I have continuously written articles and spoken out in interviews about the practice of “selling” debt settlement. Selling someone into debt settlement is the number one reason the industry has been tarred and feathered in the media. The over hyped selling by profiteers and sales groups has resulted in enforcement actions by many states, and new FTC rules, in order to curb abuse.
DEBT SETTLEMENT SHOULD NOT BE SOLD
Steve Rhode, on his blog, getoutofdebt.org, regularly covers the debt relief industry and its foul ups, bleeps and blunders. He has recently covered several lawsuits filed by employees against the firms they sell/sold debt settlement for. The lawsuits allege failure to pay wages related to work performed. Steve has posted about lawsuits against: Lloyd Ward and Associates, ABC Debt Relief, The Debt Answer, Debt RX USA, Silverleaf Debt Solutions, CreditAnswers, and Credit Solutions of America. Key assertions in these lawsuits provide a clear view into the sales culture at some of these companies. I will focus on Steve’s post about the employee suit against Credit Solutions. Credit Solutions are also the target of multiple state legal actions.
From Steve’s post where he excerpts from the court record (my comments are in bold):
For at least three years prior to filing of this complaint and continuing (hereinafter “Liability Period”), CSA had a policy and practice of not correctly compensating its debt consultants for work performed for the benefit of CSA over and above forty (40) hours per week, to wit: virtually all debt consultants received a $2,000 forgivable draw their first 90 days of employment and a non forgivable draw of $2,000 per month thereafter. Debt consultants qualified debtors for debt settlement plans of Defendant by verifying the debtor possessed at least $10,000 in debt. Next debt consultants analyzed each creditor comprising the $10,000 is owed at least $600 and there are contracts in place between the creditor and CSA. The debt consultant sets up a CSA account for each creditor. Lastly, the debt consultant verified the debtor’s bank accounts and assisted the debtor in picking a payment plan. Once a plan was chosen the debt consultant, using CSA guidelines, would set up a monthly draft on the debtor’s bank account whereby CSA would obtain its fee and moneys to satisfy the debtor’s creditors. Eighty-five percent (85%) of CSA’s fee is collected from debtors’ accounts within the first 90 days. Debt consultants received a fee from the first monthly draft which was a percentage determined on the total volume of draft’s occurring monthly attributable to that debt consultant.
Michael: Here we learn that “debt consultants” are what I would more correctly define as sales people. The way this alleged fact is laid out would actually describe more of an order taker. What do they actually do by way of a consultation? It appears they just hit the immediate qualifiers, and then help you pick a payment option that will work for you. There is an obvious motivation for “picking” a payment that you will agree to. That is how they get paid! They have to do it though (more on this below).
Debt consultants were required to work a minimum of 12 hours per day, but were expected to work as many hours as necessary to reach assigned sales goals. Debt consultants regularly worked 14-16 hours a day and CSA provided debt consultants a room to nap and sleep when necessary to reach company goals.
Michael: Imagine the pressure to hit sales goals. In the current job market, these sales people HAD to perform to keep the job. They HAD to hit sales goals even if it meant sleeping at HQ to do it! No pressure, right?
Debt consultants were not provided a rest or lunch break, but instead, CSA served debt consultants “cup of noodles” for lunch so they would not have to leave their desk and could continuing selling the debt settlement services.
Michael: This allegation is one of the most descriptive of the debt settlement sales culture I have ever seen. Why not just put a shackle from the desk to the ankle of the sales person? Were there bed pans nearby?
Debt consultants worked six (6) days a week.
Michael: Ever see Ben Affleck in the movie “Boiler Room”? “ALWAYS BE CLOSING” – the sale, that is.
As stated above, debt consultants do not receive overtime for hours worked over 40 in any week.
Michael: And why should they? You think cups of noodles are free?
CSA’s revised compensation/bonus plan containing an overtime component does not correctly calculate debt consultants’ regular rate of pay for purposes of calculating overtime; i.e. commissions paid on top of consultants’ hourly rate are not included in their regular rate of pay. – Source
Other than the outright lies that are told, there is no single more frustrating fact about the selling of a debt settlement service than the pick a payment plan approach. It is sold that way because it has to be. A consumer who is struggling to pay their creditors the required monthly minimum is focused on the dollar amount they cannot come up with. When a debt settlement sales person suggests all you need is to establish a monthly dollar figure that you can do, the hook is set!
Imagine if the sales people at Credit Solutions actually shared the truth of the matter with you. If they told you that in order to be successful with settling your delinquent accounts, you are in a race. You have to come up with the money to fund offers as fast as possible. You would not feel the sigh of relief that is purposefully designed into the sales approach by the majority of people selling debt settlement. Instead, your heart would palpitate. You would know that debt settlement is a tough choice, not an easy one. You would have a much clearer idea if debt settlement is even right for you. The sales person for CSA would not close as many sales. Do you think they would ever get to go home?
Debt Consultant Offering Debt Relief
If you are asked what you can come up with each month to put toward settlement, or someone “helps” you come up with a figure they are confident you will bite on, you are talking to someone offering “pick-a-pay”. Pick-a-Pay is a suitability test that everyone will pass. Using this approach means virtually any one breathing will qualify for debt settlement. That is, and has been, absurd (absurdly profitable too).
Look to speak with someone who actually works with consumers and their creditors/collectors on a daily basis. If they have any experience, and are what I would consider a responsible service provider, they will tell you the amount of money you will need to come up with, and how quickly, in order to SUCCEED with settlement in your particular situation. Armed with this knowledge, you will then be able to evaluate whether or not filing bankruptcy would be the better choice.
Anyone with questions about how debt settlement will help them get rid of problem debt should do a ton of research about the option itself, and all the pros and cons of debt negotiation. Once you understand the process, talk to a professional offering paid services about what they can do to help.