I was sent the audio of a debt relief call with a settlement agency that would be recognized if I identified them.
The caller in this case asks some very good questions when it comes to fees. You can listen to the call below or here.
This company makes the pitch later in the call “Well, we’re handling it for you. If you were to try to do it on yourself, most people, you know, it’s like anything else, you could go change your own oil and pay and just find the cans of oil for $5 instead of paying $50 to a mechanic to do it. But do you really want to spend the time to go in and do all that?”
But here is the part that is a little tough to swallow. It will cost the consumer 90 percent of the value of the debt to settle. And that does not even cover the cost of the monthly maintenance fee.
In addition, settling would cost time and money, expose the consumer to credit report negative entries that will last seven years, and wind up costing much more than a Chapter 7 bankruptcy that would eliminate all of the debt in 90 to 120 days and cost less than $2,000.
The cost of hiring this company if everything goes well is 90 percent of the amount you owe? “So that means I would have to pay you $400, pay the creditor $500 on a debt that was only $1,000 to start. Correct.”
Why?
Settlement Call Transcript
[00:00:00] Yeah, we just wanted to be straightforward with people, let them know that some people don’t realize that some do. So you want to take all these credit cards and throw them into one simple payment that fits in your budget. But also we’ll let you get the debts resolved over a reasonable period of time.
[00:00:24] So here’s our process. Step one is a free consultation. I want to get the name, how much you owe, and I want to do a budget analysis from that. I’ll be able to give you a payment. If the payment sounds fair to you, then I’ll explain exactly how the program works and more detailed. The program. Sounds fair.
[00:00:42] I’ll send you enrollment documents east side and get back to me along with one other form. When I get those back all, they’d be able to turn into your account for activation. Okay, so that we’re ready. So soon as you make your first payment, we’ll be able to right around when you make your first name, it will be able to start contacting the lenders.
[00:01:01] Okay. All right. Well, I wanna, I want to slow you down just a little bit. Um, I need you to tell me about the program, the pros and the cons. And I mean, I know it’s not perfect. I mean, there’s not a perfect way to get out of debt so I can handle, I can handle the constitute. I just need you to be honest with me about what that.
[00:01:24] Oh, I tell you, yeah, we disclose all this stuff. We’re disclosure happy. We’re licensed to do business in your state. You’re in BEEP. Right. And we, so we disclose everything. Yeah, absolutely. So if you want to flip the script and do it a different way, that’s no problem. So what will happen is I just need you to tell me, um, you know, what I can expect as far as approximate amounts for settling.
[NOTE: The State the caller says they are in limits the maximum fee to significantly less than the company is charging and they’ve verified the state in the call.]
[00:01:52] And I also need, um, to know how you get paid and you know what I can expect to have to pay you for your services. Uh that’s we can start with there. Can you, can you give me that information? Yeah, we, we, we’re not really supposed to give you settlement projections. Regulation says we, you know, we’re not really supposed to do that, but what I can tell you is the way the program works is you make a payment, right?
[00:02:19] And that payment goes into an escrow account. We don’t touch it. There’s no upfront fees. The money is managed by a law firm. That’s separate from our company, right. They manage the money. They only charge $9 and 95 cents a month. That will be included in the payment. Okay. Um, they’re not your personal attorneys are there to manage the money.
[00:02:37] Okay. Okay. What’s the name of the. Yes.
[00:02:46] No. That’s okay. So the money accumulates and it goes in there, right. And it does, one of the thing I want you to know is it does take some time for us, for us to build enough funds to resolve a debt. You know, sometimes three months, sometimes six months. It just depends on how much you owe your lenders of what your payment is.
[00:03:05] But as the money accumulates, you know, we’ll get enough. To settle and resolve these debts one by one. Now, the way that works is let’s say you have a lender that you owe a thousand dollars to, and let’s say they come back and they say, well said it’s 500 bucks. We’ll call this debt resolved. So what we would do is get that in writing.
[00:03:25] Once we get it in writing, then we would send that to the, uh, that letter to the escrow agent. The escrow agent would then validate the way. You know, and then once they validate it, they would pay that creditor out of the escrow account.
[NOTE: What kind of “validation” does an escrow company do other than pay as stated?]
After that escrow agent, after that their account has been paid at that point in time, we’ll get our portion of the fee for doing that work.
[00:03:47] Right. Which is 40% of the debt, the settlement savings you keep. So. The $500 there that was left after or so after the creditor has been paid after we get our fee, whatever’s left is yours. We’ll either use that to pay another debt off sooner, or if it’s the end of the program and you have money left, we’ll send you a check.
[00:04:07] Okay. All right, let me stop you. I just want to make sure that I heard something. Clearly. You said that, that we’re, we’re pretending that there’s a thousand dollars. That you are able to settle for $500, correct.
[00:04:31] But for illustration,
[00:04:35] for illustration purposes, only you, you said that we would sell it for 50 cents or 50 cents on the dollar. And then you said that your fee is 40% of the. So that means I would have to pay you $400, pay the creditor $500 on a debt that was only $1,000 to start. Correct. And that scenario? Yes. But remember also Scott, we’re not, we could be three to six months before we get anything and we’re on the hook during that time.
[00:05:12] We’re investing time and manpower to manage your account. So we don’t make anything during that time. Right. That’s why, you know, that’s why our fee is what it is. We also, this is one thing to consider. We specialize in helping people with payday loan debt, right. That’s our specialty. And. Payday loan debts are different than credit card debts, but people don’t have as much of that.
[00:05:42] Right. But the creditors are very aggressive. So the average credit card client, they owe $17,000. The average payday loan client owes three or 4,000. So we have to charge more of a fee because of the fact that, uh, It’s less debt. We have to be able to survive as a business. And when you’ve take into account that we’re spending a lot of time, we have a lot of clients, so we do a lot of work for, and then they drop off before we make anything, you know, and that’s part of the business.
[00:06:12] We understand that, but that’s one of the reasons also why we have to charge the fee that we do. We have to be able to survive as a business.
[NOTE: It sounds like the debt relief company is trying to justify charging such a high fee for not screening their clients or developing a business model that does not push the costs on to the consumer.]
[00:06:22] You needing to survive, but what, what I need you to help me see is how does potentially paying 90% of a debt.
[00:06:40] Well, we’re handling it for you. If you were to try to do it on yourself, most people, you know, it’s like anything else, you could go change your own oil and pay and just find the cans of oil for $5 instead of paying $50 to a mechanic to do it. But do you really want to spend the time to go in and do all that?
[00:07:00] It’s the same thing with this. This is our area of expertise. We’re good at it. And this isn’t necessarily the easiest thing in the world to do these creditors. You know, you’re emotionally vested in the, in the credit cards, you know, and they put pressure on you. You maybe you don’t get things in writing.
[00:07:16] You just pay someone to pay them, to get them off your back. You know, we handle all that. You know, so, you know, plus, you know, it’s in that scenario, you owed a thousand you’re in and out for 900. You know, if you keep doing what you’re doing, you’re going to pay probably even more than a thousand, I guess you have interest in everything, you know?
[00:07:37] So there’s that, there’s that as well. 40% of the amount of debt at the time I come into the program or after all the late fees and stuff are added on six months down the road. Well, so we get the bounces from you and we validate the deaths, right?