Interviewer: How long does the full debt settlement process usually take?
Andrew Campbell: That’s the problem. Not all of these debt settlement companies are operating illegally. Some of them are licensed to operate in states and they follow the states’ rules and regulations, and those people I have no problem with whatsoever.
But with a lot of the credit card debt settlement scams, the problem is, at least in Michigan, most of them violate Michigan law because Michigan has a law called the Credit Services Protection Act and that says that if you’re an intermediary between a debtor and a creditor, your contract has to be performed within 90 days.
That means that you can’t simply collect money from people for months and months and months and years and years and years, because the contract’s not being fully executed within 90 days.
What you have to do is in order to comply with that law is you have to be able to have a consumer who has a lump sum readily available. Most people don’t and they have to pay into the debt settlement company for several months before they can get enough of the debt settlement company to make one offer to one credit card company.
That’s the law, at least in Michigan. The violation is that they fail to perform the agreed services within 90 days following the date the buyer signs the contract for services. They have to perform in 90 days and most of the time, that’s impossible for them.
A lot of credit card companies won’t even deal with debt settlement companies. A lot of credit card companies say, at least publicly and I’m not sure this is true, “Hey, look, it doesn’t matter to us. A consumer can call us and make a deal just as easy as a debt settlement company can call us and make a deal. There’s no difference.”
In a lot of credit card companies’ eyes, they would rather just deal with the consumer because the consumer’s going to have more money to pay the credit card company if you don’t have the debt settlement company taking 10%, 15%, 20%.
This is a real problem in the mortgage industry. Remember a few years when we had the financial crisis in 2008?
Interviewer: Oh yeah.
Andrew Campbell: That caused a lot of foreclosures and that’s where you had all these people offering loan modification services. They would ask for $3,000 or $4,000 up front to see if they could get a modification of their loan and these people would pay it.
The FTC, which is the Federal Trade Commission, came out and made a rule and said, “No, you can’t do that. You just can’t do that anymore.”
If you’re a telemarketer, which a lot of these debt settlement companies are, under the FTC Telemarketing Sales Rule you can’t request or receive payment until you, the debt settlement company, produce the promised services and you provide proof documenting that you’ve done the services to the consumer.
There are no more upfront payments that are allowed by the FTC and also the FTC mandated additional disclosures that have to be made to the consumer before they actually sign the contract.