collection efforts. People in the collection business often develop either a good cop or a bad cop persona.
Speaking to and repeating your current financial hardship to a good cop collector can be tedious, but otherwise not unpleasant. Speaking to a bad cop collector can be about as pleasant as running your nails over a chalk board repeatedly.
We’ve Got You Covered
We will continue to develop our coverage of this topic and add resources for dealing effectively with collection abuse. Debt Bytes will publish a resource guide for victims of abusive and illegal collection tactics that will be linked to this post and all future posts on this topic. Here at Debt Bytes, we will cover debt collection extensively:
You need to know how to be a winner in the collection game.
You need to know you have rights that protect you from abusive and illegal collection practices.
You need to know there are solid resources available to you for legal assistance if a collector violates the Fair Debt Collection Practices Act (pdf doc).
Debt Collection Questions?
For now, you can:
Post your question right here in the comment section below.
Fill out our consultation request form to schedule a time to speak with an experienced CRN Debt Specialist.
Or call 800-939-8657 and press ext. 3 to schedule a consult.
CRN specialists have many years of experience assisting people with putting an end to their struggles with debt. Contact us to find out if we can help you.
“CRN has worked very well for me. I listened to the tapes thoroughly and was able to settle my 2 largest accounts on my own. My coach has been a tremendous help with this program. He is handling 2 of our remaining accounts that had been turned over to lawyers. As we speak, he has already settled one of them, thus avoiding my appearance in court.”
“ "It is so easy to get into the predicament that my husband and I have gotten into and I don't know what we would have done had we not heard your commercial on the radio on the way back from a convention last June. Our coach has been such a help in dealing with all of this and we appreciate being able to take advantage of your program. Thank you so much.”
Debt Settlement is not the right solution for everyone struggling to pay their unsecured credit card bills. Not by a long shot!
