Interviewer: With these debt settlement companies, what are some of the initial red flags?
Andrew Campbell: Here are the red flags. I’m just going to summarize them for you and then I’ll go into detail.
The first would be not performing all services within 90 days. If the debt settlement doesn’t at least negotiate or attempt to negotiate with all of the consumer’s creditors within that time period they are violating Michigan law.
Second, if they charge any fees before the debt settlement company settles your debt. The telemarketing sales rule does not allow those kinds of fees.
Third, if they promote a new government program. If you see “new government program to bail people out of personal credit card debt,” usually that’s false.
Third, if they promote a new government program. If you see “new government program to bail people out of personal credit card debt,” usually that’s also false because there isn’t really a government program.
Fourth, if they guarantee they can make your unsecured debt go away, that’s also false, because really, you’re not supposed to guarantee things of that nature.
Here’s why. You never know if the credit card company is going to actually work with the debt settlement company. Some of these credit card companies have policies where they just won’t even talk to them.
In the end, most customers of debt settlement companies end up paying over a year or so and then suddenly get sued. There’s almost no way you can stop lawsuits. Some creditors will wait typically about three years before bringing an action. Others sue within six months after default.
Also, if they guarantee that your debt can go away for pennies on the dollar – you hear that phrase a lot – that’s often false or deceptive because again, it comes down to a guarantee, and really they can’t guarantee anything.
The biggest problem in Michigan is that debt settlement companies are supposed to perform all services within 90 days. This almost never happens, unless you are dealing with a licensed debt management company, like Greenpath. The licensed companies are not the problem, they follow the applicable law. The problem is the big spenders.
The huge national companies either don’t know or just don’t care about Michigan law. They make the customer pay out for years and they don’t attempt to settle all debt within 90 days.
These types of companies are the ones I pursue to help get my client’s money back.
Interviewer: Who are these individuals? What’s the deal with these companies? Who are they? I understand what the motive is (and I hate to sound like Jerry Seinfeld), but who are these people?
Andrew Campbell: Well, there are different types of operations involved. Some of these are out-of-state law firms and some of these are national players.
Some of these are out-of-state law firms and some of these are national players. These companies exist because they operate as an escape-valve for the guilt that some have in filing for bankruptcy protection.
In fact, many of the people I help are candidates for either Chapter 7 or Chapter 13 bankruptcy. Had they made that choice much earlier and not attempted debt settlement they would have saved themselves a lot more money.
If these debt settlement companies performed all services within 90 days consumers would be much better off. They would know immediately whether settlement was going to be the most effective way to resolve their debts.
The bottom feeders end up ruining it for a lot of other people, and that happens in the many areas of consumer law but especially debt settlement context.