How to Get Out of Debt With the Get Out of Debt Guy » Debt Relief Industry

Judgment to be Secured With Cash or Bond in Lloyd Ward Kansas Default Judgment Case

Steve Rhode — Fri, 25 May 2012 22:20:10 +0000

A tipster wrote to me and directed me to a previous case that was filed against Lloyd Ward in Texas as a foreign judgment.

Apparently the court in Texas has just ruled that Lloyd Ward, Lloyd Ward PC, Lloyd Ward & Associates and Lloyd Ward Group must deposit $119,000 in cash or bond “which is the amount that will secure the judgment creditor in any loss or damage occasioned by the delay on appeal. – Source

This case goes back to a case from Kansas in which Kelly Hawkins won a default judgment against the Ward entities named. You can read more about that case here.

A number of allegations came to light in that case, including the apparent ownership of a Texas law firm by non-attorneys Kevin Devoto and Lloyd Regner who are now duking it out in court themselves.

Ward’s representatives claimed the Kansas default judgment was void because the State of Kansas and the Kansas court lacked jurisdiction over any of the Defendants. It is also alleged that the Defendants have “never done business in Kansas.” – Source

A document filed in this case by Charles Branham, III Esq. basically called Ward unreliable in his claims that the Kansas default judgment should not be honored in Texas against him.

“It was undisputed that, despite Mr. Ward’s demonstrably false affidavit, that Mr. Ward and his law firms agreed to represent Kelly Hawkins in an attorney-client relationship. Supplemental Affidavit of Lloyd Ward dated March 30, 2012 stating “I have no business transactions with Kelly Hawkins” with letter from Lloyd Ward dated June 21, 2011 stating “Ms. Hawkins entered into an agreement with Lloyd Ward on April 16, 2010…” Moreover, Mr Ward acknowledges that the contract was between Mr. Hawkins and an entity which did not exist, Lloyd Ward Group, LLC. Mr. Ward further admitted that his website was an “interactive” website which included client logins and the ability to “Click here for a quote.” This website further touted Lloyd Ward & Associates as “the Premier Debt Negotiation Law Firm in the U.S.” – Source

@GetOutOfDebtGuy

CFPB Appears to Lay Ground Rules to Begin Enforcement in Debt Relief Industry

Steve Rhode — Fri, 25 May 2012 19:33:09 +0000

From How to Get Out of Debt

In a predatory move, the Consumer Financial Protection Bureau (CFPB) has issued a public request for comment over rules that could be used to regulate debt relief industry companies, both for-profit and not-for-profit.

The document, “Procedural Rules to Establish Supervisory Authority over Certain Nonbank Covered Persons Based on Risk Determination” has been put out for public comment.

Under this proposed rule the CFPB is not expressly mandated to cover debt relief companies but their mandate does allow them to have supervisory authority over any person or entity “that it “has reasonable cause to determine, by order, after notice . . . and a reasonable opportunity . . . to respond” that such covered person “is engaging, or has engaged, in conduct that poses risks to consumers with regard to the offering or provision of consumer financial products or services.” – Source

That seems to certainly cover the debt relief space since bad actors have been known to specifically engage in conduct that harms consumers. It would be a seemingly absolute stretch to say that debt relief providers do not offer “consumer financial products or services.”

The CFPB is proposing that when an entity is brought to their attention which they believe “is engaging, or has engaged, in conduct that poses risks to consumers with regard to the offering or provision of consumer financial products or services” they will contact the entity. Additionally, these rules can apply to “Any affiliate of a person described in subparagraph (1) of this paragraph if such affiliate acts as a service provider to such person.”

This contact will allow the entity a chance to respond in writing and orally.

Receiving a notice from the CFPB would not constitute of charges. The process would be informal and no discovery would be permitted. Notices would be delivered through the “U.S. Postal Service by Registered Mail, Certified Mail or Express Mail delivery, or by third-party commercial carrier, for overnight delivery and obtaining a confirmation of receipt.”

Entities that receive such a notice would be required to respond within 20 days of service of the notice. A failure to respond shall result in a waiver of an entities right to respond and trigger the final process which can result in a supervisory determination.

Companies that wish to respond to a notice from the CFPB shall “include all records, documents, or other items upon which a respondent relies; and (3) include an affidavit signed by the respondent attesting that the information contained in the response is true, accurate, and without any omission that would cause the response to be materially misleading.”

There is an interesting reference in the proposed rule that leads me to believe the CFPB may still intend to have people and entities register with the CFPB. “Notice may be served on a person currently registered with the Bureau by sending a copy of a Notice addressed to the most recent business address shown on the person’s registration form…”

Entities that are deemed to require supervision by the CFPB will fall under the following 12 U.S.C. 5514 process.

“The Bureau shall require reports and conduct examinations on a periodic basis of persons described in subsection (a)(1) for purposes of—
(A) assessing compliance with the requirements of Federal consumer financial law;
(B) obtaining information about the activities and compliance systems or procedures of such person; and
(C) detecting and assessing risks to consumers and to markets for consumer financial products and services.”

Companies found to be problematic may result in a referral by the CFPB to “Any Federal agency authorized to enforce a Federal consumer financial law described in paragraph (1) may recommend in writing to the Bureau that the Bureau initiate an enforcement proceeding, as the Bureau is authorized by that Federal law or by this title”

Parties interested in commenting can submit their comments on Docket No. CFPB-2012-0021 or RIN 3170-AA24 by going to http://www.regulations.gov.

You can read the full proposed rule here.

@GetOutOfDebtGuy

Bank of America to Credit Counseling Agencies – It’s Not Me, It’s You

Steve Rhode — Fri, 25 May 2012 18:49:10 +0000

From How to Get Out of Debt

A tipster recently emailed me saying that the inside scoop is that Bank of America is going to start working with fewer credit counseling agencies, or at least stop accepting DMP proposals.

Bank of America has been some interesting things recently. Most intriguing is their selected 75%-50 month repayment plan they are offering at 0% interest.

The plan works out to be a good deal for consumers, if they can get it. In fact it’s a better solution with Bank of America than either most debt settlement deals or credit counseling plans can offer.

While I have no confirmation on the plans by Bank of America to only focus on working with the ten or so of the largest agencies I think there is enough information floating about to make the whispers a plausible reality.

Insiders in the credit counseling world are saying that Bank of America has made it clear to some their intention is to eliminate working with a significant number of DMP providers and refuse to accept repayment proposals from many otherwise recognized 501(c)3 nonprofit credit counseling groups.

This will certainly impact credit counseling groups that will have to say, sorry Bank of America doesn’t work with us. The ones that Bank of America will accept proposals from will brag about that to consumers as evidence why consumers should work with them.

These whispers have been floating about for a year or so about this move but it just seems there is more emphasis behind this at this time. If it’s going to happen, it might be a move that’s close to being rolled out.

From a Bank of America point of view it seems to make logical sense. By paring down who they work with it would only mean needing to manage ten or so relationships. Besides, there may be some risk protection on their part to make sure the rumored demise of a number of credit counseling groups does not leave Bank of America stranded with proposals but to agency to manage them.

In the past year there have been a couple of examples of credit counseling groups, including nonprofit groups like UFS, that have gone out of business and left a mess for creditors and consumers to try to deal with.

A move by Bank of America to put this plan in place may result in a suit by some agencies against Bank of America but we’ll have to wait and see what really happens.

@GetOutOfDebtGuy

Lloyd Ward Sued by State Bar of Texas – Commission for Lawyer Discipline

Steve Rhode — Thu, 24 May 2012 21:23:27 +0000

From How to Get Out of Debt

Texas attorney Lloyd Ward, as part of Lloyd Ward & Associates, has beed sued by the State Bar of Texas, Commission for Lawyer Discipline over his alleged actions concerning debt settlement activities related to Debt RX USA and Silverleaf Debt Solutions.

The complaint, filed on May 23, 2012, alleges that in “June 2008, Michael Miles created Debt RX USA, LLC to operate as a debt settlement and negotiation company. On March 19, 2009, Miles hired Lloyd Ward to represent Debt RX as legal counsel.

Lloyd Ward subsequently prepared a Management Agreement between Lloyd Ward & Associates, PC and Miles which provided for Debt RX to manage the collection division of Lloyd Ward & Associates. Debt RX as manager was to receive 90 percent of the monthly net profits from this division. Lloyd Ward was to receive the remaining 10 percent of the net profits. The funds came from clients paying for debt settlement services.

In November 2009, Miles created Silverleaf Debt Solutions, LLC. Silverleaf and Lloyd Ward did not have a written agreement, but Lloyd Ward and Silverleaf did business together under the same terms as the agreement that Lloyd Ward had with Debt RX including the 90 percent / 10 percent fee split arrangement.

The 10 percent fee that Lloyd Ward received from both Debt RX and Silverleaf was for legal fees that Lloyd Ward incurred. When sending invoices for these legal services, Lloyd Ward addressed them to Debt RX and/or Miles-Silverleaf.

When entering into these agreements with Miles and both Debt RX and Silverleaf, Lloyd Ward failed to give them a reasonable opportunity to either seek the independent advice of counsel regarding the agreements or obtain their written consent. In addition, Lloyd Ward failed to furnish Miles and both Debt RX and Silverleaf with a conflict of interest waiver for signature.

Various lawsuits were subsequently filed against Lloyd Ward, Miles, Debt RX and Silverleaf. Lloyd Ward hired outside counsel to represent one or more parties without informing them of the lawsuit. In addition, the parties were not consulted regarding responsive pleadings that were filed including motions to dismiss.

Finally, Lloyd Ward misrepresented to Miles that there were tax issues involving Debt RX and Silverleaf. Lloyd Ward attempted to get Miles to sell Silverleaf stock to him to cure these alleged tax problems.” – Source

In the interest of disclosure, in October 2011 Lloyd Ward sued myself, my wife, this site and the Myvesta Foundation. The case is ongoing and there is nothing to report on that mater.

@GetOutOfDebtGuy

Connecticut Goes After More Debt Relief Companies

Steve Rhode — Thu, 24 May 2012 17:21:46 +0000

From How to Get Out of Debt

New administrative actions have just been made public against more debt relief companies. Connecticut does not mess around.

The new entires made public include:

Alliance Mitigation Group

The company did not respond to administrative notices sent by the Consumer Credit Division of the Department of Banking. The company was hit with $11,795 in fines and is barred from Connecticut. – Source

Home Credit Law Center, United Processing Center

The State alleges:

Home Credit is a purported law firm with an office at 9854 National Boulevard, Suite 242, Los Angeles, California.
Brian R. Linnekens is a California attorney and President of Home Credit.
United Processing is a California corporation with an office at 14252 Culver Drive # 520, Irvine, California.
On March 4, 2011, a Connecticut resident received an e-mail from a representative of Consumer Mortgage Counseling Services of America (“CMCSOA”) describing the debt negotiation services offered by CMCSOA and Home Credit.
On March 8, 2011, the Connecticut resident and his wife (“Connecticut residents”) received another email from CMCSOA which stated, in part, that “as I said on the voicemail I left you, all the info you requested on HCLC is in the contract. Mr. Linnekens personally supervises all cases, but there is no negotiator assigned to your file until you formally become a client. Please get the contract and supporting docs back to me as soon as possible, and then we’ll hit the ground running”. Included with the e-mail was an application, which included a document entitled “Limited Power of Attorney & Borrower Authorization”, which would allow a borrower to appoint Home Credit and United Processing as the borrower’s true and lawful attorneys-in-fact to, among other things, “contact the above referenced lender regarding my existing mortgage loan for the purpose of negotiating a workout agreement or modification”.
On March 11, 2011, the Connecticut residents, while physically present in this state, entered into an agreement with Home Credit for debt negotiation services. The Purpose provision of the agreement states that “[c]lient hereby retains . . . [Home Credit] and its affiliates and Consultants to prepare a plan for helping the Client acquire and analyze proposed solutions that may help the Client improve their negotiations with their lender”.
On July 15, 2011, one of the Connecticut residents filed a complaint with the Commissioner in which the Connecticut resident stated that:
The company after receiving my information said they could get me into a loan modification program. They said that they could work with my mortgage company or a bank to get my monthly payments reduced. The cost was $4100.00 which was taken out in three installments from my wife’s checking account. They also told me not to talk to any staff from the mortgage company that they will take care of that.

The payment of $4,100 for such debt negotiation services was in excess of amounts that debt negotiators may charge for services pursuant to the Schedule of Maximum Fees established by the Commissioner on or about October 1, 2009.
At no time relevant hereto were Respondents licensed to engage or offer to engage in debt negotiation in this state, nor did Respondents qualify for an exemption from licensure.
At no time relevant hereto did Respondents perform or successfully complete the services specified in the agreement.
By letter dated October 3, 2011, Home Credit admitted that it had other Connecticut clients, and claims that it is not a debt negotiator.

A further hearing will be held on this matter and they have been issued a cease & desist notice in the meantime. – Source

Michael Lupolover, Law Offices of Michael Lupolover, Premier Consumtant Group, Premier Debt Solvers, Premier Debt Pro Servicing

According to State documents, Lupolover is also affiliated as a control person of the following entities: Creditors Relief LLC; Premier Debt Solutions Limited Liability Company; Premier Debt Solvers; Premier Debt Pro; Law Offices; Consumer Law Advocates PC; Debt Solutions Limited Liability Company; and Lupolover & Canty Professional Corporation.

The Commissioner alleges that from at least October 2009 to July 2011, Respondents were engaged in unlicensed debt negotiation activity in Connecticut, in violation of Section 36a-671(b) of the Connecticut General Statutes.

As of July 20, 2011, Respondents ceased and desisted from engaging or offering to engage in debt negotiation in this state.

Pursuant to a settlement agreement entered into on July 20, 2011, with the Office of Chief Disciplinary Counsel of the State of Connecticut Judicial Branch, Lupolover and Law Offices herein represent that they have either refunded or transferred to a duly licensed or exempt debt negotiator all fees paid by Connecticut clients of Law Offices for debt negotiation services. Such refunded fees totaled approximately $166,539.

Lupolover and Premier Debt Solvers herein represent that they have refunded all fees paid by Connecticut clients of Premier Debt Solvers for debt negotiation services. Such fees totaled approximately $11,741.

Lupolover and Premier Debt Pro herein represent that they have refunded all fees paid by Connecticut clients of Premier Debt Pro for debt negotiation services. Such fees totaled approximately $2,857.

A consent order was entered into on April 26, 2012. The entities must stop engaging or offering to engage in unlicensed debt negotiation activity in Connecticut and pay a $3,000 penalty. – Source

@GetOutOfDebtGuy

Is DebtConsolidation.com Smoking Dope?

Steve Rhode — Thu, 24 May 2012 16:49:30 +0000

From How to Get Out of Debt

A company called DebtConsolidation.com just put out a press release making some rather odd statements. They claim they are “a leading information and referral source for debt management and credit counseling” but seem to be instead providing misinformation instead.

The reader who sent this to me was most upset by the statement they make, “”There is no signup fee for the debt consolidation companies we recommend. You can avoid bankruptcy which can ruin your credit for up to 10 years. You can wipe out about 50% of your unsecured debt at one of the lowest costs possible,” Spears adds.” – Source. The reader seems to feel the statements made are untrue or not in compliance with FTC regulations.

But let’s look at the entire press release / marketing message and see what DebtConsolidation.com is saying.

According to public domain records DebtConsolidation.com is owned by Platinum Worldwide, Inc. The records say the domain is for sale or lease.

You would imagine that a “leading” site would not be for lease but maybe that’s just me.

The press release title is “Credit Counseling Site Announces Its Debt Settlement Service As One of the Fastest and Most Effective Ways Out of Credit Card Debt.” It seems that even though they label themselves as a credit counseling site their primary focus is debt settlement.

The site starts the release making claims that seem to support that point of view.

But how is it the most effective and how can that statement be made with any support since both traditional debt settlement and credit counseling have such poor consumer performance numbers. The DebtConsolidation.com release doesn’t even mention the performance of the services they offer, but then again it seems the site is more of a referral service than a company that provides these services.

I was with them on the first part of this section. It is one possible solution for some well qualified consumers. But how does it “keep their payment delinquencies in check” when the very premise of debt settlement is that creditors will most likely negotiate with consumers that are delinquent.

I beg to differ on this statement of theirs. I’ve researched and written about this extensively and there is a great difference in the effectiveness of the different debt relief solutions. See The Truth About The Success Rates, Failure Rates and Completion Rates of Credit Counseling, Debt Settlement, and Bankruptcy. The press release does not provide consumers with any evidence to support their claims of effectiveness.

If the website claims to offer “all the relevant information” then why do they go on that state that bankruptcy is something to be avoided and can ruin your credit up to ten years when debt settlement will be on your credit for seven years, the same length of time as a chapter 13 bankruptcy. With settlement they claim you can wipe out “about 50%” of the unsecured debt but with a chapter 7 bankruptcy you can wipe out 100% of your unsecured debt in about three months. That all seems like relevant information that should be presented as well.

But is the 50% savings amount really a fair statement to make? It seems they say something very different on their website. “Clients who are able to stay with the program and get all their debt settled realize approximate savings of 50% before fees, or 30% including our fees, over 24 to 48 months.” – Source

So now we learn it’s not about 50% but really about 30% and that this only applies to people that complete the program and settle all of their debt but what percentage of people is that? They appear to be silent on that very important fact.

Debt Consolidation.com is a Mystery

A visit to the website for debtconsolidation.com seems to only further the mystery. There is no information about the physical location of the company or who is behind them. If we look at New York, the state where the domain is registered there is no company under the name DebtConsolidation.com that is authorized to do business.

Neither the contact us or about us pages provide any information why the company is or where they are located. – Source

The lack of transparency about who they really are makes me worried for consumers that provide information to them. Where does it go and who are they giving it to?

All of this seems like issues that you would not find a “leading” company engaged in.

A Look at the DebtConsolidation.com Website

They make some very bizarre statements on their website. Take this one for example.

That’s a statement that is not supported by the facts, at all. About 70% of all bankruptcy cases filed are under a chapter 7 bankruptcy in which the entire unsecured debt is eliminated in about three months.

Bankruptcy happens to be the only legal solution that can intervene with all of your creditors and make the calls stop.

The company claims to be an AFCC member, a trade association that is supposed to put consumers first. The AFCC site lists the member using this domain as:

Nationalrelief.com
11 Broadway
Suite 1300
New York, NY 10004
888-703-4948
www.nationalrelief.com
www.debtconsolidation.com – Source

As an AFCC member the company is supposed to be in compliance with the AFCC code of conduct which says, among other things:

Members shall comply with all federal and state laws regulating credit advocacy and debt relief services, including, but not limited to, the 2010 FTC Rules for debt relief providers. (Their performance claims do not seem to comply.)
Communications with clients and the public shall be honest and truthful. (Lacking a bit of truthfulness in my book.)
Representations regarding the services and potential outcomes of the service shall be fair and accurate. (Accurate?)
Estimates used in setting up a program for clients such as the total cost and program length shall be based on historical and substantiated data. (But where is the substantiated data?)
Members shall clearly and conspicuously disclose both the risks as well as the benefits of credit advocacy to individuals enrolling in programs. (Well balanced?)
Members shall clearly and conspicuously explain what fees are charged for services, how they are charged and when such fees are earned. (Where are they?)

The website seems to be silent on their actual fees as well. – Source. Even though their AFCC membership says they need to be open about fees, they appear to primarily say the fees are “The debt relief companies we recommend only get paid when they successfully settle your debts. Their fees are comparable to all the top performance based debt relief firms.”

The NationalRelief.com domain that is listen on the AFCC membership for DebtConsolidation.com is registered to National Debt Relief Group, 2502 86th St, 4th Floor, Brooklyn, New York and the contact is Tom Leydiker.

National Debt Relief Group, Inc is registered in New York but on September 22, 2009. That seems like less time that the amount the website claims to have experience for when they say in their press release, “For nearly a decade, the company has been providing valuable insight on debt management strategies that would prove to be the best course of action for a client’s specific financial situation.”

And just when you didn’t think it could get any stranger, there is a company called National Relief, LLC that is located at the same address listed for National Debt Relief Group, Inc. The company National Relief, LLC used to be called New Vision Debt Solutions and changed their name to National Relief, LLC on January 11, 2012. – Source

Other debt relief companies that have used the same address include Eagle One Debt Solutions, Law Offices of Robert S. Gitmeid, Maple Leaf Debt Helpers (a Canadian debt relief company) and Horizon Legal Group. – Source. There is no way to tell if these companies are related in some way or maybe they simply share the same office space.

But then there is this bit, Maple Leaf Debt Helpers, Inc uses a domain name associated with Canada, debtconsolidationcompanies.ca but the contact for the domain is Daniel Tilipman that has the email address of danny@nationalrelief.com. Maple Leaf Debt Helpers is not registered to do business in New York.

AFCC members should be able to do better than this.

@GetOutOfDebtGuy

Freedom Debt Relief Sues Century Negotiations, Inc. My How Times Change.

Steve Rhode — Mon, 21 May 2012 20:34:31 +0000

From How to Get Out of Debt

For those that have been involved in the debt world for a number of years the names Freedom Debt Relief (FDR) and Century Negotiations, Inc. (CNI) were linked together through thick and thin under the trade group TASC, (The Association of Settlement Companies). In fact the honcho over at CNI, Dave Leuthold, was even the Executive Director of TASC, under which FDR worked diligently for to help try to get favorable debt settlement legislation passed.

And as recently as April, 2012, both companies had leadership and/or speaking roles in AFCC, (American Fair Credit Council). – Source

That was then. Flash forward to May 16, 2012. That’s the day FDR sued CNI in the Northern District of California.

According to the complaint, Since November 2004, FDR and CNI had an agreement where FDR referred a number of potential clients to CNI.

“When a referral is made by FDR, it is up to CNI to determine whether or not to enroll the customer based upon CNI’s own proprietary underwriting procedures and specific enrollment criteria. A number of these referrals are rejected by CNI as a result of its own independent review. In those instances where CNI chooses to enroll a referred client, it will enter into a written contract with that client, in a form approved by CNI. The client does not enter into any agreement of any sort with FDR.”

Things look like they really began to sour in July of 2010. Around that time a CNI customer, Mr. Webster, filed suit against CNI, FDR and others. But this complaint filed by FDR against CNI alleges that “at no time did Mr. Webster ever enter into an agreement with FDR.”

Another CNI customer filed suit in August of 2010 against CNI and its chief executive officer, David Leuthold. FDR was later added to that suit.

To summarize the case, CNI feels FDR should indemnify CNI for the cases filed and FDR says bollocks. FDR claims they had nothing to do with these clients except pass the lead over to CNI.

You can read the complaint filed, here.

@GetOutOfDebtGuy

Mortgage Modification Company Former Owner Facing 80 years in Jail

Steve Rhode — Fri, 18 May 2012 21:00:09 +0000

From How to Get Out of Debt

Isaak Khafizov, a former owner of American Home Recovery (AHR), a mortgage loan modification business, was found guilty yesterday in Manhattan federal court of conspiracy, mail fraud, and wire fraud in connection with a scheme to defraud distressed homeowners and lenders. Khafizov was convicted after a ten-day jury trial presided over by U.S. District Judge George B. Daniels. He was remanded into the custody of the U.S. Marshals following his conviction.

“At the height of our nation’s financial and housing crisis, Khafizov and his conspirators defrauded homeowners desperate to save their homes,” said Christy Romero, Special Inspector General at SIGTARP. “Khafizov exploited the government’s response to the financial crisis by touting his operation’s purported affiliation with federal programs. He and his conspirators used the false comfort in those reassurances to dupe hundreds of victims out of hundreds of thousands of dollars while some victims fell into foreclosure and personal bankruptcy. Those exploiting TARP and the federal government’s response to the financial crisis will be brought to justice by SIGTARP and our partners in law enforcement.”

Manhattan U.S. Attorney Preet Bharara said: “Isaak Khafizov dangled false promises of relief to distressed homeowners who were trying to keep their homes, but instead, he repeatedly victimized them by stealing their money and forcing many of them into foreclosure. He will now face justice for the fraud that he committed against vulnerable and needy homeowners all over the country.”

According to the Superseding Indictment filed in Manhattan federal court, other court documents, and statements made during court proceedings:

In or about the spring of 2008, Isaak Khafizov, Jaime Cassuto and David Cassuto, founded American Home Recovery (AHR), a mortgage modification business that operated in Manhattan. As shown at trial, from the spring of 2008 through the summer of 2009, Khafizov used AHR to commit a systematic fraud that preyed on distressed homeowners. Khafizov and AHR’s salespeople fraudulently induced distressed homeowners all over the United States to pay AHR thousands of dollars in up-front fees, by falsely promising the homeowners that: (1) AHR could get them better interest rates and lower monthly fees, all within a short timeframe; (2) AHR would return the up-front fees if it did not succeed in getting the homeowners the mortgage modifications they desired; (3) the homeowners had been “pre-approved” for mortgage modifications by their lenders; (4) AHR was affiliated with government agencies and programs established by the Economic Stimulus Act of 2008; (5) AHR possessed special expertise in mortgage modifications, and (6) AHR had special relationships with lenders. After receiving up-front fees from the distressed homeowners, Khafizov and AHR did little or no work to try to renegotiate the homeowners’ mortgages. And on those rare occasions when Khafizov succeeded in getting a homeowner a mortgage modification, he typically did so by coaching the homeowner to lie about his or her income and assets on forms submitted to the mortgage-lender.

Because Khafizov and AHR did not do the work they had promised and because Khafizov specifically directed the distressed homeowners to stop paying their mortgages and to pay AHR its fees instead, many of AHR’s clients wound up in foreclosure. All told, Khafizov and AHR defrauded hundreds of customers across the country out of hundreds of thousands of dollars in fees.

Khafizov, 25 of Queens, New York, was convicted of one count of conspiracy to commit mail and wire fraud, one count of mail fraud, and two counts of wire fraud. He faces a total maximum sentence of 80 years in prison and is due to be sentenced by Judge Daniels on September 6, 2012. Jaime Cassuto and David Cassuto each pled guilty to multiple counts of fraud on April 2, 2012. – Source

IRS Yanks Nonprofit Status of Credit Counseling Agencies

Steve Rhode — Fri, 18 May 2012 18:59:40 +0000

From How to Get Out of Debt

The IRS has just posted a public update on the nonprofit credit counseling agencies that have recently lost their 501(c)3 tax status from the IRS.

The companies named lost their nonprofit status in April and early May, 2012. They include:

Budget Right Debt Management, Inc. Lake Mary, FL 4/9/12
Budget Right Debt Management, Inc. Maitland, FL 4/9/12
Consumer Advocacy Group, Inc. Beverly Hills, CA 4/16/12
CreditGuard of America, Inc. Boca Raton, FL 4/16/12
A Family Budget Counseling, Inc. Huntington City, NY 4/30/12
Freedom Debt Management, Inc. Boca Raton, FL 5/7/12

@GetOutOfDebtGuy

Debt Settlement Companies Suffer from Premature Representation

Guest Post — Thu, 17 May 2012 14:58:56 +0000

From How to Get Out of Debt

First, I’d like to say thank you to Steve Rhode for the invitation to make a guest post. Steve, I greatly appreciate you opening up your venue. Rather than focusing on what Debt Relief A La Carte offers, I’d like to take this opportunity to discuss why. It will be much more meaningful for all. I’ve been waiting for a podium such as this, to open up for debate, the premature aspects of debt settlement. I couldn’t have dreamt of a better place.

Here we go…

The year was 1999, I was working for a Collect America franchise in Denver, as a collector and soon to be floor manager. I remember this day as if it were yesterday. My encounter that day left my head spinning with intrigue. It was my first dance with a debt settlement company. In my mind, I dissected their approach, their plan, the reason for their existence. Conceptually, I thought the idea was amazing. I viewed their existence as a way for the consumer to level the playing field. It made so much sense.

However, encounter after encounter, I began to notice a trend. It was rare that these companies ever had any money to actually negotiate a settlement. Instead of the debt settlement company playing the role of advocate, their involvement was more like an obstruction. What could have been a mutually beneficial scenario for all involved, ended up impeding our collection efforts. It was an ugly business model that had so much potential, if just done right.

If you asked me what is the most important thing to me, in respect to our debt settlement service? I would tell you sustainability. What is the key to sustainability? A mutually beneficial outcome for all involved. In my mind, the model that involves premature representation doesn’t achieve this. It is very frustrating to the creditor and collection community when representation doesn’t lead to a potential timely resolution. Then, when you couple this with the fact, that real life challenges to consumers are almost certain to impact the length of time even further. It’s beyond ugly. It’s representation with no potential solution in sight. It forced the creditor and collection community to a position of defense, and it’s so unnecessary.

The FTC rule, the individual state legislation, it’s all great. Especially, the advance fee ban. But, it missed big time on the main reason and true source of the Debt Settlement industries core problem – premature representation. What other industry does this? In what other capacity does someone represent someone else, when the potential for execution doesn’t exist?

I get why debt settlement companies offer to do it. One of the most appealing elements to a consumer is a debt settlement companies engagement. They want that representation to occur. Consumers don’t know any better, and by now this industry should. Maintaining the appeal should be less important than the consumers best interest.

Some of you may be scratching your head questioning why this is. I’ll explain… The collection community is well aware that a typical debt settlement plan takes years, and that they may potentially have to wait that long before settling. They’re also well aware that the completion rates for debt settlement companies are low. Both of these items cause some creditors to become more aggressive in an effort to become the priority and collect. Simply because there is a great chance that if they’re not settled with first or second, they may never be settled with at all.

In my opinion, the chances of a consumer being sued when they’re representing themselves versus when they’re prematurely represented, are night and day. I’m not saying that people who represent themselves don’t get sued, I’m saying that it isn’t done by invitation.

One twist of a knob is all it takes to offer debt settlement in a successfully dependable form. We twisted it the day I started my company over 10 years ago. We did so by only offering our Debt Settlement service to consumers, who have the financial ability to settle their enrolled debts right away. That’s it. That’s all it takes.

Our typical Debt Settlement client has $42,000 in debt, owes 6 different creditors, and has roughly half of it available to them via a loan from family, a 401k, IRA, equity in an asset, life insurance, or an annuity. Our strategy since inception has been to help them to find a way to generate enough money to settle their delinquent unsecured debts, all at once.

By creating the opportunity for our client, to get out of debt for x instead of y, we create value for everyone involved. We help a creditor, collection agency, or attorney capture revenue from an account that they may otherwise wouldn’t. We help the consumer avert a possible bankruptcy when they possibly otherwise couldn’t. We minimize the “what if’s”, by negotiating simultaneously to produce an end result for all of our clients enrolled debts, before they pay anything to anyone, including us.

The worst case scenario is there may be some accounts that may not be low enough for our clients to be able to afford to settle. In this situation, we give them the choice of us continuing to negotiate the account to obtain a lower settlement, negotiate a payment plan, or they have the option to unenroll the account from our service.

What has this one difference of only representing consumers when they have the money to settle led to?

A successfully reliable debt settlement business model
94.2% of all enrolled accounts have been settled or entered into a payment plan. Disclosure: We have omitted accounts where our clients took our advice and paid the account in full to avoid the settlement designation on their credit report. All of the accounts had a balance of less than $1,200. The advice was based on the amount of savings versus a “paid in full” rating rather than a “settled” one.
Dramatic restructuring of the consumers monthly obligations – when a client uses a loan from their 401k for example, generally their loan payment is less than half of their previous related monthly expenses
Timely resolution – our Debt Settlement clients are with us for generally 30-90 days
Minimization to the possible exposures of debt settlement – we eliminate the need for a creditor or collection agency to pursue the consumer legally for the purpose of making their account the priority, since all enrolled accounts are negotiated simultaneously
Less exposure to interest and fees, since our clients generally settle their debts in 30 – 90 days
Client rehabilitation – again, since our clients generally resolve all of their delinquent debts in 30-90 days, their credit will begin to rehabilitate much sooner
Mutually beneficial outcomes for all involved – consumers resolve their issue within their capabilities. And, creditors benefit by liquidating an account that they may not liquidate normally, and from the time value of the settlement

You may say to yourself that this all makes sense, but what about the other 90% + that don’t have that ability?

We thought about this too. A lot. How could we achieve a more reliable debt settlement business model for the consumer that needs to settle over time? The answer was the same. We only offer to enroll accounts into our Debt Settlement service, when the funds to settle are available. It’s that exact same knob again. I’ll tell you how we accomplish this…

If a consumer can’t settle their debts right away, we offer to train them to settle their debts themselves. And, when they have the funds available to settle, we give them the option to hire us to negotiate their more challenging accounts. All of the potential exposures that premature representation brings upon the consumer are eliminated, because we don’t do it.

We teach them by…

Breaking down their finances to determine how much they can afford to accumulate monthly
Approximating how much money they will need and how long it should take them to settle their debts
Reviewing specifically who they owe and determine if they have any potentially legally aggressive creditors
Creating a debt settlement timeline, where we detail the order in which they should settle their debts and the approximation of when they will be able to do so. Example: Settle with ABC Bank at month 6 for approximately 50%, settle with XYZ Bank at month 11 for approximately 50%, and so on
Forming a strategy to submit offers to their creditors, by helping them figure out the best angle to take, and by creating a presentation that demonstrates the reasons why their creditors should settle with them
Discussing how to manage and communicate with their creditors while they’re accumulating funds
Teaching them what may happen to their accounts as they age and go through the collection cycle
Explaining how collector’s view their ability to pay, so our trainees will know how to act accordingly
Arming them with the information of what their creditors, collection agencies, or collection attorneys have settled for. We provide them with the lowest, the average, and the highest settlement percentages that we negotiated ourselves
Teaching them how to communicate and negotiate, by discussing what information to share, how to make their offer, when to make their offer, and how best to negotiate
And finally, by teaching them how to handle the transactions when paying their settlements, so they’ll know exactly what they need and what to do

When our trainees represent themselves, they maintain their anonymity. They’re just another account that moves through the currents of the collection cycle. Their accounts aren’t flagged or outright targeted for aggressive pursuit due to premature representation, because they aren’t represented. At least not until they have the funds available to settle, and then it’s an option at Debt Relief A La Carte.

Most of our Do-It-Yourself Debt Settlement clients are pleasantly surprised by random settlement offers that they receive. What they figure out, is that they really only need representation with the minority of their accounts, if any at all. This cost savings achieved by not having to pay a debt settlement fee, potentially enables them to settle their debts more quickly. Which further enhances their chances for success.

To make sure that our trainees achieve the highest success possible. As part of our suite of debt relief services, we make our Periodic Review service available. This gives our trainees [consumers] the option to inquire with us about their specific situation, whenever they have the need. Our trainees use this service to assist them with keeping on track, to inquire about recent communication they have had, to run their negotiations and offers by us, and to obtain our opinions and refinements to their strategies. A lot of empowerment is achieved by our trainees through this service, not just for debt settlement, but for everyday life.

We also offer a Role Playing service, where we pretend to be a bill collector, so our trainees can enhance their negotiating skills. This is a very powerful tool that helps prepare our trainees for their communication and negotiation strategies.

And then, if we offer our Debt Settlement service in the trainees state, and they have funds available to settle, we give them the option to hire us to negotiate their more challenging accounts. So, if they really need that professional help, they have the option to use it.

I’ve had a lot of fun with our DIY Debt Settlement services. It is really rewarding for me to hear my trainee, engulfed in a new found confidence when they negotiate their own settlement. It’s like watching the most beautiful thing you can imagine, become what it is.

They quickly learn that it isn’t anywhere near as daunting as they thought it would be. And, they benefit greatly by always being in the know, in regard to the status of their accounts.

If I could wish for just one thing, it we be for the general public to know that negotiating settlements is common place in the debt collection industry. Random settlement offers are generated as a matter of doing business as usual.

I want to commend the debt settlement companies that have taken the high road, and agree to only represent their clients when their funds to settle are available. I seriously applaud you, as it is an incredibly ethical move. We just offer our services a little differently, in order to give our trainees the option of minimizing their costs associated with settling their debts, so they may get out of debt as soon as possible. This is why I changed the name of my company about a year ago, to Debt Relief A La Carte. It is up to our trainees and their situations to decide just how much professional help they actually need. We just provide the outlet to make that possible.

* We were formerly known as Strauss and Associates.

So, if you were to ask me for my opinion regarding what could clean up this industry for good, it would be a law that requires consumers to have the financial capacity to settle their enrolled debt prior to being able to gain representation from a debt settlement company. It is the only way to offer debt settlement in a successfully reliable fashion. There is no reason for representation to occur prematurely. It creates on obstructionist relationship with the collection industry, that in turn, makes success more difficult for a debt settlement companies clients. It stifles growth and prosperity for everyone involved. It’s just not good.

Steve, thank you for the soap box. I appreciate it.

Jared Strauss
Debt Relief A La Carte, Inc
www.avoidbk.com

Non-Profit Housing Counseling Agencies to be Focus of IRS Examinations

Steve Rhode — Wed, 16 May 2012 15:59:40 +0000

From How to Get Out of Debt

The report below comes from Venable law firm. All I can say to my credit counseling friends is they better learn the meaning of the phrase BOHICA (Bend Over Here It Comes Again).

Earlier this year, the Internal Revenue Service’s (“IRS”) Exempt Organizations (“EO”) division unveiled its annual work plan. The plan highlights EO’s priorities for the year and is the best indicator of what the staff will be focused on in its determinations and examinations activities. These areas of focus were recently reiterated in remarks at a tax-exempt organizations conference attended by IRS EO staff.

One of the plan’s six general work areas is of special interest to credit and housing counseling agencies.

The plan calls out the increasing challenges confronted by the IRS, as residential foreclosures have mounted and the number of exempt organizations involved in foreclosure assistance activities has increased.

According to the report, in FY 2012, both EO’s Determinations and Examinations offices will focus on the activities of mortgage foreclosure assistance organizations to determine whether they are fulfilling their exempt purpose, and whether they are complying with the requirements of section 501(q) of the Internal Revenue Code (the “Code”).

Section 501(q) of the Code, added by the Pension Protection Act of 2006, establishes additional standards that a credit counseling organization must satisfy to qualify for exemption under section 501(c)(3) or 501(c)(4). Of particular relevance, in 2010, the IRS Office of Chief Counsel issued a memorandum concluding that organizations that engage in housing counseling may be subject to Code section 501(q).

The FY 2012 Work Plan and recent off-the record comments by IRS staff confirm that the IRS will be closely reviewing applications of would-be exempt organizations and the ongoing operations of existing groups that provide mortgage foreclosure assistance services.

Beginning in 2004, the IRS began scrutinizing tax-exempt credit counseling agencies in a manner and scope it never had previously. Since then, the IRS has initiated over 254 audits of credit counseling agencies. While the credit counseling compliance project is nearly complete and many organizations survived the process with their tax-exempt status intact, the IRS is now poised to focus on the activities of housing counseling agencies. Many of the same organizations that were audited as part of the credit counseling compliance initiative may be scrutinized all over again, along with several that escaped scrutiny due to their non-involvement in areas related to debt management plans for repayment of unsecured credit card debt.

In an audit, the IRS examines Form 990 returns to verify the correctness of the income or gross receipts, deductions, and credits, and to determine that the organization is operating in the manner stated and for the purposes set forth in its application for recognition of tax exemption.

Fortunately, a well-informed housing counseling agency can go a long way toward preparing for an IRS audit. While the advice and guidance of counsel is recommended in formulating and implementing an audit response and ongoing compliance with the Code, existing IRS-provided guidance in this area – which is quite extensive – and the lessons learned during the credit counseling compliance initiative can help a mortgage foreclosure assistance service provider conduct a “mock” IRS audit to identify areas of weakness from a tax-exemption perspective, as well as to suggest corrective measures.

@GetOutOfDebtGuy

Credit Card Delinquency Rates Continue Decline

Steve Rhode — Wed, 16 May 2012 15:18:46 +0000

From How to Get Out of Debt

What spells good news for American consumers, spells more bad news for the debt relief industry. According to TransUnion, the national credit card delinquency rate for people more than 90 days past due has dropped to 0.73% from last quarters 0.78%.

In addition the average credit card debt per borrower decreased by $242 to $4,962.

While total credit card originations increased in 2011, about 24% of those new cards went to subprime borrowers.

“The influx of sub-prime lending we saw from previous quarters continued in Q1 2012, but demand for new card originations also picked up among prime and super-prime consumers,” Ezra Becker from TransUnion said. “The good news is that increased lending, particularly to non-prime borrowers, hasn’t affected delinquency rates, which have remained unchanged over the past year. Bank cards are one of the most important assets for consumers, and it is evident consumers have been working hard to stay current on their cards and to maintain access to this important financial tool.”

Currently the highest credit card delinquency rates are in Mississippi, Georgia, Alabama, and Arkansas. The highest credit card debt per borrower is in Alaska, Colorado, North Carolina, Connecticut.

These facts appear to demonstrate that the demand for debt relief services will continue to be flat or decreased moving forward until consumers begin to load up on easy credit again.

@GetOutOfDebtGuy

Credit Counselor or Debt Collector? Midland Credit Management Applies Clever Approach.

Steve Rhode — Sun, 13 May 2012 14:21:30 +0000

From How to Get Out of Debt

I just had an opportunity to look at the website for Midland Credit Management and I must say, for a collections agency they certainly appear more like a credit counseling group.

Don’t get me wrong, it appear they provide full and apparent disclosure they are a debt collector, “Please understand that this is a communication from a debt collector. This is an attempt to collect a debt. Any information obtained will be used for that purpose,” but the primary message reads like a debt relief company.

For example:

Midland Credit Management is a national financial services company that helps consumers resolve past-due debt obligations. By providing customers with education and payment plans, we help our customers start down the path toward improving their credit and reinstating their borrowing power.
Midland Credit Management has helped over two million customers eliminate outstanding debts.
We have more than a thousand agents around the world working to help consumers like you.
Take advantage of our easy payment options to gain control of your outstanding financial obligations.
Midland can partner with you to create a better economic future for you and your family.

And those are just the messages on the front page. If you didn’t know better you would think you landed on the website of almost any debt relief provider, even a debt settlement company.

“…helping people like you settle outstanding debt obligations.”

Before you start to flame up that there are differences between a debt collector and a credit counselor, I agree. But from the point of view of a typical consumer in a panic the messaging appears to be the same kind and gentle messaging as one might see on a credit counseling or other debt relief company site.

Who is Midland Credit Management

“Midland Credit Management (MCM) is a national financial services company that helps consumers resolve past-due financial obligations. We empower our customers through education and payment plans, and help them return to a path toward improved financial health.” – Source

According to their website:

Ascension Capital Group, Inc.
2201 East Lamar Boulevard, Suite 200
Arlington, TX 76006

Encore Capital Group
3111 Camino Del Rio North, Suite 1300
San Diego, CA 92108

Midland Credit Management, Inc. (MCM)
8875 Aero Drive, Suite 200
San Diego, CA 92123
800-265-8825

Other Affiliates:
Midland Funding LLC
Midland Funding NCC-2 Corporation
MRC Receivables Corporation
Midland Recovery Corp

If the company can deliver solutions that fit within a larger plan for a consumer to get out of debt and they are flexible and understanding this kinder and gentle approach may work well for them as a debt collector.

However, based on this consumer complaint, hanging up on the consumer is not the best practical approach.

MCM appears to be a debt buyer and does sue consumers in their effort to recover. Pursuing their legal rights as the debt owner is an appropriate way to collect. – Source

Watch Out Credit Counselors

Based on messaging alone this debt collector is doing a great job of beating you at your own game.

@GetOutOfDebtGuy

USADP – USA Debt Processors Says What?

Steve Rhode — Fri, 11 May 2012 16:55:24 +0000

From How to Get Out of Debt

A reader sent in an email with a message about USA Debt Processors. They wanted to know:

How can they say they are “FTC Compliant” at bottom of page?
They do not appear to be licensed in Indiana.
Global Client Solutions is identified as a bank and FDIC insured.

So I went and checked the claims made.

It does appear that USA Debt Processors is running a graphic that says they are FTC compliant. I agree, that’s a problem. They even use the FTC logo. Rut-Ro.

The company does appear to be a licensed company in Indiana as USA Debt Processors Corporation. Their website lists them at:

USA Debt Processors
24402 W. Lockport St.
Suite 221
Plainfield, IL 60544 – Source

According to the list of licensed debt management companies provided by the State of Indiana, USA Debt Processors does not appear to be on that list. – Source. In Indiana I was told by the State, debt settlement companies do not need a license.

Their site does seem to say that Global Client Solutions is a bank. – Source. That would be in error. Insert head slap here.

A special hat tip to the reader that sent this in.

@GetOutOfDebtGuy

Wow. HomeStreet Bank and American Financial Solutions Don’t Seem to Understand Debt Settlement, At All

Steve Rhode — Fri, 11 May 2012 15:57:15 +0000

From How to Get Out of Debt

A reader brought my attention to a press release sent out by HomeStree Bank in Hawaii and the nonprofit credit counseling group American Financial Solutions. One thing is clear after I read the release is either those two companies don’t understand how debt settlement works at all or the person that wrote the press release is not all that informed.

The press release says:

I wonder how the average banker would view the same consumer who was enrolled in a credit counseling program. Isn’t it all just really determined by credit scores these days. It is really. So it’s not the fact someone was in a debt settlement program that is the impact. It’s the impact on the credit score from the collections activity and maybe the charge off.

HomeStreet Bank must be one of the unusual lenders these days that makes its lending decisions arbitrarily based on what the credit report says rather than the credit score.

So how is that different than the credit counseling approach where people get their accounts closed by the creditor and interest rates reduced. Wouldn’t the lender also be likely to say “Well they said they’d pay the interest we sold them but then they went and paid less.”

The press release says:

What HomeStreet Bank and American Financial Solutions fail to mention in their explanation is the IRS has a form and process to deal with this. IRS Form 982 eliminates the tax liability for all insolvent debtors and the tax liability up to the point where the consumer would become solvent.

I wish the issues with the release ended there, but they don’t.

The companies then recommend that consumers negotiate with the creditors directly to settle their debts and that the creditor, “Request that the creditor provide them with a 1099 – C form rather than sending the remaining debt to a collection agency.” Ironically they also don’t recommend that consumers should not deal with American Financial Solutions or other credit counseling groups and contact creditors directly to workout debt management plans.

Consumers do not need to pay huge sums of money to someone to settle their debts. There are debt coaches out there like ZipDebt and Consumer Recovery Network that will educate and coach consumers through the process and on how to make sure the debt is not sold to another party.

In closing the spokesperson for HomeStreet Bank seems to contradict himself.

“The information on your credit report determines your ability to qualify for many things from car insurance, getting a job, and of course buying or refinancing a home,” cautions KiloDavis, “but there are resources out there, like American Financial Solutions, who can get you back on track. Bad credit is not a death sentence. You can fix it, but it’ll take some elbow work. Making that first call to ask for help can be scary, but when some of that weight starts lifting off your shoulders, you’ll be glad you did it.”

So is he saying American Financial Solutions can repair or improve your credit? If so them American Financial Solutions would seem to run into potential trouble with the Credit Repair Organizations Act as other credit counseling groups have.

If not, then he seems to be saying that any impact you take from debt settlement is easy to fix.

The press release even says, “Credit counseling agency American Financial Solutions provides the information needed to make the right decision about settling debt.” I wonder if that means their approach is that there is not an appropriate time and place for debt settlement? Which there is of course.

Is American Financial Solutions providing consumers with a fair and balanced approach to all major debt solutions in order to allow the consumer to make an informed decision?

They also say, “But there are real ramifications to your credit and credit score when using debt settlements to manage debt.” But don’t seem to say that a credit counseling program that closes your accounts with the creditors can impact your credit score as well.

So what was the goal they were trying to achieve with this press release? You’ll find the entire press release here.

@GetOutOfDebtGuy

Nonprofit 501(c)3 Credit Counseling Group Kind of Offering Debt Settlement

Steve Rhode — Fri, 11 May 2012 14:47:21 +0000

From How to Get Out of Debt

It seems like it’s been several years now since I first started talking about the need for nonprofit credit counseling groups to offer debt settlement as a tool they can use to assist consumers with.

A reader sent me an email and pointed out that Community Credit Counseling Corporation out of New Jersey is now doing that openly. Apparently they are less afraid of losing their fairshare compensation than other credit counseling groups are.

Credit counseling organization that do not consider debt settlement as a viable tool to use in certain situations are doing their consumers a disservice.

But while I’m praising Community Credit Counseling Corp for getting into debt settlement I have to cringe a bit at the marketing on their site. It seems that their credit counseling program and debt settlement are still setup to guide consumers towards those solutions and away from bankruptcy.

But from their page promoting their “debt settlement” solution it then appears they are not really settling the debt at all but pushing their debt management solution. – Source

Their website seems to scream they are offering some type of debt settlement. The page title says Non-Profit Debt Settlement and the logo includes a statement about debt reduction as in settlement.

If Community Credit Counseling Corporation is not really offering a debt settlement solution where they are negotiating with creditors and settling debt for less than the amount due, the advertising on their site sure seems misleading, doesn’t it.

For an A+ BBB rated company they sure have some significant advertising message issues.

Save up to 70% of your debt!
Settle and save up to 70% of your debt
Avoid bankruptcy
Eliminate harassing creditor calls
Get debt free fast
Settle your debt for less
Don’t be fooled settle your debt for less

The FTC has issued guidance about such claims. Ah, right, the FTC does not regulate nonprofit organizations, but the CFPB will.

I find it highly suspicious that Community Credit Counseling Corporation can “eliminate” creditor calls with a settlement approach, unless they are doing lumpsum settlements when a consumer has cash in hand. And what is a “harassing creditor call” as opposed to a collection call?

What Community Credit Counseling Corporation does not do is provide any evidence I could find as to the results their program obtains for the average person who enrolled. How much reduction off the original balance did they settle for? How fast did people get out of debt? Was avoiding bankruptcy in the best interest of the client? How many consumers saved 70% of their debt?

Their own “About Us” page doesn’t even mention their debt settlement service:

The reality here is probably that this nonprofit credit counseling group is a small company. They are probably trying to stretch their marketing a bit to capture additional clients.

It’s most likely time for the group to clarify their messaging and either clearly offer a debt settlement solution or give a couple of hours to clear up their potentially misleading advertising messages that could confuse consumers.

@GetOutOfDebtGuy

Brookstone Law Mailer. The Line Between Clever Advertising and Too Much.

Steve Rhode — Thu, 10 May 2012 13:29:26 +0000

From How to Get Out of Debt

A reader shared the following mailer from Brookstone Law. In the past I have been very critical of attorney mailers selling real estate related services that appeared to be official government looking forms or notices. Those forms did not disclose they were attorney advertising and some even had official looking government seals and logos.

This mailer from Brookstone Law raises an interesting question about where the line exists between clever marketing and what is intended to confuse or fool consumers into being something it is not.

The outside of this mailer in my opinion is both clever and problematic. The clever part is the use of the color printed outside labels to give it some visual pop.

While the envelope does clearly but ambiguously state it is actually an attorney advertising piece it waivers on that a bit by saying it “may” be attorney advertising. In fact it absolutely is attorney advertising.

The outside labels could give the consumer the impression they are part of a legal matter in some way other than the receiver of an advertising piece. And that’s the line between being clever and being over the line. In my opinion the envelope alone here would give critics of Brookstone Law some ammunition to claim they have bent the boundary of advertising that does not mislead or confuse the consumer, to the very breaking point.

The letter enclosed in the envelope gets a kudo for actually labeling it as Attorney Advertisement at the top in a noticeable manner. There is no “may” about it. And also a pat on the back for clearly naming the attorney responsible for the mailer, Vito Torchia, Jr.

The mailer appears to be a solicitation for a mass joinder or mass tort lawsuit against a mortgage lender. There is no indication from the letter if an advanced fee will be required.

What makes this letter interesting is rather than publish a list of unreasonable results the list actually contains statements about things they may find. I don’t find that section to be misleading.

Unlike the mailer from NHT Law Group, this letter does not make an actual statement that there is a lawsuit against the lender, but one might be “contemplated.” That appears to be a factual statement as well.

So what is your opinion about this mailer and is this a cleverly crafted piece of attorney advertising that is fine or does it step over the line and confuse the average consumer into thinking it’s something it’s not? Post your comments below.

@GetOutOfDebtGuy

Debt Relief Companies Registered in Colorado Shows Little Registration Activity

Steve Rhode — Mon, 07 May 2012 17:58:38 +0000

From How to Get Out of Debt

A reader and tipster sent in a current list of debt management companies that are registered to offer debt management services.

What surprised me in looking over the list was how few registrations there actually were, in the past 16 months, since January 1, 2011.

The list of providers says only the following companies have registered since then.

CHRISTIAN CREDIT COUNSELORS INC
CONSOLIDATED CREDIT SOLUTIONS INC
CONSUMER CREDIT AND BUDGET COUNSELING INC DBA NATIONAL FOUNDATION FOR DEBT MANAGEMENT DBA WARRIOR SUPPORT SERVICES
CREDIT AND DEBT ASSISTANCE CENTER OF AMERICA INC
NATIONAL BUDGET PLANNERS OF SOUTH FLORIDA INC
PREFERRED FINANCIAL SERVICES CORPORATION DBA PREFERRED FINANCIAL SERVICES DBA PFS DBA PFS1

The full list of registered and approved Colorado debt management companies as of April 20, 2012 can be found here.

@GetOutOfDebtGuy

Nova Scotia, Canada Debt Settlement Protection Act

Steve Rhode — Mon, 07 May 2012 17:45:21 +0000

From How to Get Out of Debt

Nova Scotia has introduced the Debt Settlement Protection Act and it had the first reading on April 26, 2012.

The act states:

Be it enacted by the Governor and Assembly as follows:

1 This Act may be cited as the Debt Settlement Protection Act.

2 In this Act,

(a) “agent” means a person employed, appointed or authorized by a debt settlement agency to solicit business or arrange debt settlements on behalf of debtors for the debt settlement agency;

(b) “agreement” means an agreement between a debtor and a debt settlement agency or agent authorizing the debt settlement agency or agent, as the case may be, to arrange a debt settlement on behalf of the debtor in respect of one or more debts owing by the debtor to the debtor’s creditors;

(c) “debt settlement” means an arrangement in which a creditor allows a debtor to satisfy a debt owing to the creditor by paying an amount less than the amount owing on the debt;

(d) “debt settlement agency” means a person who deals with a creditor for the purpose of arranging a debt settlement on behalf of a debtor, or holds out to the public that the person provides such a service, and includes a person who provides or holds out to the public that the person provides one or more of the following services:

(i) debt arbitration,
(ii) debt negotiation,

(iii) credit settlement;

(e) “licence” means a licence granted under this Act;
(f) “Minister” means the Minister of Service Nova Scotia and Municipal Relations;

(g) “Registrar” means the Registrar for the purpose of this Act.
3 This Act does not apply to

(a) a lawyer or law firm as defined by the Legal Profession Act; or

(b) a not-for-profit debt counselling organization.
4 (1) The Director of Consumer Services appointed under the Consumer Services Act or a person appointed by the Governor in Council is the Registrar for the purpose of this Act.

(2) The Registrar shall exercise the powers and perform the duties conferred or imposed by this Act and by the Minister.

5 (1) Except as may be otherwise permitted under this Act or the regulations, no person shall

(a) carry on business as a debt settlement agency unless that person holds a licence to operate a debt settlement agency; or

(b) act as an agent unless that person holds a licence to act as an agent of a licensed debt settlement agency.

(2) A licensed debt settlement agency shall not carry on business under a name other than the name in which it is registered.

(3) A licensed debt settlement agency shall not carry on business at a place other than that authorized by the license issued by the Registrar.

6 (1) Every application for a licence must be made to the Registrar upon a form provided by the Registrar and must be accompanied by the fee prescribed in the regulations.

(2) The applicant may be required by the Registrar to verify by affidavit or otherwise the statements made in the application.

(3) An applicant for a licence as a debt settlement agency shall file with the Registrar

(a) a copy of each form of agreement that the debt settlement agency uses or proposes to use; and

(b) a bond in the form prescribed by the regulations.

(4) The agreement must set out particulars of the fees charged or proposed to be charged by the debt settlement agency and must be written in plain language outlining the terms, conditions and responsibilities of all parties.

(5) The agreement must contain a cancellation or opt-out policy.

(6) A new application for a licence must be made if there is evidence of a change of material circumstances since the date of the previous application.

7 (1) Every applicant for a licence shall state in the application an address for service in the Province, and any notice required under this Act or the regulations is for the purpose of this Act deemed to have been received if delivered or sent by registered mail to that address or to the address for service stated or shown in a notice of change of address provided under subsection (2).

(2) Every licensee shall notify the Registrar in writing of any change of address for service.

8 (1) Every application for a licence as an agent must be accompanied by a statement in writing given by a licensed debt settlement agency that the applicant, where granted a licence, is authorized to act as a agent representing that debt settlement agency.

(2) A licence issued to a agent must indicate thereon the name of the debt settlement agency who furnished the statement required under subsection (1) and on whose behalf the agent is authorized to act.

9 An agent who is the holder of a licence is deemed to be authorized by the debt settlement agency specified in the licence to act for or on behalf of that debt settlement agency.

10 (1) Where an agent ceases to represent a debt settlement agency, the debt settlement agency shall forthwith give notice in writing to the Registrar that the agent has ceased to represent the debt settlement agency and the receipt of such notice by the Registrar shall operate as a termination of the licence of the agent.

(2) A debt settlement agency that fails to give the notice required at subsection (1) within five days after the agent has ceased to represent the debt settlement agency is guilty of an offence.

11 The transfer of the licence of an agent from one debt settlement agency to another is prohibited.

12 Where an agent whose licence is terminated is appointed by another debt settlement agency or is re-appointed by the debt settlement agency with whom the agent was previously licensed, the agent shall make a new application to the Registrar for a licence.

13 (1) The Registrar may

(a) grant a licence;

(b) by notice to the licensee, make the licence subject to such terms, conditions and restrictions as are prescribed by the Governor in Council; and

(2) Every licensee shall comply with the terms, conditions and restrictions placed on that person’s licence by the Registrar.

14 Unless previously terminated or cancelled, every licence expires at the end of the day on April 30th of each year.

15 (1) The Registrar may suspend or cancel a licence if the licensee

(a) has violated any provision of this Act or the regulations or has failed to comply with any of the terms, conditions or restrictions placed by the Registrar on the licence;

(b) has made a material misstatement in the licence application or in any of the information or material submitted to the Registrar pursuant to Section 6;

(d) has demonstrated incompetency, unfitness or untrustworthiness to carry on the business in respect of which the licence was granted.

(2) Where a bond filed under this Act does not meet the requirements set out in the regulations, it is deemed to be invalid and the licence of the debt settlement agency is automatically suspended until the debt settlement agency files with the Registrar a new bond in the amount and in the form required by the regulations.

(3) When the licence of a debt settlement agency is suspended or cancelled, the licences of all agents of the debt settlement agency are automatically suspended or cancelled.

16 The Registrar may request further information or material from the applicant for a licence or from a licensee within a specified time and may require verification by affidavit or otherwise of any information or material provided.

17 (1) A person who is dissatisfied with a decision of the Registrar under this Act may, within thirty days from the date of the decision, appeal by filing a notice of appeal, to a judge of the Supreme Court of Nova Scotia who may, upon hearing the appeal, order any one or more of the following:

(a) dismiss the appeal;

(b) allow the appeal;

(d) vary the decision appealed against;

(e) refer the matter back to the Registrar for further consideration and decision;

(f) award costs of the appeal;

(g) make such other order as seems just.

(2) The appeal to the Supreme Court of Nova Scotia shall be made in accordance with the appeal provisions in Rule 7 of the Nova Scotia Civil Procedure Rules.

(3) A party to the appeal before the Supreme Court of Nova Scotia may appeal from the order issued by that court to the Nova Scotia Court of Appeal on a question of law or jurisdiction in accordance with the appeal provisions in Rule 90 of the Nova Scotia Civil Procedure Rules.

18 Every holder of a licence to operate a debt settlement agency shall, in accordance with the regulations,

(a) keep proper records and books of account showing money received and money paid out, including a receipt book, cash book, clients ledger, debtors ledger, and journal or equivalent machine accounting records satisfactory to the Registrar;

(b) maintain a trust account in a chartered bank, credit union or trust company, and deposit all money received on behalf of a client in the trust account; and

(a) make false or unsubstantiated claims about the service being provided;

(b) advise the client’s creditors of an address change, unless it is a change to the client’s permanent address;

(c) charge a fee to a person for whom the debt settlement agency acts in addition to or in excess of the fee provided for in the agreement; or

(d) advertise in any form unless

(i) the advertisement clearly states that the debt settlement agency or agent is a debt settlement agency or agent of a debt settlement agency, as the case may be, and
(ii) where the advertisement includes examples of possible outcomes to debt settlement, the examples of possible outcomes reflect actual debt settlements achieved by the debt settlement agency or agent.

(2) No debt settlement agency or agent shall collect any fee from a debtor in respect of a debt unless
(a) the debt settlement agency or agent has arranged a debt settlement in accordance with the agreement, or otherwise the debtor’s satisfaction;

(b) the debt settlement has been agreed to in writing by the debtor and creditor; and

(3) Where an agreement authorizes a debt settlement agency or agent to settle more than one debt on behalf of a debtor and the debt settlement agency or agent settles one debt in accordance with the agreement or the debtor’s satisfaction, the debt settlement agency or agent may collect a fee in respect of the debt pro-rated by the ratio that

(a) the original amount of the debt settled bears to the total original amount of the debts authorized to be settled under the agreement; or

(b) the amount of the reduction of the debt settled bears to the anticipated amount of the reduction of all the debts authorized to be settled under the agreement,

if provided for under the agreement.

20 (1) The Registrar, or any person authorized in writing by the Registrar, may investigate and inquire into any matter the investigation the Registrar considers expedient for the administration of this Act.

(2) The person making an investigation pursuant to subsection (1) may at all reasonable times demand the production of and inspect all or any of the books, documents, papers, correspondence and records of the person in respect of whom the investigation is being made, and any person who has the custody, possession or control of any such books, documents, papers, correspondence or records shall produce them and permit the inspection thereof by the person making the investigation.

(3) For the purpose of subsection (1), the Registrar or any person designated in writing by the Registrar may at any reasonable time enter upon the business premises of the debt settlement agency to make an investigation.

21 (1) No person shall knowingly engage or use the services of a debt settlement agency that is not licensed under this Act.

(2) No debt settlement agency shall employ an agent or appoint or authorize an agent to act on its behalf unless the agent is licensed under this Act.

22 A person who

(a) does anything that is prohibited by this Act or the regulations; or

(b) omits to do anything that is required by this Act or the regulations to be done,

is guilty of an offence against this Act.

23 (1) A person who is guilty of an offence against this Act or the regulations is liable on summary conviction to a fine of not less than one hundred dollars and not more than one thousand dollars and in default of payment to imprisonment for a term not exceeding six months.

(2) Notwithstanding subsection (1), where the person convicted of an offence under this Act or the regulations is a debt settlement agency, the maximum penalty is ten thousand dollars.

24 Where in a prosecution for an offence under this Act it is alleged that the accused carried on the business of a debt settlement agency without being the holder of a licence, evidence of one transaction is prima facie evidence that the accused carried on such business.

25 A certificate under the hand of the Registrar stating that

(a) a debt settlement agency, agent or other person named in the certificate was or was not licensed under this Act;

(b) a licence was granted to a debt settlement agency or agent; or

is without proof of the office or signature of the Registrar admissible in evidence as prima facie proof of the facts stated in the certificate for all purposes in any action, proceeding or prosecution.

26 No prosecution for any offence under this Act may be commenced after two years from the date of the offence.

27 (1) The Governor in Council may make regulations

(a) governing applications for licences or renewal of licences and prescribing terms and conditions of licences;

(b) requiring the payment of fees on application for licences or renewal of licences and prescribing the amount thereof;

(d) requiring and governing the books, accounts and records that must be kept by debt settlement agencies;

(e) requiring debt settlement agencies to make returns and furnish information to the Registrar;

(f) requiring any information required to be furnished or contained in any form or return to be verified by affidavit;

(g) prohibiting the use of any particular method in the settlement of debts;

(h) respecting any matter or thing the Governor in Council considers necessary or advisable to carry out effectively the intent and purpose of this Act.

(2) The exercise by the Governor in Council of the authority contained in subsection (1) is regulations within the meaning of the Regulations Act.

29 This Act has effect on and after on April 1, 2013. – Source

Texas Man Sentenced to Jail for Foreclosure Rescue Scam

Steve Rhode — Fri, 04 May 2012 15:24:42 +0000

From How to Get Out of Debt

An Austin, Texas, man was sentenced yesterday in the Western District of Texas to 61 months in prison and was ordered to forfeit $84,010 for his role in operating a foreclosure-rescue scam in Southern California and elsewhere that charged distressed homeowners fees in exchange for fraudulently delaying foreclosure sales.

Frederic Alan Gladle, 53, was sentenced by U.S. District Judge Lee Yeakel. Gladle pleaded guilty on Jan. 6, 2012, to one count of bankruptcy fraud and one count of aggravated identity theft. He was originally charged on Dec. 9, 2011. In addition to the $84,010, Gladle was ordered to forfeit 63 prepaid, reloadable debit cards that he used to further his scheme.

“Gladle preyed on struggling homeowners with promises to delay their foreclosures for a fee,” said Special Inspector General Romero. “To forestall the foreclosures, Gladle deeded away a portion of their homes to unsuspecting debtors in bankruptcy, stealing the debtors’ identities and forging their signatures. Gladle exploited homeowners, the debtors whose identities he stole, and multiple banks, including TARP banks. The exploitation of TARP will not be tolerated, and SIGTARP and our partners will hold individuals accountable for their actions.”

“Mr. Gladle concocted an elaborate fraud scheme to use the financial crisis to his criminal advantage,” said Assistant Attorney General Breuer. “He preyed upon vulnerable homeowners facing foreclosure, just as the housing bubble began to burst and stood in the way of financial institutions attempting to collect on their debts. We will continue to pursue scam artists like Mr. Gladle and ensure that they are held accountable for their crimes.”

“Foreclosure-rescue scams are designed to victimize people in extreme financial distress,” said U.S. Attorney André Birotte Jr. “Financial predators like Mr. Gladle need to be held accountable for the harm they cause, and today’s sentence does just that, sending the message to scam artists like Mr. Gladle that the final outcome for their criminal schemes is a long stay in federal prison.”

“This scheme was particularly insidious in that Mr. Gladle exploited victims who were already in financial straits,” said FBI Assistant Director Martinez. “This sentence should send a message to those contemplating similar fraud targeting vulnerable individuals or the banking system and, in addition, should encourage those trying to salvage their homes to beware of fraudulent rescue offers.”

Gladle admitted that beginning in October 2007 and continuing until October 2011, he operated a foreclosure-rescue fraud scheme that netted him more than $1.6 million in fees from distressed homeowners. According to court documents, Gladle used five aliases to avoid detection, including stealing the identity of at least one person and setting up a mobile phone account in that victim’s name.

Gladle admitted that he recruited homeowners whose properties were in danger of imminent foreclosure and falsely promised to delay the foreclosures for up to six months in exchange for a fee of approximately $750 per month. Gladle, directly or through salespersons, directed homeowners to sign deeds granting fractional interest in their properties to debtors in bankruptcy proceedings whose names Gladle found by searching bankruptcy records. The debtors were unaware that their names and bankruptcy cases were being stolen by Gladle in his scheme. Gladle then sent the unsuspecting debtors’ bankruptcy petitions, and the deeds that transferred fractional interests to the debtors, to the homeowners’ lenders to stop foreclosure proceedings.

Because bankruptcy filings give rise to automatic stays that protect debtors’ properties, the receipt of the bankruptcy petitions and deeds in the debtors’ names forced lenders to cancel foreclosure sales. The lenders, which included banks that received government funds under the Troubled Asset Relief Program (TARP), could not move forward to collect money that was owed to them until getting permission from the bankruptcy courts, thereby repeatedly delaying the lenders’ recovery of their money. When homeowners wanted to void the deeds to the unsuspecting debtors, Gladle would forge the debtors’ signatures on papers voiding the deeds.

A defendant charged in the Northern and Central Districts of California for a separate, similar foreclosure rescue scheme, Glen Alan Ward, was arrested in Canada last month. Ward has been a fugitive sought by U.S. federal authorities since 2000. According to court documents, Ward, who also goes by the name Brandon Michaels, is alleged to have worked with and taught Gladle the scheme. Ward is currently being detained in Canada pending his extradition to the United States. – Source

Debt Relief Options – What In The World is Going On?

Steve Rhode — Fri, 04 May 2012 14:25:46 +0000

From How to Get Out of Debt

A couple of loyal readers sent me in tips about a recent press release by Debt Relief Options (DebtReliefOptions.com) out of Frisco, Texas. Both readers wanted to point out the $100,000 sweepstakes Debt Relief Options was offering and one made the point Debt Relief Options appears to not be registered to do business in Texas, which is an interesting point I cover below.

The press release states:

“”People are struggling just to keep up with their minimum payments and many have given up hope of ever getting out of debt,” according to Paul Bennett, General Manager of Debt Relief Options. “This contest is our attempt to get the attention of people who are overwhelmed with their debt but have not taken steps to get help.” Debt Relief Option’s “$100,000 Fresh Start Sweepstakes” is designed to help those who are carrying a heavy debt load.” – Source

And right about here is where the puzzling issues begin.

While the press release says the General Manager of Debt Relief Options is Paul Bennett, their own website says it is Michael Slevin, Jr. – Source

The press release says “Debt Relief Options is a wholly owned subsidiary of EFA Processing in Frisco.” It did take a few minutes to find them in Texas since they are not registered to do business under Debt Relief Options but instead DR Options, LLC which is under the control of Ken Talbert as managing member, and not EFA as stated. – Source

Debt Relief Options isn’t even one of their assumed names to do business under or so it appears. The State of Texas only lists DRO and World Law Options as assumed names.

This is not the first debt relief company in Texas to try the sweepstakes approach. Last year I wrote about a similar approach by United Debt Services. My observation then, as now is the same, “If you thought debt settlement laws were tough, try dealing with state sweepstakes rules.”

The Fine Print

According to the official rules to enter their sweepstakes there are some limitations.

“Open only to legal U.S. residents 21 years of age and older as of March 1, 2012, excluding residents of Kansas, Puerto Rico, South Carolina, West Virginia, and Wisconsin. Entrants must possess a minimum of $20,000 in unsecured debt at the time of entry, as well as have a steady source of income at the time of entry in order to be eligible to enter.” – Source

The grand prize looks like the odds of anyone winning it are one in one hundred million entries.

The Debt Relief Options sweepstakes entry page makes additional entry requirements not specified in the rules. The rules they posted do not say anything about being excluded because you don’t have a desire to get out of debt, you are not a U.S. citizen, you don’t have a photo ID, or you are currently not in another debt reduction program. – Source

What struck me as well about the sweepstakes was the requirement that you must have a minimum of $20,000 in debt to enter, yet the Debt Relief Options chart shows that people with $10,000 or more of debt are eligible for debt settlement.

Debt Relief Options says int heir press release, “DRO provides a variety of Debt Reduction Programs including Debt Management, Debt Settlement and Bankruptcy.” But as you can see above snapshot on their debt relief options page, apparently they want people to avoid bankruptcy.

The options page intrigues me as well. The page claims to help people “know their options” but the table appears to say bankruptcy impacts credit the most, it’s not available for people with less than $10,000 in debt, and there is no do it yourself option. To my knowledge those statements are not true. The credit score impact statement is the most perplexing for me. It seems like a long stretch to say that someone who files bankruptcy and starts to rebuild their credit in months is going to have a bigger impact than someone who defaults on their unsecured debt, risks being sued or even a judgment, and takes years to complete the program in a debt settlement approach.

The one item I could not find on their website was any statement about the success rates of each of their options they purport to offer.

Listen to what this bankruptcy attorney has to say about the impact of bankruptcy on your credit report.

Embed Share

In general the overwhelming majority of people that file a chapter 7 bankruptcy (70%+ of all bankruptcy filers) discharge their debt in a few months. It would be informative and enlightening for Debt Relief Options to post the success rates for each of the other options to allow consumers to make an informed choice.

I’m not trying to be unfair or harsh about Debt Relief Options. Their press release attracted attention and people sent it to me, I looked at it and then looked at their website. The observations above are not nitpick points but things that stood out to me and puzzled or intrigued me.

@GetOutOfDebtGuy

P.S. Enjoy the Debt Relief Options post song below!!!!

*Video:teaser video for post about debt relief options and some interesting items i discovered.

Debt Relief Law Center Attorney Takes Cash to Modify Mortgages and Gets Disbarred Instead

Steve Rhode — Thu, 03 May 2012 13:51:56 +0000

From How to Get Out of Debt

A Los Angeles attorney accused of misappropriating $1.1 million from 10 clients has agreed to be disbarred, the State Bar announced Wednesday.

In one of the largest misappropriation cases ever handled by the Office of Chief Trial Counsel, Vafa Allan Khoshbin [bar# 165486], 52, had promised clients he could get their first mortgages modified and their second mortgages settled for pennies on the dollar.

The clients gave him money, which was deposited either to his client trust account or to his business account. But the cash disappeared before Khoshbin did any loan modification work or made any payments to banks on his clients’ behalf, according to a stipulation approved Wednesday by the State Bar Court.

One couple, Sharooz and Fariba Arianpour, turned over $357,000 thinking it would be used to settle a second mortgage and a loan they held on a car wash.

Koshbin will be placed on involuntarily inactive status May 5 until the California Supreme Court acts on the disbarment recommendation. Khoshbin also agreed to pay restitution plus interest of 10 percent per year.

In mitigation, Khoshbin was experiencing family and financial problems. Khoshbin also said he inappropriately surrendered his authority to a non-attorney who was handling finances for the firm, Debt Relief Law Center.

Part of the services provided by Debt Relief Law Center included selling consumers advanced fee forensic audits.

Khoshbin, who was admitted to practice in 1993, also received a public reproval Feb. 13 for failing to follow through with a client’s lawsuit against a mortgage lender and failing to refund $5,000 in attorney fees.

You can read the full official document here.

@GetOutOfDebtGuy

That’s Weird. Lloyd Ward Law Website Now Sells New York City Hotel Rooms

Steve Rhode — Wed, 02 May 2012 14:37:03 +0000

From How to Get Out of Debt

Previously I wrote about a website, LloydWardLaw.com, that was about promoting apparent mass joinder marketing for Dallas, Texas attorney, Lloyd Ward and law firm Lloyd Ward & Associates.

You can see a previous view of that site here.

So imagine my surprise when I just got a tip the content on that site that promoted Texas attorney Lloyd Ward had changed and LloydWardLaw.com now sells hotel rooms in New York City. – Source

New York City! Doesn’t a certain salsa commercial come to mind for you as well?

Never a dull moment in the debt relief world, is there.

@GetOutOfDebtGuy

Bear Hunt Excuse Used in Update to Most Bizarre Debt Industry Lawsuit

Steve Rhode — Wed, 02 May 2012 13:39:37 +0000

From How to Get Out of Debt

In March I wrote about the most bizarre debt industry lawsuit of the year. It involved Lloyd Regner and Kevin Devoto, guys that had a relationship with Lloyd Ward.

In the last article on this matter, which is a must read, the case against Devoto and others by Regner was laid out. The case involved characters identified as “Convict”, “Charlatan”, a loose woman and a church. I’m telling you, it’s a page turner.

Apparently new documents have been filed in this case, which I’ve received a copy of. These new documents have to speak for themselves since they lay out a new version of the events.

Kevin Devoto, Lloyd Regner Update

The following motion to consolidate with cause document is reported to have been filed in this case.

Two separate lawsuits have been filed involving the same fundamental dispute and same set of facts. Both of them ended up in this Court.

To understand why they should be consolidated-«and why they should be consolidated under the afterfiled suit’s cause number–a statement of the underlying facts and the facts leading up to the filing of these suits is necessary.

Background Facts

Lloyd Regner and Kevin Devoto were in business together for over four years. They created a number of entities based on different business models (the “Entities”). These are the same entities that are now currently Plaintiffs in this suit.

Around the middle of 2011, David Glenwinkel became involved in various business matters with the Entities and their co-owners. In January 2012, NISCO Enterprises, LLC (“NiSCO”) purchased Mr. Devoto’s 50% ownership interest in the Entities with the consent of Mr. Regner and his counsel. These events feature prominently inthe two competing suits filed by Regner and NISCO.

In February 2012, not long after the sale to NiSCO, tension between Mr. Regner and Mr. Devoto, which had been growing over the past six months, reached a breaking point. Accusations of competing businesses and theft of employees began to fly as Mr. Regner took unilateral control of the Entities and barred Mr, Devoto and NISCO from ali access to the Entities.

As a result of Mr. Regner’s actions, NiSCO made r request to inspect the Entities’ books and records to determine, among other things, whether any distributions had been made, distributions which NiSCO was entitled to receive.

On February 28, 2012, NISCO, through its attorneys, made a formal demand to Mr. Regner for access to the Entities’ records and to provide an accounting. A true and correct copy of this demand is attached to Plaintiffs’ Original Petition in NISCO Enterprises, LLC and Devoto Regner, etal., Cause No. DC12-03426.

In response to the demand, on March 8, 2012, Mr. Regner and several of the Defendants, including, Mr. Devoto and Mr. Gienwinkel, who was acting as NISCO’s representative, held a meeting at the law offices of Mr. Regner’s counsel, Gregory Shamoun and Brian Norman of Shamoun & Norman, LLP. Counsel for the each of the Defendants was also present at the March 8 meeting.

The purpose of the meeting was to determine if there could be an amicable “divorce” between the two coowners. No resolution was reached. But Regner’s counsel did agree to allow an independent auditor to have access to the Entities’ books and records to conduct an audit and business valuation.

Additionally, upon conclusion of the March 8 meeting, the parties’ attorneys-at the request of Mr. Shamoun«-agreed that neither side would file suit for the next week pending the independent audit ofthe Entities.

But despite this agreement, on March 9, 2012, the very next day after the meeting, Cause No. DC-12-02789 was filed and assigned to this Court, the 193rd. As originally filed, this suit (currently styled Regner, etal. Glenwinkel, etal. (hereinafter the “Regner Suit”)), was styled simply ABC D.R.L. Co. V. ll/I.G.B and involved allegations of conversion and trespass to chattel by a former employee; throughout, the original parties are only identified by their initials. Citation was issued for but never served. The Original Petition was signed by Jana Lambro, who listed her address but did not indicate any law firm. Ms. Lambro’s address, however, is the same as that of the law firm of Shamoun & Norman, LLP and she is an associate at Shamoun & Norman. ln reality, this petition was filed as a mere placeholder for Plaintiffs Second Amended Petition in the Regner Suit.

On March 15, 2012, while NlSCO was engaging an accountant to review the Entities books and records, Ms. Lambro filed Plaintiffs’ First Amended Original Petition in Cause No. DC-12-02789 The amendments added multiple additional plaintiffs and defendants. But again, all of them were identified by their initials only. (For example, the Plaintiffs were: ABC DRL Co., LR., R&D. MD., LLC, ABC A.S., LLC, L.A., LLC. C. LLC, L.S.M.D., Ine, RD., LLC, and T.D.A., LLC.) this petition was filed as a mere placeholder with no intention of ever being served on the named defendants.

Finally, on March 27, 2012, after several unsuccessful attempts to get its independent accountant access to review the Entities records (records because their own team was conducting a forensic accounting of the Entities’ NiSCO’s accountants were only seeking to review a limited amount of information for the period after which NISCO and Mr. Devoto had been denied access. This information could have easily been provided without interfering with Mr. Regner’s own accountants.) and after several unsuccessful attempts to set a reasonable date for formal medìation (Mr, Shamoun claimed he could not agree to a mediation date before the end of May because he was going on a bear hunt.) NISCO and Devoto filed the suit styled NISCO Enterprises, LLC and Devoto V. Regner, et al., Cause No. DC-12-03426 (the “NISCO Suit”).

On March 28, 2012, after NlSCO’s counsel informed Mr. Shamoun that it had filed suit, Shamoun immediately filed his Second Amended Petition in the Regner Suit. Only then did Mr. Shamoun put his own name and his firm’s name on the pleadings and make an official appearance.

What had originally started as a three page petition with two parties-identified only by their initials–asserting claims of conversion and trespass of chattel became, over the course of three weeks, a thirty-six page suit with eleven causes of action and thirty parties.

Notwithstanding the seeming complexity and grandiosity of the claims in the Regner Suit, the dispute at the heart of that suit and the NISCO suit is relatively simple and involves from the same set of common facts: two business partners and oo-owners of multiple business have had a falling out. – Source

And There Are More Claims

In an attached affirmative defense document new claims against Lloyd Regner are made.

And the band played on.

This case might be an absolute train wreck but at least it’s got some entertainment value to it.

@GetOutOfDebtGuy

Settlement Reached in The Mortgage Law Group and Underwater Property Solutions Suit by Arizona AG

Steve Rhode — Mon, 30 Apr 2012 16:34:22 +0000

From How to Get Out of Debt

Arizona Attorney General Tom Horne has reached a settlement with Underwater Property Solutions, LLC (“UPS”), a Scottsdale, Arizona based mortgage loan modification service company that the State accused, in a consumer fraud lawsuit, of participating in a deceptive scheme designed to collect advance fees from consumers looking for assistance in obtaining mortgage loan modifications. In nearly all cases, it is illegal for businesses to charge upfront fees for loan modifications.

The State alleged that, along with co-defendant The Mortgage Law Group, LLP (“TMLG”), that also does business under the name Macey, Aleman & Searns, a Chicago, Illinois law firm, UPS agreed to market mortgage modification services to consumers as legal services to be performed by TMLG attorneys, including local “partners” in the states where TMLG’s clients resided. The State alleged that UPS did nearly all of the substantive work for consumers who paid “retainer fees” to TMLG. The State also alleged that UPS told consumers that TMLG could stop foreclosures, that consumers were guaranteed a modification if they hired TMLG, and that consumers would save hundreds of dollars a month with their modifications, when the representations were nothing more than speculation and often proved to be false.

The settlement, which is awaiting court approval, will permanently prohibit UPS from engaging in any consumer debt or loan modification activities in Arizona or on behalf of Arizona consumers and requires UPS to pay full restitution to consumers who filed a complaint with the Attorney General’s Office, as well as attorney’s fees. In entering into the settlement with the State, UPS did not admit that it violated the law nor did the court make findings that it did so. Litigation against TMLG continues.

Assistant Attorney General Cherie Howe handled the case.

If you feel you have been a victim of consumer fraud, please contact the Arizona Attorney General’s Office Consumer Information & Complaints Unit at (602) 542-5763 / (520) 628-6504 / (800) 352-8431. You may also file a consumer complaint online at: www.azag.gov/consumer/complaintform.html. – Source

The original suit against The Mortgage Law Group, Macey, Aleman & Searns, and Underwater Property Solutions alleged a similar setup as we’ve see in the attorney model debt settlement business.

According to the complaint filed The Mortgage Law Group and Underwater Property Solutions advertised and sold mortgage modification services to consumers. “Defendants represented, directly or by implication, would be performed by TMLG lawyers, including local attorney “partners” who were purportedly licensed in the states where TMLG ‘s clients were located. In fact, to the extent any substantive modification services were performed on behalf of TMLG clients, they were done so by non-lawyer employees of third-party loan modification companies, including UPS, with whom TMLG had an agreement to provide such services in exchange for compensation that approximated the large majority of whatever “retainer fees” TMLG’s clients paid for purported lawyer services.”

It is stated that some consumers were told if they hired The Mortgage Law Group they would be guaranteed a modification, the home would not be foreclosed on and they could expect a lower mortgage payment.

You can read the full complaint filed by Arizona, Source.

@GetOutOfDebtGuy

Legal Helpers Debt Resolution Sues Global Client Solutions. Bloom Off That Rose.

Steve Rhode — Fri, 27 Apr 2012 21:24:40 +0000

From How to Get Out of Debt

On April 23, 2012 Legal Helpers Debt Resolution filed suit against Global Client Solutions and CDS Client Services. in Illinois.

It’s just so amazing how far the once loving relationship between Legal Helpers and Global Client Solutions has changed. At one point people were concerned Global Client Solutions may have been bending over backwards to assist Legal Helpers Debt Resolution and now apparently they are bending over the other way.

The suit filed by Legal Helpers Debt Resolution alleges CDS has 4,000 consumer accounts they were setup incorrectly and failed to designate Legal Helpers’ as having control over the Global account.

The lawsuit is brought in an attempt to “correct the set-up of the Clients’ accounts with Global.”

It’s interesting to now see Legal Helpers so insistent that the consumer relationship is with them and not the affiliate or backend service company. In the suit LHDR even cites, “According to the Illinois Rules of Professional Conduct, “with respect to a non lawyer employed by or associated with a lawyer…a lawyer having direct supervisory authority over the non lawyer shall make reasonable efforts to ensure that the person’s conduct is compatible with the professional obligations of the lawyer.” See Illinois Rules of Professional Conduct, Rule 5.3.”

On April 16, 2012 LHDR sent Global instructions that (1) CDS was no longer authorized to act on behalf of the Clients; (2) CDS was not authorized to maintain possession and control of Client Accounts; (3) CDS was not authorized to receive funds from the Client Accounts; (4) Global was to transfer all Client accounts to the control of Legal Helpers.

Well the whole effort went sideways when Global Client Solutions “refused to acknowledge Legal Helpers’ Amendment to Instructions citing that CDS maintains that the latter should remain in control of the Client Accounts since CDS was originally named as a “Sponsor” for the Clients in several of that DSA Agreements.”

LHDR says that upon the termination of CDS, LHDR had to be named as in control of the client accounts since CDS is not a law firm and cannot act as a lawyer for the client.

Legal Helpers Debt Resolution asked the court for a Temporary Restraining Order so they could get the client accounts back.

LHDR even claims, “Legal Helpers has a duty to protect, manage, and oversee the interests of its clients.”

On April 27, 2012 CDS responded to the Legal Helpers action with a basically, “cool your britches” approach. They said, ”CDS Client Services, Inc. (“CDS”) has never stopped servicing — and continues to service — the very accounts that Legal Helpers professes to have been abandoned by CDS. The accounts about which Legal Helpers recently got client complaints are not accounts over which CDS has control; they are accounts over which Legal Helpers seized control a month ago. Legal Helpers is either confused or being disingenuous, but either way, there is no emergency; each account that CDS “controls” is being serviced by CDS and is not among the accounts that are the subject of the complaints to which Legal Helpers has cited.”

CDS goes on to say that GCS has no role in this other than as a spectator and that it “intends to remain neutral and leave this matter to the companies and/or courts for the ultimate determination as to the dispute.” – Source

You can read the full complaint, here.

David Henson, President of CDS Client Solutions sees the situation differently in his declaration. In fact he takes exception with Ryan Sasson of Legal Helpers who “asserts that [Legal Helpers Debt Resolution] requires “emergency” relief because “CDS has stopped providing services to Legal Helpers’ clients.” Henson says the assertion is incorrect.

Apparently the 4,000 CDS-LHDR clients are broken up into two groups. (1) 3,200 clients CDS is listed as the sponsor of with GCS and (2) 800 clients that had LHDR as the sponsor and they LHDR took control over. The dispute appears to be over the 3,200 clients CDS still controls.

Henson goes on to say that they were wrongfully terminated by LHDR over a demand by LHDR for “two large “contribution deposits” to fund potential settlements of the Illinois AG Action and Washington Class Action.”

“CDS and the other [backend companies] balked, because, among other things, there was no basis for the amounts sought by Legal Helpers from CDS (and the other administrators). No settlements had been reached. Legal Helpers would provide no information or accounting as to how it determined the amounts of the purported “contribution deposits.” The amounts demanded were completely arbitrary. Because of this, CDS, along with every other administrator, could not agree to accede to this completely unreasonable and unsupported demand.”

“Legal Helpers thereafter apparently concocted a new plan to seize the fees that CDS and others were earning as a way to fund Legal Helpers’ liabilities. On March 30, 2012, Legal Helpers summarily terminated all of its service providers’ (including CDS) allegedly “for cause” on the pretext that each administrator had breached its contract with Legal Helpers in the exact same way.”

“Specifically Legal Helpers claimed that each administrator had failed to fund Legal Helpers’ liabilities (even though the service providers were not responsible for such liabilities under their contracts with Legal Helpers), failed to maintain the finances necessary to fund those liabilities (which, again, the service providers were not responsible for paying), failed to provide certain client information to Legal Helpers (which CDS had in fact provided), failed to settle client debts in a timely manner (which is false), and misdirected client funds (also false).”

Following the Termination of CDS, Legal Helpers Runs Into Difficulties

“After Legal Helpers assumed complete control over the [800] clients, Legal Helpers apparently ran into operational difficulties. Client monies in those accounts apparently were not being sent to the clients’ creditors.”

Alleged email LHDR sent to clients of CDS saying LHDR was now in control of the client account.

You can read the full declaration of David Henson, here.

@GetOutOfDebtGuy

Office of Fair Trading in UK Issues New Rules for Debt Relief Providers

Steve Rhode — Tue, 24 Apr 2012 17:40:51 +0000

From How to Get Out of Debt

The Office of Fair Trading (OFT) in the UK has recently issued new rules that govern the delivery of debt relief assistance in the UK. Under these new rules a number of items are considered to be unfair or improper business practices.

The OFT stated:

It appears the deceptive nature of some lead generation websites is an issue across the pond as well as in the United States.

The OFT states that lead generators may probably need to be licensed, not an easy task, in order to generate leads if advice is given, “If during the process of generating leads and/or referring consumers on to another business, a business gives any form of advice to debtors about the liquidation of debts due under consumer credit agreements, it needs to be licensed to cover its engagement in debt counseling.”

As with recent guidance by the CFPB regarding service providers and the responsibility of companies utilizing outside service providers, The OFT expects debt relief companies to ensure the service providers they work with are appropriately licensed and the websites from which leads may be generated must be named on the consumer credit license the company holds.

In addition, service providers in the UK should be screen to ensure:

any advice, website content or other advertising (including pay-per- click) provided/produced by that third party is clear and transparent about the nature of the service being provided and does not breach the Consumer Protection from Unfair Trading Regulations 2008
the third party is registered with the Information Commissioner’s Office (ICO) and has processes in place to ensure that when handling personal information and passing on consumer’s personal details, it complies with relevant data protection requirements33
when cold calling or contacting consumers directly, the third party has processes in place to ensure that it complies with the rules governing electronic marketing set out in the Privacy and Electronic Communications (EC Directive) Regulations 2003 (PECRs).

The following acts are considered to be unfair and improper.

lead generators falsely claiming to, or implying that they, offer debt management services
not making the true nature of the service to be provided sufficiently clear to consumers via website or other advertising content or when using other direct marketing contact methods such as, for example, telephone calls or text messaging
failing to be sufficiently clear as to what the consumer’s details (personal data) will be used for
failing to declare the existence of a financial interest in a lead or referral, including ‘pay per click’
failing to declare, on request by the consumer, the nature of any relevant association, or prior arrangement, with the third party providing the service being offered, such as a debt management business
falsely claiming or implying contact is being made on behalf of the government or charities and/or making any other false or misleading claims or statements regarding ‘status’.
licensees dealing with ‘known’ non-compliant lead generation businesses.
referring leads to unlicensed service providers (with a view to the service provider providing licensable services) and/or to licensed service providers who provide services of a type inconsistent with that described in advertising or in other communications to consumers

Focus is place on advertising as well. The OFT wants debt relief companies to make sure all marketing, advertising and promotion, either oral or written, is accurate, truthful and should not mislead by implication or omission.

Debt relief companies are also tasked with making sure they fully inform the consumer about ALL debt relief options available and may not omit options, such as bankruptcy, that don’t suit their sales goals.

Commissioned Sales Staff Must Be Closely Monitored

The OFT is very concerned about the commissioned advice sales staff may give consumers. “Licensees should not inappropriately incentivise debt advisers (including staff, agents and third parties), for example, by way of targets, commission or any other incentive, such that they might be induced to target consumers with particular debt management options, products and services, which may not be appropriate for the consumers given their individual needs and circumstances.”

As appears evident, the issue about shoving people into debt solutions based on revenue over appropriateness is a clear concern of the OFT.

Additional examples of unfair or improper business practices include:

failing to carry out a realistic and reliable assessment, taking appropriate account of the consumer’s financial position (including income and expenditure), personal circumstances (including the reason for the financial difficulty, whether it is temporary or longer term and any previous debt management arrangement entered into, including the reason for any failure) and other relevant factors (such as reasonably foreseeable future changes to employment status), before advising consumers on a particular course of action to take
failing to refer the consumer, where appropriate, to a not-for-profit advice organisation66 for further help.
failing to involve the consumer in the decision making process from the outset and/or failing to take appropriate steps with a view to ensuring that he understands all of his options and the consequences and implications of any recommended course of action, in order for him to be better enabled to make informed choices
failing to advise consumers not to ignore correspondence or other contact from creditors or those acting on behalf of creditors
failing to explore and take account of the consumer’s reasonable expectations, desired outcome, preferences, and attitude to risk
actively discouraging the consumer from shopping around for alternative sources of debt advice
using technical language and jargon and not explaining the options available in a way that the average consumer could understand such that the consumer might be constrained in his ability to reach an informed decision

The Office of Fair Trading advice and guidance for debt relief companies continues far beyond these points. Having lived in the UK and held a Credit License there as a debt relief provider I do secretly chuckle when American companies complain about the level of regulation and licensing here. Can you imagine if the U.S. adopted the UK rules? How would you cope then?

How about these refund rules that are improper:

Be thankful for the regulation you’ve got now, as evidenced by the OFT guidance in the UK it could be oh so much tougher.

All 96 pages of the guidance are available here for your review.

@GetOutOfDebtGuy

Current List of Debt Settlement Companies Licensed in Maryland

Steve Rhode — Mon, 23 Apr 2012 21:05:33 +0000

From How to Get Out of Debt

According to the Maryland Division of Financial Regulation, the following companies are the only ones licensed to offer debt settlement services in Maryland under the new debt settlement law.

This list is effective April 19, 2012.

Freedom Debt Relief
1875 S. Grant Street, Suite 450
San Mateo, CA 94402-2676

CareOne Services, Inc.
8993 Stanford Boulevard
Columbia, Maryland 21045

Debt Relief Center, Inc.
25 Crossroads Drive, Suite 404
Owings Mills, Maryland 21117

Superior Debt Services
2625 Redwing Road, Suite 140
Fort Collins, CO 80526

Accredited Debt Relief
591 Camino De La Reina, Suite 818
San Diego, CA 92108

Century Negotiations Inc.
1061 Main Street, Suite 19
N. Huntingdon, PA 15642

Renaissance Debt Solutions, Inc.
11350 McCormick Road, EP IV, Suite 102
Hunt Valley, Maryland 21031

Debtmerica, LLC
3100 S. Harbor Blvd., Suite 250
Santa Ana, California 92704

Rescue 1 Financial LLC
2101 Business Center Drive, Suite 120
Irvine, CA 92612

Debt Settlement Group, Inc.
13017 Wisteria Drive, #443
Germantown, Maryland 20874

ClearOne Advantage LLC
1501 S. Clinton Street, Suite 320
Baltimore, MD 21224

Debt Management Associates, Inc.
11510 Notchcliff Road
Glen Arm, Maryland 21057

National Relief LLC
11 Broadway, Suite 1300
New York, NY 10004

S & N Debt Solutions LLC
150 A Andover St., Suite 11A
Danvers, MA 01923

@GetOutOfDebtGuy

Nationwide Asset Services in Bankruptcy to Sell Client Accounts

Steve Rhode — Mon, 23 Apr 2012 17:41:42 +0000

From How to Get Out of Debt

A tipster sent me the following message:

I deciphered that NAS was Nationwide Asset Services but I’m not sure who FCS is.

According to court documents, Nationwide Asset Services did file a chapter 11 bankruptcy on November 29, 2011. On April 20, 2012 their attorney requested court permission to sell “the Debtor’s Book of Business, toll free number, website domains, Debt Software license, and intellectual property” for $170,000. The buyer is listed as Brite Solutions. – Source

It appears there are about 1,600 clients involved in this transaction. Here a sample of the client’s as they are described.

Some of the data does not appear to make sense. For example, the first client says they have 43.2 months left in a 43 month program which they started 8/27/2008.

What’s interesting as well is it looks like there may be many clients enrolled in states where the company is not licensed.

As an example, the client listing shows consumers from Minnesota but Minnesota says only the following companies are licensed: PREFERRED FINANCIAL SERVICES, TOUCHSTONE PARTNERS, NEW ERA DEBT SOLUTIONS, CAREONE SERVICES, SUPERIOR DEBT SERVICES, UNITED DEBT COUNSELING, PACIFIC DEBT, DEBTMERICA, J. HASS GROUP, FREEDOM DEBT RELIEF.

It will be interesting to see how Brite Solutions deals with taking on clients in states they do not appear to be licensed in like Minnesota. I wonder what will happen to those consumers? It sure seems like a lot of liability to take on for Brite Solutions.

@GetOutOfDebtGuy

FTC Goes After Another Alleged Collection Enterprise That Threatened Consumers and Offered Debt Reduction Services

Steve Rhode — Mon, 23 Apr 2012 14:26:12 +0000

From How to Get Out of Debt

The Federal Trade Commission recently filed suit against Pro Credit Group, Brett Fisher, Sanders Legal Group, Sanders Law, Andre Sanders, My Success Track, Consumer Credit Group, Dale Robinson, William Balsamo and First Financial Asset Services.

According to the FTC court documents, the defendants operated a common enterprise while engaging in deceptive acts and practices. They used an interrelated network of companies that have shared business functions, office locations, phone numbers and advertising.

“Because these defendants have operated as a common enterprise, each of them is jointly and severally liable for the acts and practices.”

The FTC alleges that from approximately January 2010 the defendants worked closely with overseas call center and engaged in a scheme to defraud consumers through the processing of payments for debts that consumers do not actually owe. The companies targeted consumers who had previously applied for or received loans from online payday loan companies.

Calls to consumers often claimed they were law enforcement officers or lawyers or affiliated with law enforcement authorities. Consumers were threatened they would face arrest if they failed to pay immediately.

Once consumers paid, payments were processed under the name Sanders Legal Group. Sanders Legal also mailed receipts to consumers reflecting their payments.

The U.S. Secret Service contacted the defendants in August, 2010 and began an investigation into the alleged criminal activities. Even knowing the investigation was underway the defendants continued on with their scheme.

Interest Rate Reduction Activities

Defendants Pro Credit Group, Brett Fisher, Sanders Law, My Success Track, Andre Sanders, Consumer Credit Group, First Financial Asset Services, and William Balsamo also allegedly “engaged in a scheme to defraud consumers by selling them a service that purports to lower the interest rates on consumers’ debts.”

The interest rate reduction defendants called consumers and told them they would “negotiate directly with consumers’ creditors to reduce consumers’ interest rates.” Consumers were told interest rates could be lowered into the “single digits.”

Consumers were also told that if the enrolled in the program they would receive assistance from personal finance consultants. People were told they would be eligible for a full refund and were charged between $695 to $995 for this service.

The budget and financial advice consumers received after completing the companies forms told them to pay more than the minimum monthly payments to pay off debt quicker.

The FTC states that consumers’ who enrolled in this program say their creditors were never contacted and no negotiations ever took place.

Customers that asked for refunds were told to wait a few months to see the results. “In many instances, consumers only receive refunds after making repeated requests to the defendants or after complaining to, or threatening to complaint to, the Better Business Bureau or law enforcement authorities.” Of those that receive refunds, many only received half or less of their initial payment. – Source

@GetOutOfDebtGuy

Bankruptcy Court Not In Love With Attorney Loophole Debt Settlement. It’s a Duck.

Steve Rhode — Mon, 23 Apr 2012 14:00:30 +0000

From How to Get Out of Debt

A recent memorandum opinion from Kansas in the United States Bankruptcy Court against Persels and Associates and attorney Stan Goodwin didn’t probably wind up how Persels would have wanted it to.

The summary of the opinion is intriguing and clear. The United States Chief Bankruptcy Judge, Robert Nugent, says:

Here are excerpts from the opinion that will be of interest to readers.

Kansas consumer protection law prohibits both deception and unconscionable conduct in offering consumers debt settlement services. While it also prohibits firms that are not registered with the State Bank Commissioner from supplying those services, Kansas law establishes a safe harbor that exempts Kansas lawyers who supply debt settlement services in the course of practicing law from registration and regulation by the Commissioner. Persels and Associates, L.L.C. (“Persels”), a law firm owned and controlled by Neil J. Ruther, Esq., enters into independent contractor agreements with Kansas attorneys as part of a calculated effort to slip into this safe harbor. None of the lawyers who work directly for Persels is admitted to the Kansas bar or practices in Kansas. Persels is an unregistered credit services organization that represents to Kansas consumers that it will “represent” them as attorneys in the negotiation and settlement of their debts. It made these (and more) representations to Levi Kinderknecht, the debtor in this chapter 7 case, and received over $1,000 from Kinderknecht for its purported services.

His chapter 7 trustee, Linda S. Parks, sued both Persels and Stan Goodwin, one of Persels field attorneys in Kansas, in connection with their “representation” of Kinderknecht. Parks asserted a variety of state law tort claims, state law consumer violations, and a 11 U.S.C. § 548 fraudulent conveyance claim, all arising from Kinderknecht’s enrollment and participation in a debt settlement plan with Persels.

Among the defendants’ assertions was their claim that they are exempt from the provisions of the Kansas Credit Services Organization Act (KCSOA), KAN. STAT. ANN. § 50-1116(b)(2005). The Persels law firm is a limited liability company that is neither owned by or employs Kansas lawyers. Because none of its individual lawyers are “licensed to practice law in this state,” and because entities are not “licensed” to practice law, Persels is not exempt from the provisions of the KCSOA, including the requirement that it register with the State Bank Commissioner, § 50-1118. Further, Persels’ failure to register with the State Bank Commissioner is a per se deceptive act or practice in violation of the Kansas Consumer Protection Act (KCPA) under § 50-1132. Finally, neither the KCSOA nor the KCPA is unconstitutional as applied to Persels and Goodwin.

Understanding Persels workflow requires a description of the cast of characters who participate in it. CareOne Services, Inc., not a party to this proceeding, is a national company registered with the Kansas Bank Commissioner under the Kansas Credit Services Organization Act (KCSOA), KAN. STAT. ANN. § 50-1116 et seq. to provide debt management services to Kansas consumers. A debt management plan is a plan in which a debtor’s creditors agree to stay attempts to collect a debt while the debtor makes payments under a plan that pays all debts in full. CareOne refers those debtors who do not have the income or assets to participate in debt management to Persels & Associates, LLC for debt settlement. In that debt settlement process that Persels advertises, Persels negotiates with debtor’s creditors for a reduction in the amount of the debt. The debtor makes payments to Persels to fund the payment of its attorneys fees and the compromised debts. In this case, CareOne referred debtor Levi Kinderknecht to Persels for debt settlement. Persels is not registered with the Kansas Bank Commissioner under the KCSOA.

In addition to CareOne personnel and Persels staff attorneys, Persels has field attorneys in virtually every state, including Kansas. After Persels signs a debtor up for debt settlement and the debtor pays an initial legal fee, Persels assigns the client to a field attorney in the state in which the field attorney is licensed to practice. The field attorney makes an introductory call to the client. Thereafter, the field attorney monitors or reviews the client file monthly and enters notes in the Persels software and may communicate with CareOne personnel, credit negotiators, or Persels employees. If the Persels client is sued by a creditor, the field attorney is available to provide advice to the client but the field attorney does not enter an appearance in the case or otherwise represent the client in court. They may draft answers and other pleadings for the client to sign and file pro se. The pleadings disclose that they were prepared by a Persels attorney.

Stan Goodwin was the Kansas field attorney for Persels assigned to Kinderknecht. Goodwin’s relationship with Persels is defined by an Independent Contractor Agreement under which Goodwin agreed to provide legal services to Persels’ clients, including: “ . . . providing legal advice in the general practice of law, Debt Settlement, Bankruptcy, . . .”.7 Goodwin does not practice law apart from his arrangement with Persels and has no clients other than those assigned to him by Persels; these number approximately 500 clients. Goodwin does not file bankruptcy cases or practice in this court. His only experience representing debtors is dealing with Persels clients enrolled in a debt settlement plan. He does not have access to the escrow account set up for the debtor’s payments. He is paid a flat fee of approximately $10-12 per client per month and is issued a 1099 from Persels for his work. Goodwin does not record or keep time records for his services, but did enter notes on Kinderknecht’s plan in the computer software upon his monthly review of the client file.

The success rate of Persels clients is dubious at best. During the one year period from October 2008 to October 2009, Persels enrolled 681 Kansas residents in a debt settlement program. 320 participants terminated within six months and 465 participants dropped out of the program within one year.

According to her file notes, the Persels representative, reading from a script, advised Kinderknecht about several points: (1) Persels fees would total 15% of his debts, (2) Persels would collect the fee over the initial 18 months of the plan; (3) the initial $100 legal fee was due on March 2; (4) Kinderknecht’s monthly payments were $162.90 which included a legal fee of $140.13 for the first five months, then $100.10 a month for months 6 through 18; (5) the monthly payments began March 13 and would be held in trust; (6) no payments would be made to creditors until they agreed to a settlement offer; (7) any creditors might pursue legal action to collect their debt before they accepted a settlement offer; (8) Kinderknecht should notify Persels when he received communication from his creditors; (9) Persels would send cease and desist letters to creditors upon receipt of Kinderknecht’s initial payment; and (10) Persels would notify Kinderknecht of all settlement activity but he should not expect any activity until the escrow account had accumulated enough money over an unspecified period of time.

He had monthly disposable income of $22.90 to pay toward these unsecured debts. Notwithstanding his meager disposable income, the payment schedule attached to the retainer agreement called him to make 60 monthly payments of $162.90, for a total of $9,774.00.19.

Kinderknecht electronically signed the retainer agreement on February 19, 2009. When he signed on with Persels, he believed he had hired a lawyer, that he was not going to get sued by his creditors, and that by hiring a lawyer, he would be able to resolve his debt in 60 months. Prior to retaining Persels, he had never hired a lawyer before. He would not have signed on if he had understood that this relationship offered him no protection from suit by his creditors and that he would have to represent himself in court. Nor would he have enrolled in debt settlement had he been informed that most people who sign up for debt settlement do not complete the plan.

According to the log, a Persels attorney named “Swyngaard” conducted an “Attorney Record Review” on February 20, 2009. Goodwin identified this individual as Sara Wyngaard, a Persels attorney living in Mexico. This notes log entry apparently references the “underwriting” conducted by a Persels staff attorney to determine that the debtor is an appropriate candidate for debt settlement before assigning the debtor to a field attorney.

Citibank sued Kinderknecht to collect his debt, serving him with summons and a petition on August 7, 2009. He contacted Persels that day and forwarded the papers to Persels on August 11. When Kinderknecht spoke to Goodwin about the summons on August 9, 2009, he realized for the first time that Persels’ representation of him did not include court appearances. Goodwin explained to Kinderknecht that he could represent himself. Goodwin received the lawsuit papers on August 13 and on August 17, prepared form pleadings in response to the Citibank suit, and e-mailed them to Kinderknecht. Goodwin told Kinderknecht that he would try to work with Citibank’s attorneys to get them to not pursue him, but Goodwin never contacted Citibank’s counsel regarding the suit. On September 26, Goodwin conducted a file review and called Kinderknecht for the status of the Citibank litigation, leaving a voice message. Goodwin sent another request for the lawsuit status when he reviewed the file October 30. Because Kinderknecht did not want to defend himself pro se against Citibank, he hired a local bankruptcy attorney and filed a chapter 7 petition on October 20, 2009. On November 2, 2009, Kinderknecht canceled the debt settlement plan. Persels refunded $200.80, the balance in his trust account, to Kinderknecht on November 10, 2009.34

Kinderknecht’s bankruptcy case trustee commenced the current adversary proceeding on October 1, 2010. As listed in the final pretrial order,35 she asserted a variety of claims against Persels and/or Goodwin.36 They include (1) avoiding a fraudulent transfer under 11 U.S.C. § 548(a)(1)(B) because Kinderknecht did not receive reasonably equivalent value in exchange for the fees he paid; (2) claims for the commission of deceptive practices and unconscionable acts in the services provided Kinderknecht in violation of the Kansas Consumer Protection Act (KCPA), KAN. STAT. ANN. §§ 50-626 and 627 (2005 and 2010 Supp.); (3) common law legal malpractice; (4) breach of fiduciary duty; (5) disgorgement of unreasonable attorneys’ fees; and (6) claims that Persels and Goodwin violated the Kansas Credit Services Organization Act (KCSOA), KAN. STAT. ANN. § 50-1118 (2005) by providing credit services without registering with the state bank commissioner and without complying with the other provisions of that act.

In their summary judgment memoranda, the defendants also challenged the constitutionality of the KCSOA and the KCPA as sought to be applied to them under the circumstances here. The Court certified the constitutional challenge and the Kansas Attorney General intervened to defend the constitutionality of the state statutes as sought to be applied here.

Analysis and Conclusions of Law

The Kansas Credit Services Organization Act requires that credit services organizations providing debt management services to Kansas residents first register with the Kansas bank commissioner under KAN. STAT. ANN. § 50-1118 (2005). Persels and Goodwin are credit services organizations that engage in debt management services. Kinderknecht is a Kansas resident. Neither Persels nor Goodwin is registered with the state bank commissioner. They contend that they are exempt from the Act’s registration and other requirements because they are attorneys.

The attorney exemption is found in § 50-1116(b) of the Act and states:

Any person licensed to practice law in this state acting within the course and scope of such person’s practice as an attorney shall be exempt from the provisions of this act. To qualify for the attorney exemption, two requirements must be satisfied under the plain language of the statute: (1) that the “person” is licensed to practice law in Kansas; and (2) that the “person” is acting within the course and scope of such person’s practice as an attorney.

To the extent that Goodwin was practicing law, he may qualify for the attorney exemption and not be subject to the registration requirement or other provisions of the KCSOA. He is an individual licensed to practice law in Kansas and arguably represented Kinderknecht in the course of his “practice,” which consists exclusively of acting as a field attorney for Persels in Kansas and representing only clients assigned to him by Persels. He had no engagement or fee agreement with Kinderknecht and did not directly charge Kinderknecht fees. Goodwin received fees from Persels, not Kinderknecht.

Goodwin gave Kinderknecht no specific legal advice about entering into the debt settlement plan. Kinderknecht had already retained Persels and enrolled in the plan before he was assigned to Goodwin. Goodwin did no negotiating with any creditors. Indeed, he testified that he would not have advised Kinderknecht to proceed with debt settlement with respect to Bank of America or Citi. Only when Kinderknecht was sued did Goodwin confer with him about how to proceed and Goodwin’s only contribution then was to “ghost” some pleadings and forward them to Kinderknecht for Kinderknecht to sign. Despite his telling Kinderknecht that he would try to dissaude Citi’s counsel from pursuing the action, he never did so. If this is the extent of what Goodwin does for his “clients,” whether he is “practicing law” as that term is commonly understood is questionable. Therefore, enough dispute remains in the record to deny Goodwin summary judgment on the issue of his being exempt from the KCSOA under § 50-1116(b).

Persels’ status under the KCSOA stands on a different footing from Goodwin and compels a different conclusion. Persels is a Maryland limited liability company that holds itself out as a national law firm dedicated to consumer rights. Although a law firm, might fall within the KCSOA’s definition of “person,” law firms are not licensed to practice law in Kansas. Nor does Persels suggest or point to facts in this record that would support a finding that the Persels firm (as opposed to its member lawyers) has been granted a license to practice law anywhere. On March 23, 2012 while this motion was pending, the Kansas Court of Appeals handed down its decision in Consumer Law Associates, LLC, et al v. Stork, Acting Com’r of the Office of the Kansas State Bank Com’r, and affirmed the state trial court’s determination that the attorney exemption in the KCSOA does not apply to a limited liability company or any other entity that is not licensed to practice law by the Kansas Supreme Court.

Only individual members or attorneys of a law firm may be licensed to practice law. A law firm can only act through the individuals that comprise the firm, just as a corporation can only act by and through individuals. The Persels law firm is comprised of both attorney and non-attorney employees. Obviously, the non-attorney staff of Persels are not licensed to practice law in Kansas or any other state. Persels admits that none of its “staff attorneys” or members is licensed to practice law in Kansas. Nor has Persels identified a Kansas licensed attorney in the Persels firm who represented Kinderknecht and provided legal services to him. Indeed, the fact that Persels has no attorneys licensed in this State is the very reason it needed Goodwin, who is licensed in the state of Kansas, to “represent” the Kansas debtor. But Goodwin’s relationship with Persels is that of an independent contractor, not a member of the Persels law firm acting as an agent of Persels. Thus, Persels can neither rely on the fact that Goodwin is a Kansas-licensed attorney, nor claim that it “practices” law in Kansas through the instrumentality of a Kansas-licensed independent contractor. Holding otherwise would allow Persels to insulate itself from any liability resulting from Goodwin’s conduct because he is an independent contractor while availing itself of the KCSOA safe harbor on the strength of Goodwin’s Kansas license. Persels can’t have it both ways.

Because no member or associate of the Persels law firm is licensed to practice law in Kansas, the Court need look no further to determine that Persels is not protected by the safe harbor of § 50-1116(b). There is no need to determine whether Persels was acting within the course and scope of such person’s practice as an attorney. The Persels law firm is not protected by the attorney exemption in § 50-1116(b) and was required to register with the Kansas bank commissioner and comply with the provisions of the KCSOA.

The Persels’ workflow model as established by the uncontroverted facts demonstrates that non lawyers performed the vast majority of services provided to Kinderknecht and that so-called “credit negotiators” – non-lawyer members of Persels’ administrative staff – were tasked with negotiating debtor’s debts with creditors. Neither Persels staff attorneys nor Kansas attorney Goodwin negotiated any of Kinderknecht’s debts. Other than the “cease and desist” letters, no attorney communicated with any of the creditors Kinderknecht enrolled in his plan, despite Persels’ representation that he would “be represented for purposes of negotiation of your debts by a Persels . . . attorney licensed in your state of residence.” What Kinderknecht was sold were debt settlement services that Persels’ dressed up as “legal services” in a bald-faced effort to evade complying with the KCSOA. What could be more deceptive?

Neither Persels nor Goodwin disclosed to Kinderknecht that because he had so little disposable income, his debts were simply too high for successful debt settlement to be likely. Persels and Goodwin knew that certain creditors were more aggressive and likely to sue debt settlement clients rather than negotiate the debts. And they knew that Kinderknecht owed two of them money. This would have been particularly relevant information for Kinderknecht. He considered debt settlement because he feared getting sued by his creditors and sought the assistance of attorneys to help him deal with his creditors. Had Persels or Goodwin told him that, Kinderknecht might not have enrolled in debt settlement or retained Persels to represent him. Yet neither Persels nor Goodwin ever discussed with Kinderknecht the advantages and disadvantages of debt settlement versus bankruptcy or explained why he was a suitable candidate for debt settlement.

You can read the full Order Designated as Opinion here.

@GetOutOfDebtGuy

Amazing How Hypocritical You Are Steve Rhode

Steve Rhode — Mon, 23 Apr 2012 03:49:07 +0000

From How to Get Out of Debt

Someone just posted the following comment, on a post about Lloyd Ward, which actually creates a perfect segue for me to finally write an article I’ve had percolating for some time. While some of the claims made by the commenter are skewed, it is true that back in the early 2000s the non-profit group that I ran did charge some advanced fees for service. But I wanted to share with you what I learned from that experience.

I guess we can’t help but let our life experiences influence our future decisions and points of view. That’s actually a good thing, isn’t it? Shouldn’t we learn from our mistakes or experiences? Actually one of my life mottos is “No sense wasting a perfectly good mistake.” So with that in mind I learned a number of great lessons along the way that shaped who I am and my points of view that I embrace today.

In my case, my experience with the non-profit group taught me one big lesson, advanced fee debt relief programs don’t work. It’s a lesson learned I’ve shared with readers along the way as well. And it’s a lesson I’ve watched many not listen to and instead learn it over and over again, especially in the heyday of advanced fee debt settlement.

While I don’t know of any big advanced fee debt relief programs from much earlier generations, as a student of debt relief history there have certainly been other approaches and attempts, such as the early for-profit proraters or “debt lumpers,” that failed as well.

As I said to the commenter:

I’m not sure what the commenter is referring to about scrambling to take things down. I have not scrambled to do that.

The non-profit group I ran, in the building pictured, focused on a much more holistic approach to debt help. Besides the staff psychologist we had a CPA, CFP, Tax Advisor, Certified Arbitrators, HR specialists for clients to utilize, etc. The focus was to help someone recover from the issue at hand and prepare to do better. If you consider that money problems are both about reducing expenses and increasing income you can better understand our approach back then.

For example, our HR specialists would review client resumes and prepare people for interviews in an effort to help them focus on earning more at the same time we were dealing with the debt. There were times we even hunted for jobs and arranged interviews for clients as well. A couple of times we even had our IT staff help some clients troubleshoot their home internet connections so they could be better connected on the internet to find jobs.

The $3,000 program we had was an advanced fee program and was not prohibited when we offered it. In that comprehensive program we gathered all of the client’s financial information and as a team of 3-4 spent 40+ hours on average working each client case. The client’s team was managed by the CFP and other experts.

We would evaluate the current situation, have multiple conference calls with clients and the designated team, make all encompassing specific suggestions for changes, help implement those recommendations, and intervene with creditors. That intervention was in the form of a comprehensive financial analysis and extensive documentation showing what the consumer could afford and what reductions all creditors would need to make for it to be successful. We even included a letter from a local bankruptcy attorney indicating they were willing to represent the consumer and assist them to file bankruptcy if the creditor did not accept the plan.

In the end the program was determined to be a failure and terminated. And the big reason the program failed was that it lacked any power to require creditors to implement changes, even if those changes were in their best interest. We learned the hard way, the only solution that has ultimate unilateral power over a creditor is bankruptcy.

If a consumer had ten creditors and nine agreed to the plan, the plan would work at first but fail because of the actions of the lone creditor. Does that sound familiar modern debt settlers? How many times have you seen a client blow apart because a creditor didn’t want to accept the settlement offer and instead sued. While we didn’t have any clients sued that I can remember, we did strongly encourage clients with aggressive creditors to meet with a bankruptcy attorney and protect themselves.

I think that program ran for a couple of years, tops. But along the way the difference was we focused on learning lessons, consumer satisfaction and issued refunds, not trapping people into the agreement os saying, as some debt relief companies have, “You signed the agreement, live with it.”

I’ve never mentioned it on the site before, because it is not relevant when writing about others, but the non-profit company I ran, had a great reputation. We had an A+ BBB rating and at the peak about 20,000 clients. – Source

The vast majority of our clients were very happy and we diligently focused on customer service. All staff members had to read and we tried to encourage them to live the philosophies taught in Raving Fans. It’s a book I highly recommend to all debt relief companies that care, as well.

Sure, we did have some complaints, with 20,000 clients at the peak and probably 100,000 over the years we were in business you have got to naturally expect some complaints.

For those that had an issue we focused on making sure those people had their problem resolved and worked hard to deliver exceptional customer service using the Raving Fans approach. That’s where I learned the lesson of the incredible power of exceptional customer service and how it can take a problem and neutralize it. I even shared what I learned in this guide I wrote, How to Handle a Consumer Complaint Like a Pro And Come Out Smelling Like a Rose.

That’s why it blows my mind to watch current day debt relief companies tell their customer to go pound sand and not give refunds or resolve their issues and let them go elsewhere, like this website, and complain. No refunds and poor customer service results in regulator complaints, complaints result in legislative interaction, and new laws result in restriction.

The commenter didn’t mention it but back in the day we even settled debts as well and there were clearly cases when settling was a tool to use, but not all cases. Settling was best for those that had cash on hand to settle and an offer and acceptance could be made quickly with the creditor. For that program we charged a flat rate of $495 per creditor and if we were unable to secure a settlement we refunded 100% of the fee.

But what the commenter fails to place into context is that between then and now the entire debt relief industry went, well, crazy with advanced fee debt settlement. And while some debt settlement companies had their hearts in the right place, many just took the money and ran. Some even spent their incredible windfall on hookers, drugs, and exotic cars. I’m not kidding. You know who you are.

Modern advanced fee debt settlement was also based on a number of poor factors at the heart of some operations.

No refunds.
Provide bad customer service to make clients quit so advanced fees can be kept.
Spend the money from advanced fees before delivering the service. Creating essentially a Ponzi scheme where future income was necessary to pay for services delivered to previously enrolled clients.

In addition, back in my time, which was between 1994 and 2004, rules, regulations and the need to provide protection for consumers from bad actors was not as necessary as it has been recently. These are all new rules and laws I’ve watched evolve since that time which are directly the result of companies harming consumers which required regulators to step in.

It wasn’t until the explosion of Ameridebt that a big focus on bad behavior on a mass scale hit the radar in the debt relief space. Ameridebt was a non-profit credit counseling group that charged all people an advanced fee by keeping the first months DMP payment instead of sending it to creditors. The fallout from this was a crackdown by the IRS on non-profit credit counseling and many new regulations by the IRS.

Until then the ability to keep the first months payment was legal in most, if not all places. The reason Ameridebt was nailed was not because they took the first payment but because they took the payment and hid the fact they were taking it. Creditors would start to call consumers and people got pissed their creditors were not getting paid. Ameridebt imploded and people even went to jail over it. Some though went on to take what they learned from the experience and bring that into a debt settlement industry that then re-adopted the advanced fee sales approach. There is even a common link between Ameridebt and the spectacular debt settlement debt settlement failures of Hess Kennedy and Allegro Law.

I get the point and see the irony that at one point the non-profit credit counseling group I ran charged advanced fees. I really do, but I learned a bunch of lessons from those days that I try to share with readers in advice and direction. I use my interest in debt relief history to try to make all aware of mistakes that failed in the past so people are not doomed to repeat them again.

For me, the alleged attack that at one point the group I was affiliated with charged fees is a bit like saying at one time cars were built without seat belts. Somewhere along the way the industry and public learned the value of seat belts saving lives and doing good and now getting into a car without clicking your seatbelt seems foreign and odd to us because we’ve learned that it can protect us.

Between Then and Now

And between those days past for me and today I learned an entirely different paradigm on how advanced fees for debt relief services can be turned from being logical, good and proper to detrimental and wrong when abused.

I also learned a lesson about dealing with states and making 100% certain you are fully compliant with regulations. I learned my lesson the hard way with California. You can read about that here, Debt Relief Expert With Background You Don’t Know About. Not being complaint, intentionally or unintentionally, no matter how hard you try, has consequences. If anything, my position on this site is not if a regulation is good or bad, that doesn’t matter, but that companies comply with it so they don’t have the same experience I did.

One point the commenter makes is that they have the contracts we used. And the reason why is most likely that we made sure all our client agreements were publicly available before any consumer gave any information. The contracts were available and linked on the enroll and program pages so people could read the agreements before signing up. That’s a practice I’d like to see more companies do today. There is no reason why a consumer should not have the freedom to review the agreement without giving up personal information. There is also nothing in a client agreement that is a trade secret.

What the commenter did not mention was that back in the 1990s and up till a certain point we had pages that did have pages with messages on it like avoid bankruptcy and mentioned that debt consolidation loans were not a way to go. But along the way my points of view on that changed.

It took me ten years to go public about my bankruptcy. I wrote about how I finally did publicly mention it in the article How the Washington Post Outed My Bankruptcy Secret. Finally opening up about my bankruptcy allowed me to begin to evaluate my personal experience outside of a state of fear of discovery. Now that the secret was out I looked at bankruptcy in a different light. And the experience we had in dealing with creditors with that comprehensive program changed my mind as well. It was from that time forward I began to embrace bankruptcy as a more logical solution in more and more cases.

In fact that comprehensive bankruptcy program, the expensive one, I mentioned had it’s client forms based on Chapter 13 documentation that clients could take to their bankruptcy attorney if they decided to file. We also wrote many educational articles and talked openly about how bankruptcy could benefit the consumer.

Not to bore you with more details but there came a point where we actually shed all of our debt management clients. It just got too difficult to offer a debt management program and speak out about the weak points of the DMP at the same time. A line in the sand was drawn and putting the consumer first, won. That eventually led to the closing of the non-profit.

I also used to tell people all the time they could not borrow their way out of debt with a debt consolidation loan. That point of view changed over time as well with the advent of LendingClub.com and other peer-to-peer lending networks that actually made a lot of unsecured debt consolidation loans at less than bank rates. Today it is possible to borrow your way out of debt using a LendingClub.com debt consolidation loan if the rate you are approved for is lower than the combined debt interest rate — and improve your credit at the same time.

In other areas we were just too far ahead of our time with our holistic approach. One program area I wish we had been able to continue was our personal money management where we managed the personal finances of clients. In that program the client’s bills came to us and we evaluated, managed and paid them.

Often we were able to save the client money by having staff trained and aware of potholes and deals. Since we received the client bills we were aware of other opportunities as well. For example, we scanned the incoming bills and scrapped the information off them. We knew who the creditors were and the interest rates they were charging but we also knew the credit score of the client. Armed with that information the system would generate an alert if a client was being charged an interest rate by a specific creditor that was higher than was being charged to another client with the same creditor and similar credit score. Armed with that information the account manager could call the creditor and get the interest rate reduced to the lowest rate. The creditor would balk and say “We don’t offer any such program,” but when we could give them the name of a customer they actually did offer that rate to their tune changed. It was great to be able to negotiate with the creditors from a position of strength.

Often the areas we found that needed attention was cell phone plans, home phone plans, and other service items. I remember we uncovered one person was paying double for their home alarm service for not good reason at all.

A review of the service packages and insurance costs could save the client hundreds of dollars a month. And then, rather than needing a debt intervention program they were able to make ends meet and pay their way out of debt.

It was an amazing program with incredible technology. But today, there are some similar services in development that will be rolling out in the next year. I’ve seen the Alpha demos of some of them and shared some of the successful ideas we developed way back when to incorporate, like the one above.

So you see that along the way I changed and learned a number of lessons. I also learned debtors are considered to be a disadvantaged class of consumers and right or wrong, if you charge advanced fees and the consumer is not able to resolve their problem, or fees and performance are not transparently disclosed, the outcome will not be favorable for anyone. Unhappy clients complain and complaints can lead to regulation and lawsuits.

Maybe the ultimate irony is just that that I once ran a non-profit group that did charge advanced fees for debt relief services and learned from the experience. An experience I try to share with my readers.

@GetOutOfDebtGuy

P.S. If you want to know more lessons I learned, read this article from 2010, What I Learned From Selling Debt Relief Services. What I Got Wrong and Right On the Front Lines.

Scott Law Group Debt Settlement Litigation List Contains Some New Companies

Steve Rhode — Thu, 19 Apr 2012 15:08:38 +0000

From How to Get Out of Debt

The Scott Law Group in Washington State has been VERY active in going after debt settlement companies that allegedly injure consumers. It appears some new companies have been added to their list of current litigation, The new companies include FBL Associates, Lifeguard Financial, Please Reduce My Debt, and Think Outside the Box Solutions. – Source

Here is the current list as shown on their website today.

Alliance8, Inc
American Debt Settlement Group, LLC
Amerix Corporation
Ascend One Corporation
Bay View Law Group, PC
Belmont Media LLC (dba Crusader Customer Services and Crusader Law Group)
CareOne Services, Inc
CDS Client Services (dba Capital Debt Settlement)
Century Negotiations, Inc.
Consumer Law Associates, LLC
Debtmerica, LLC
Debt Relief Center, Inc.
Debt Relief USA, Inc.
Debt Shield, Inc.
DR Options LLC (dba Debt Relief Options LLC)
EFA Processing, LP
Fast Track Debt Relief, Inc.
FBL Associates, PLLC
FBL Associates, PC
Freedom Debt Center
Freedom Debt Relief, LLC
Freedom Financial Network, LLC
Freedom Fidelity Management, Inc (dba Freedom Financial Management)
GHS Solutions, LLC
Global Client Solutions, LLC
Greenbyphone, Inc.
iVista Enterprise, Inc (dba ZeroDebt USA, Inc)
JEM Group, Inc
J Hass Group, LLC
JIO Reserves, Inc
LDL Freedom Enterprises (dba Financial Crossroads)
Legal Helpers Debt Resolution, LLC
Legal Services Support Group, LLC
Lifeguard Financial, Inc.
Lifeguard Financial, LLC
Lowermybills.com Inc.
Marshall Banks, LLC (dba Kazlow & Tucker Debt Relief)
National Consumer Legal Center, Inc.
Nationwide Support Services, Inc.
NoteWorld, LLC
Orion Processing LLC (dba World Law Direct , World Law Group, World Law Group America LLP, World Law Plan, World Law Processing, World Law Services & World Law Debt Settlement)
Persels & Associates LLC
Please Reduce My Debt, LLC
Quality Support Services, LLC
Rocky Mountain Bank & Trust
SCF State Capital Financial, Inc.
Sierra Financial Solutions, Inc.
Solid Ground Financial, LLC
Think Outside The Box Solutions, LLC

@GetOutOfDebtGuy

Connecticut Forces Global Client Solutions to Make Sure Debt Settlement Companies Are Really Licensed

Steve Rhode — Thu, 19 Apr 2012 14:42:57 +0000

From How to Get Out of Debt

Global Client Solutions, one of the major escrow companies that handles funds for debt settlement clients, was charged with being an unlicensed money transmitter by the state of Connecticut and then entered into a consent order to resolve the issue. According to the records, on November 30, 2011 Global Client Solutions received a cease and desist letter from the state and a Notice of Intent to Impose Civil Penalty and Notice of Right to Hearing.

The agreement strikes at the very heart of the the flow of money from Connecticut residents, through Global Client Solutions to debt settlement companies. With this charge and consent order Global Client Solutions is now tasked with making sure the debt settlement companies they provide services for are actually licensed in Connecticut. Something they should have been doing for every state all along.

You’ve certainly got to give a hat tip to Connecticut for being clever on this approach to clean up unlicensed debt settlement companies who serve Connecticut residents.

The allegations made by Connecticut were:

As a result of the above actions, Global Client Solutions agreed to enter into a consent agreement without admitting or denying any of the allegations. As part of that agreement, Global Client Solutions is to pay the State of Connecticut $150,000 as a civil penalty. Additionally, Global Client Solutions institute procedures to reasonably ensure that the debt negotiation companies with which it does business in Connecticut (“DNEGs”) are either duly licensed or exempt from debt negotiation licensing in Connecticut, including, but not limited to:

No later than the date this Consent Order is executed by Global, Global shall send a notice to all DNEGs advising them that as of May 16, 2012, Global will no longer process DNEG fee disbursements on behalf of Connecticut residents who have engaged such DNEG, unless, prior to May 16, 2012, such DNEG advises Global, in writing, that it is licensed or exempt from debt negotiation licensing in Connecticut;
No later than May 25, 2012, Global shall provide copies of all written responses received from such DNEGs pursuant to paragraph (3)(a) to Carmine Costa, Director, Consumer Credit Division, Department of Banking, 260 Constitution Plaza, Hartford, Connecticut 06103-1800, or carmine.costa@ct.gov;
Effective May 16, 2012, Global shall no longer process fee disbursements to a DNEG, unless such DNEG has advised Global, in writing, that it is licensed or exempt from debt negotiation licensing in Connecticut. In addition, Global shall cease processing fee disbursements to a DNEG if the Commissioner notifies Global that (1) such DNEG is not licensed in Connecticut, (2) the Commissioner has issued a final decision ordering such DNEG to cease and desist from violating Section 36a-671 of the Connecticut General Statutes, or (3) the Commissioner has issued an advisory opinion indicating such DNEG is not exempt;
Effective ninety (90) days after the date this Consent Order is executed by Global, Global shall cease receiving its monthly service fees from the disbursement account of any Connecticut resident who is no longer actively participating in a debt settlement program as a result of Global no longer processing fee disbursements to the DNEG, pursuant to paragraph (3)(c) above, and shall promptly return all monies held in such accounts on behalf of Connecticut residents;
Upon execution of this Consent Order by Global, Global shall no longer accept new agreements to establish disbursement accounts and process payments on behalf of Connecticut residents who have engaged a DNEG, unless prior to such acceptance, such DNEG has advised Global, in writing, that it is licensed or exempt from debt negotiation licensing in Connecticut; and
For a period of eighteen (18) months from the date this Consent Order is executed by Global, Global shall provide copies of all written responses received from DNEGs advising Global that the DNEG is licensed or exempt from debt negotiation licensing in Connecticut to Carmine Costa, Director, Consumer Credit Division, Department of Banking, 260 Constitution Plaza, Hartford, Connecticut 06103-1800, or carmine.costa@ct.gov. – Source

Global Client Solutions also agreed to waive all monthly fees for existing Connecticut residents for three months.

@GetOutOfDebtGuy

Oh Dear – Debt Help and Answers Site Needs Help

Steve Rhode — Wed, 18 Apr 2012 18:22:00 +0000

From How to Get Out of Debt

Someone asked me to look at debthelpandanswers.com, and so I did. Clearly what we have here is a small player who is trying to attract potential customers. The site appears to be for a Marcella Hill.

The site seems very basic and is actually still using an Obama video on it. Surprising considering all the flack generated from that.

But anyway, the glaring issue I found was the quiz.

As you will see on the image below. I answered each quiz question showing I did not need help. The result when you hit the results button? You guessed it, “You overwhelmed with DEBT STRESS.” (This time the typo isn’t mine.)

Interactive quizzes can be fun and all that but seriously, if you are going to have an interactive quiz on the site at least have the results make sense.

And then there is this puzzling chart on the debt settlement page.

Does anyone have a clue how debt settlement only results in a negative impact on the credit score for four years? Now I might guess that what they were trying to say was that the credit can be rebuilt but if that’s the case then why is chapter 13 bankruptcy listed as ten years when it’s only on the credit report for seven? And where is the column for chapter 7 bankruptcy to make an actual comparison?

Take a look at the site at debthelpandanswers.com and offer your suggestions for improvements in the comments below. Maybe we can actually Marcella Hill correct some of the errors and issues we find and make it a better site for her and her clients.

@GetOutOfDebtGuy

Consumer Credit Default Rates Drop in March 2012

Steve Rhode — Wed, 18 Apr 2012 17:46:09 +0000

From How to Get Out of Debt

Data through March 2012, released today by S&P Indices and Experian for the S&P/Experian Consumer Credit Default Indices, a comprehensive measure of changes in consumer credit defaults showed that, with the exception of bank card, all loan types saw a decrease in default rates for the third consecutive month. In addition, the four that did decrease posted their lowest rates since the end of the recent economic crisis. The national composite declined to 1.96% in March from the 2.09% February rate. The first mortgage default rate decreased from February’s 2.02% to March’s 1.88%. Second mortgage and auto loans default rates also declined from 1.20% and 1.22% in February to 1.03% and 1.11% in March, respectively. Bank card was the only loan type where default rates increased in March to 4.47% from its 4.41% February level.

“The first quarter of 2012 was largely positive for the consumer,” says David M. Blitzer, Managing Director and Chairman of the Index Committee for S&P Indices. “Not only have we resumed the downward trend in consumer default rates that began in the spring of 2009, but we appear to be reaching new lows across most loan types. The first three months of 2012 show broad based declines in default rates with first and second mortgage, auto and composite default rates all reaching post-recession lows.

“The first mortgage default rate fell by 14 basis points in March, bringing this rate below the prior August 2011 low. The second mortgage rate fell by even more during the month, 17 basis points. Both second mortgage and auto default rates are also at their lowest in the three-plus year history of these data. While the bank card rate rose, it was not by much and is still close to the recent low reported just last month.

“Four of the five cities we cover saw their default rates drop. For the third consecutive month, Chicago saw a decline, moving from 2.84% in December to 2.35% in March. That’s almost half a percentage point and one of the two cities to post new lows. New York and Miami both fell for the second consecutive month. New York decreased slightly from 2.04% in February to 2.01% in March. Miami dropped almost a full percentage point, from 4.54% in February to 3.62% in March. While it still remains the highest default rate, Miami is the other city to hit a post-recession low. Dallas moved down from 1.61% in February to 1.44% in March and retains the lowest rate among the five cities we follow. Los Angeles was the only city where default rates marginally rose, from 1.87% to 1.88%.” – Source

The table below summarizes the March 2012 results for the S&P/Experian Credit Default Indices. These data are not seasonally adjusted and are not subject to revision.

The table below provides the S&P/Experian Consumer Default Composite Indices for the five MSAs:

Bogus National Debt Relief Hardship Program Mailer Still Being Sent

Steve Rhode — Wed, 18 Apr 2012 16:09:33 +0000

From How to Get Out of Debt

First off I would like to applaud the debt relief company that sent me in this mailer. Good debt relief companies that care about consumers and who want to play a role is stamping out bogus advertising that hurt the entire industry, can play a role by forwarding material to me at tips@getoutofdebt.org.

I’ve covered bogus mailers on The National Debt Relief Hardship Program before.

The reason I call this mailer bogus is that it pretends to be something it is clearly not. This is not an official government mailer by any stretch of the imagination, even though it uses an official looking format and seal.

The inside of the mailer tells people to call 866-661-8285 for information on the NDRHP mailer. Uses postal permit 1297.

The fine print at the bottom of the inside is tough to read but what I can make out says, “This letter is an advertisement that provides consumer leads to debt resolution providers and law firms.” You see, there is no official government program called The National Debt Relief Hardship Program. It’s as bogus as the statement on the mailer that says, “Enrollment is limited.” I mean really, how can leads that are being farmed and sent to outside providers be limited?

The mailer doesn’t make sense in other ways as well.

It says “due to recent delinquent payments filed against you” and then makes mention of a try-bureau credit report but nothing is filed against anyone. It might be reported, but not filed. Saying filed makes it deceptively sound like some sort of legal action.

The mailer also makes the claim that it will “Avoid Negative Public Record” but I challenge anyone to show me how settling a debt will not result in any negative public record when at the very least the part of the debt forgiven will be reported negatively.

I’m also at a loss on how they can claim an “Immediate Reduction of Payments up to 60%” which gives the recipient the impression that some sort of payment reduction is sanctioned by the creditors. Hell, you can cut your payment by 80% if you stop sending 80% of your payment to your creditors.

The claims made in this mailer are a classic example of why debt relief companies need to be certain what their lead and service providers are doing to get business. The CFPB has made it very clear that the bad acts of underlying service providers will transfer to the companies that hire them.

Any debt relief company that has received leads as a result of this fake form and logo mailer which makes claims prohibited under the TSR should be afraid.

I would suggest that any consumer that received this mailer should file an online complaint with the United States Postal Inspection Service and bring it to their attention to investigate.

@GetOutOfDebtGuy

Pro Debt Solutions Creates Consumer Advantage Loan to Lend Money to Debtors First and Then Settle Their Debt

Steve Rhode — Tue, 17 Apr 2012 23:14:16 +0000

From How to Get Out of Debt

A reader posted a comment about a company called Pro Debt Solutions in California. While this initially sounded like the same debt restructuring B.S. we’ve heard about and covered before, this might actually be a different approach.

The reader said:

I thought for sure that the company would not be a registered lender in California, but I was wrong, they do hold a lender license. Now that’s a refreshing change.

Pro Debt Solutions is located at:
Pro Debt Solutions, Inc.
314 S. Melrose Dr., #200
Vista, Ca 92081

A search of the address located a Pro-Net Financial, Inc. at the same address.

Pro Debt Solutions, Inc was registered to do business on July 17, 2008. Pro-Net Financial was registered in California on September 28, 1988. The website attributed to Pro-Net Financial (howtowipeoutdebt.com) does not appear to be operational. – Source

It appears Pro Debt Solutions is under the control of Andrew Bloom and Marisa Bloom of Vista, California.

It is a bit perplexing to look at the BBB record on this company. The BBB gives them an F rating and lists the owner as Michael Scott Moore. They also list an alternative name for the company as Consumer Debt Relief Program. – Source

I also found an unusual comment that allegedly linked the street address of Pro Debt Solutions to a bogus debt relief mailer I’ve warned consumers about before. Many others were associated with the same National Debt Relief Plan mailer as well. – Source

I contacted Andrew Bloom from Pro Debt Solutions to ask him about his approach. He stated he extends 0% interest loans to debtors but adds on a fee, typically a percentage of the total debt. The surcharge he said was variable, “I, of course, have my formulas, but there is no hard and fast rule as to the amount.”

Apparently this approach is crafted for each client. “it really depends upon the debt situation (lawsuit to be paid off / payday type loan / difficult creditors / easy creditors). It’s all based on what I can get the settlements at. Then of course it all has to be balanced with the consumer’s monthly income/expense,” said Bloom.

Bloom states that he only assist consumers in California presently but has plans to expand in the future. I did notice that Pro Debt Solutions is registered to do business in a number of states already.

The commenter stated their debts were paid in full when Pro Debt Solutions extended the loan to them.

Bloom states the approach is superior to other debt settlement companies. He said, “No one else is lending in this space, which is why I am. Superior results for consumer (pay back less than originally owed, credit begins to get better and of course it eliminates any collector calls and lawsuits since the accounts are paid off). And yes, I do make a good profit, which the borrower knows exactly what I make upfront.”

I do have to be a bit critical of Bloom’s comparison chart on his website.

It would be nice to see it include consumer bankruptcy in the matrix and update or qualify the credit counseling “major damage to credit” line. The reason bankruptcy should be included here is that if the claim is going to be made that the Consumer Advantage Loan provides the “Best Overall Results” then consumers should be fully informed what their options are.

While this approach might run into trouble in UDMSA controlled states the fact a loan is actually extended on the front end and no advanced fee is collected seems to avoid the TSR all together.

We’ll have to wish Andrew luck with this approach and keep our eyes on it to see how it unfolds.

@GetOutOfDebtGuy

The Resolution Law Group Sued Over Claims in Mailer by First Mariner Bank

Steve Rhode — Mon, 16 Apr 2012 15:43:41 +0000

From How to Get Out of Debt

It looks like another company marketing services against lenders has run into trouble as a result of their mailers. It’s somewhat similar to the claims made against another company, NHT Law Group. You can read that story here.

It looks like mortgage lenders are going after these mass joinder like mailers more often.

In the complaint filed against The Resolution Law Group on April 13, 2012 by First Mariner Bank the bank alleges the advertising by the Resolution Law Group was false and injurious.

The mailer in question is this one.

One interesting observation is that the disclaimer at the bottom says “Licensed to Practice Law in CT and CA” but does not say who the lawyer is that is licensed.

The bank states the mailed advertisement gives the consumer “case details” about the “national lawsuit” but First Mariner Bank says those statements are untrue. Additionally the mailer alleges the bank has engaged in fraudulent or improper lending activity, which the bank denies as well and says The Resolution Law Group knew were false.

You can read the complaint here.

I wonder if The Resolution Law Group will try the excuse that this was a problem created by their marketing company like NHT Law Group claimed. An interesting example of the extended liability of service providers that I just covered here.

@GetOutOfDebtGuy

CFPB Sends Clear Message You Will Be Held Responsible for Your Affiliates and Lead Sources

Steve Rhode — Mon, 16 Apr 2012 15:04:43 +0000

From How to Get Out of Debt

You absolutely can’t overlook the April 13th announcement from the Consumer Financial Protection Bureau about the liability that extends to any debt relief company by the actions of service providers.

The CFPB will hold all appropriate companies accountable when legal violations occur with service providers you contract with.

“Consumers are at a real disadvantage because they do not get to choose the service providers they deal with—the financial institution does,” said CFPB Director Richard Cordray. “Consumers must not be hurt by unfair, deceptive, or abusive practices of service providers. Banks and nonbanks must manage these relationships carefully and can be held accountable if they break the law.”

The announcement is geared towards banks and nonblanks but it sends a clear message about what the CFPB feels is the chain of liability when it comes to selling consumers services that are not in the financial interests of consumers or cause them harm.

The CFPB recognizes that these outside parties that provide assistance to companies as service providers. These service providers are defined as “any person that provides a material service to a covered person in connection with the offering or provision by such covered person of a consumer financial product or service.”

While debt relief companies may use the services of these service providers, such as lead brokers, affiliates, backend service providers, etc. The liability for the actions of these service providers passes back to the company.

The CFPB recognizes that service providers can provide a valuable service and that some companies may use such outside companies for expertise that would not otherwise be available without significant investment or to help with marketing products or services.

In the past some have looked at using outside service providers as a way to limit exposure and risk to the debt relief company. No more. This early warning from the CFPB should not be ignored. It is a groundwork that is being laid that will impact all.

Using outside vendors can pose additional risks. In order to avoid such extended liability from service providers it is the responsibility of the company contracting with outside service providers to conduct a thorough and documented due diligence to positively verify the service provider or your company meets the following requirements.

The service provider understands and is capable of complying with Federal consumer financial law.
The service provider has strict policies, procedures, internal controls, and training materials to ensure the service provider conducts appropriate training and oversight of employees or agents that have consumer contact or compliance responsibilities.
You must establish your own internal controls and on-going monitoring to determine whether the service provider is complying with Federal consumer financial law.
You absolutely must take and document all prompt actions to address fully any problems identified through the monitoring process, including terminating the relationship where appropriate.

For debt relief providers, the largest exposure to this extended liability os going to come from lead generation sites that are sale, misleading, or non-compliant and from agents that are not properly supervised. The 1099 argument is not going to fly anymore if those agents generate business or services your debt relief company sells to consumers.

@GetOutOfDebtGuy

Consumer Freaked Out With American Financial Service and Legal Helpers Debt Resolution Changes

Steve Rhode — Fri, 13 Apr 2012 17:46:20 +0000

From How to Get Out of Debt

I received the following statement from a consumer regarding the recent changes at Legal Helpers Debt Resolution with the termination of their backend servicing companies, including apparently American Financial Service.

While the statements made might apply more to American Financial Service that was probably terminated, the perception is that this is poor service being delivered by Legal Helpers Debt Resolution and that’s going to be a big problem for them moving forward.

@GetOutOfDebtGuy

Portfolio Recovery Associates Gets Tough on Debt Settlement Companies

Steve Rhode — Fri, 13 Apr 2012 16:40:17 +0000

From How to Get Out of Debt

A debt settlement insider forwarded over to tips@getoutofdebt.org the following fax they received from Portfolio Recovery recently. It appears the Portfolio Recovery is getting tough with settlement companies and law firms.

The correspondence from Joseph Hood III even says that effective 3-1-2012 Portfolio Recovery will no longer generate agreement letters for arrangements. That could be terribly dangerous for consumers if there is not a written agreement in place before any settlement payments are sent.

Portfolio Recovery is asking companies to complete the following questionnaire. The questions are certainly very leading and appear to be an effort for Portfolio Recovery to cover their ass(ets). It actually reminds me a lot of what credit counseling groups were asked to complete at one time.

It’s interesting they ask about the cease and desist letter and that they inquire about fees. Presumably some decision will be made about working with some companies based on fees. I can see how they may elect to not work with enrolled debt fee companies or advanced fee companies if they perceived it would cut into their recovery.

It’s interesting that Portfolio Recovery was interested about vetting and background checks but only for employees working from home. You would have thought those questions would have applied to all employees and officers. Especially with the number of people with felonies or convictions working in the debt relief industry. In fact I was tipped to one yesterday that is currently on probation but running a debt relief agency.

Portfolio Recovery Settlement Terms

@GetOutOfDebtGuy

Consumer Affairs Processing Center Responds to LHDR Recent Stories

Steve Rhode — Thu, 12 Apr 2012 13:39:21 +0000

From How to Get Out of Debt

I received the following statement from Dale Weikel from Consumer Affairs Processing Center in response to recent stories that involved CAPC. I’ll just let his words provide the update.

From Dale:

I just wanted to respond to the numerous accusations being thrown around your site and clarify some errors. I am Dale S. Weikel , the current and sole owner of Consumer Affairs Processing Center, Inc (CAPC). CAPC has been contractually obligated to service several thousand LHDR clients ever since 2009. Neither LHDR nor CAPC has a direct relationship with Consumer Affairs Law Center or Thomas Moore, Esq.

I am aware of Mr. Moore from previous dealings and perceive him to be a unique individual, specifically an attorney with integrity who actually cares about the client more than the fees being charged.

CAPC has endeavored to service LHDR clients to the best of its ability however, given the recent circumstances surrounding the numerous law suits against LHDR, creditors are reluctant to negotiate under the LHDR name , so I’m attempting to insure that as many clients as possible are taken care of. To that end I have convinced Mr. Moore to be a “life raft” for the LHDR clients.

Legal Helpers Debt Resolution clients are getting nervous with all these articles and uncertainty created by recent events chronicled on your site. Just like your articles on “Debt Settlement Life Raft Companies” and http://getoutofdebt.org/26800/if-your-debt-settlement-has-recently-failed-these-companies-are-offe ring-you-help-at-a-very-low-cost, I’m sure that there are dozens of companies willing to step up for nervous and scared clients who don’t want to stop mid-stream of their program, but also don’t want to continue with LHDR.

In the previous articles here, it looks like all third party LHDR service providers were unceremoniously and unexpectedly dumped, including all sales agents and front end companies. There are demands to back-ends from LHDR to not contact the clients, but clients tend to be persistent with wanting what they want no matter what someone says. Relationships and trust bonds are built between a client and an employee over the course of a 3 or 4 year program. Calls to the advisor and negotiator they’ve had for years discussing how that relationship has been interfered with are probably frustrating and heartbreaking for both parties.

If a client wants to cancel LHDR altogether due to fear of what is happening, wouldn’t it make sense to give them an alternative choice? Especially, the ‘Life Raft Companies’ who will continue where they left off?

We’ll probably be seeing a lot of reports of LHDR clients looking for alternative companies to help them complete their programs.

When LHDR first approached us they represented that they were compliant in all 50 states and understood the debt resolution process. As demonstrated by the numerous lawsuits against them including one in their home state of Illinois they obviously misrepresented their capabilities. Furthermore their actions against their numerous business partners indicate to me that they appear to lack the integrity to honor contracts. I would not be able to sleep at night if I did not attempt to provide a way for the clients to be given the services for which they have paid. I might also mention that I will not be benefiting in anyway whether the clients transfer or not. My efforts as always are based on what I feel is best for the client.

As to the Cease and Desist request made by Horwood Marcus & Berk, to Consumer Affairs Law Center, Consumer Affairs Law Center has not poached any LHDR clients so the request directed at them is meaningless. CAPC is giving LHDR clients an option.

Dale S. Weikel

Good News for Debt Relief Companies. Lenders Getting Back to Subprime Credit.

Steve Rhode — Wed, 11 Apr 2012 16:13:22 +0000

From How to Get Out of Debt

Debt relief companies know the more subprime credit that’s given out, the more business they are probably going to get. It’s just the way it works.

Over the past five years or so lenders have been hesitant to extend credit to those borrowers most likely to default, the subprime consumers. And consumers have been hesitant to take on new credit.

According to a New York Times article out today that a reader brought to my attention, lenders are getting back to playing in the subprime sandbox in search of profits.

The article claims Capital One, GM Financial, HSBC and Chase are getting back into the subprime market and actively lending. Apparently damaged credit extensions are up 12.3 percent over the same time a year before.

The article states, “Some former banking regulators said they worried that this kind of lending, even in its early stages, signaled a potentially dangerous return to the same risky lending that helped fuel the credit crisis.” You think? Of course banks will get back into subprime lending. It’s where they make a lot of money. While the default rates are higher than with the best customers, so are the fees and interest earned.

If you’ve been in the debt relief business over a couple of decades you’ve seen all this stuff is cyclical. Boom times follow bust times. The problem is the bust periods feel too long and the boom periods too short.

I know of several people that have received Capital One credit cards immediately following bankruptcy and the story mentions more. Rather than bankruptcy being the creditor stigma people perceive it to be, creditors want to lend to the folks again and they are actively doing it.

Once we start to see banks more comfortable to start exploiting this market segment again then debt relief companies should start to see an increase in demand within nine to eighteen months following that increase. That is, unless the debt relief space starts attracting new players to capitalize on increased demand. A reader just yesterday sent me a link to a website that was talking about the millions that can be earned by opening your own debt relief company.

You can read the full New York Times article here.

@GetOutOfDebtGuy

Legal Helpers Debt Resolution Sues Over Client Funds

Steve Rhode — Wed, 11 Apr 2012 15:26:42 +0000

From How to Get Out of Debt

On April 2, 2012 Legal Helpers Debt Resolution filed suit against Reliant Account Management Systems and Reliant Account Management. These are companies that helps client funds for the debt settlement program.

According to the suit, Reliant Account Management (RAM) “is a payment processing company used by Legal Helpers and more than 5,000 of its clients to process payments by client from their individual bank accounts into a trust account which in turn is used both to pay clients’ creditors and to pay for the services provided by Legal Helpers.”

This suit alleges that Legal Helpers did not terminate all of its outside affiliate/franchise/backend relationship and instead says it terminated “several.” The suit states, “RAM has refused to acknowledge compliance with lawful instructions regarding disbursement of funds held in the client trust account both for payment of creditors and for the payment of Legal Helpers’ service fees. Instead, RAM has forwarded to LHDR letters from the [outside administrative support companies] directing RAM to disobey client instructions.”

Reliant Account Management Systems, LLC and Reliant Account Management, LLC are both California companies. The suit states Reliant Account Management Systems is comprised of GS Associated Holdings, LLC; Lakewood J & B Development, Inc; and Data Pro Services, Inc. Reliant Account Management is said to be comprised of GS Holdings, LLC and Lakewood J & B Development, Inc.

Legal Helpers states that it currently services 18,500 clients nationwide and that RAM is one of three payment processors that Legal Helpers contracts with.

As of March 30, 2012 Legal Helpers instructed RAM “that it should continue processing payments to Legal Helpers, but should no longer withdraw funds from the Legal Helpers Account to pay the OAs for administration services because the OA relationship had been terminated.”

Allegedly RAM has failed to acknowledge it will follow the directions of Legal Helpers and it is alleged “RAM’s failure to acknowledge or perform its duties to Legal Helpers and its clients threatens to cause and will cause irreparable harm to both Legal Helpers and its clients in their debt settlement efforts.”

The letter sent to RAM identifies JEM Group, Nationwide Support Services and Service First Financial as companies that were terminated by LHDR.

You can read a full copy of the suit here.

@GetOutOfDebtGuy

Nelson Gamble & Associates In More Trouble

Steve Rhode — Tue, 10 Apr 2012 21:25:15 +0000

From How to Get Out of Debt

Ohio Attorney General Mike DeWine filed a lawsuit against Jeremy Nelson of Trabuco Canyon, California, and his two companies for operating debt settlement businesses that took money from consumers to settle their debts but failed to deliver on their promises.

“We will take action to protect Ohioans from unfair business practices regardless of where the business is located,” DeWine said. “This individual operated businesses that promised to help settle consumers’ debts, told them to stop communicating with their creditors, and took upfront payment before providing any services. Ultimately he and his businesses failed to fulfill their promises and violated Ohio law.”

According to the Attorney General’s lawsuit, filed in the Franklin County Court of Common Pleas, Jeremy Nelson is the president of Jackson Hunter Morris & Knight, a Nevada corporation that represents that its principal place of business is in Newport Beach, California. Mr. Nelson was also the president of Nelson Gamble & Associates, which previously was a Colorado corporation and represented that its principal place of business was in Irvine, California. Neither business was registered with the Ohio Secretary of State to do business in the state. [Have I not been telling you for the last year how important this is?]

Through his businesses, Mr. Nelson advertised that his businesses could help consumers settle their debts. He advertised online and gave consumers the impression that they were getting professional services associated with legal counsel. Representatives told consumers over the phone that the business would negotiate with consumers’ creditors so that they could settle their debts by paying only a portion of what they owed. According to the Attorney General, consumers paid money for these services but did not have their debts settled.

The Attorney General’s lawsuit charges Jeremy Nelson and his businesses with violating Ohio’s Consumer Sales Practices Act and Debt Adjuster Act. Specific counts include failure to deliver, misrepresentation, and charging higher fees than Ohio law allows. Through the lawsuit, the Attorney General seeks injunctive relief, civil penalties, and consumer restitution.

“With the average American carrying thousands of dollars in credit card debt, debt settlement services can seem very appealing,” Attorney General DeWine said. “But far too many of these businesses fail to deliver on their promises and leave consumers in a worse financial situation.”

Consumers should beware of businesses that:

Charge upfront fees over $75;
Do not provide copies of contracts;
Tell consumers not to communicate with their creditors;
Tell consumers they will get them a settlement that would be more favorable than consumers could obtain on their own.

Apparently Jeremy Nelson gambled with Ohio and lost. I wonder if that’s where the name Nelson Gamble came from?

@GetOutOfDebtGuy

Fiji Serviced United Employee Benefits Group and National Employee Benefits Group Still Not Registered in America

Steve Rhode — Tue, 10 Apr 2012 19:09:10 +0000

From How to Get Out of Debt

On March 15, 2012 I published a story titled, “Debt Relief Companies of Tim Gibbons and Jennifer Yoffe Not What They Seem.”

in that article I pointed out a number of issues with companies associated with Tim Gibbons and Jennifer Yoffe. The debt relief companies were United Employee Benefits Group and National Employee Benefits Group.

While I often don’t get back to taking a second look on many articles, I thought I would in this case. After all, Gibbons went after me hard with threats of legal action about my article. It made sense to check to see if the problems I’d alleged had been fixed.

In the case of United Employee Benefits Group, they claimed to have their executive offices in Texas. At the time of the article there was no State of Texas business registration to be found and Gibbons, nor Yoffe, produced any evidence to support any such filing.

A check just now found there is still no registration to do business on the state site.

And it looks like little has changed at the uebg.org website as well.

National Employee Benefits Group has a similar looking website as the last time I saw it at nationalemployeebenefits.org.

NEBG claims to still be located in California but as of the publication of this article the State of California still has no record of their registration as National Employee Benefits Group to do business.

The only thing I found that’s changed from my previous article was that the BBB has since changed the rating of National Employee Benefits Group from A- to a solid F. – Source

And apparently United Employee Benefits, LLC, Nevada registered, with managers Tim Gibbons and Jennifer Yoffe has still not fixed their business name to match their website or their website name to match their registered business name.

It appears no action has been taken to correct the issues raised in the article. Tim Gibbons and Jennifer Yoffe do not appear to have subsequently registered to do business in Texas and I did not observe any changes to their website. For them it appears as business as usual. Same with the National Employee Benefits Group.

Apparently the glaring issues of no apparent registration to do business were of no concern to them since it appears they have taken no steps to fix the basic problem.

Kind of sad it wasn’t more of an apparent priority to them to register and operate legally. I mean really, you would think that if their executive office was located in Texas they’d at least make an effort to make sure it’s registered. Wouldn’t you?

@GetOutOfDebtGuy

Consumer Affairs Law Center and Consumer Affairs Processing Center Take Over Legal Helpers Debt Resolution Account

Steve Rhode — Tue, 10 Apr 2012 16:32:17 +0000

From How to Get Out of Debt

Yesterday I wrote about a consumer that contacted me and said Legal Helpers Debt Resolution contacted them after terminating all the LHDR affiliates and told her LHDR would be transiting their account to Consumer Affairs Law Center.

I asked the consumer to send me the form to look at and after reviewing it I’m entirely puzzled why since she is a Legal Helpers Debt Resolution client she would be claimed to cancel her services and transfer her account to another entity. It makes no sense.

The form states:

Consumer Statement Received

What makes this form very, very strange is the fact the consumer was contacted directly by Legal Helpers Debt Resolution and told to sign this form which terminates the agreement with Legal helpers Debt Resolution. And then it instructs the unnamed payment processor to redirect funds to Consumer Affairs Law Center instead.

Who is Consumer Affairs Law Center?

Consumer Affairs Law Center, Inc.
410 Village Run E
Encinitas, CA 92024 – Source

888-438-8110
888-531-8022
info@calawcenters.com

Google maps reports that address is actually associated with this address of a 1,536 square foot home. – Source. The same address is associated with Home Sweet Home Professional Pet Staff. – Source

According to the State of California, Consumer Affairs Law Center, Inc. is located at 17461 Derian Ave., Suite 220, Irvine, CA 92614. Consumer Affairs Law Center, Inc. has no known officers. Consumer Affairs Law Center, Inc. filed as a Articles of Incorporation on Monday, January 24, 2011 in the state of California and is currently active. Thomas A Moore serves as the registered agent for this organization.

Consumer Affairs Law Center is not registered as a professional corporation.

Domain: calawcenters.com Registered February 10, 2011. Ownership is hidden. (Red Flag)

The site gives the name of only one attorney, Thomas A. Moore. It’s puzzling why Legal Helpers Debt Resolution would terminate a client account and send it to this lawyer that claims all sorts of expertise, except for extensive experience in debt resolution?

The sites doesn’t even really call their services debt settlement. They call it Forensic Mitigation.

According to the State Bar of California, Thomas A. Moore, is an active member but has his office address at a different location. They state his office is actually located at:

1901 E Alton Ave
Ste 240
Santa Ana, CA 92705 – Source

That’s interesting because it is also the same address as Freedom Financial Management, Freedom Fidelity Management, Global Solutions, Alliance8, and Allstate. – Source

Thomas A. Moore is associated with a number of law groups that are registered as professional corporations, unlike Consumer Affairs Law Center. Alliance Law Group, Blue Ridge Law Group, Brownstone Law Group, Noveck & Moore, Providence Law Group.

Of the law firms Moore is associated with, they appear to be debt relief companies.

Consumer Affairs Processing Center

The Consumer Affairs Law Center letter sent to the consumer to switch to Consumer Affairs Law Center from Legal Helpers Debt Resolution says, “CALC has worked with CAPC for some time and believes they provide the best services in the industry.”

It’s an interesting statement to make in light of the lawsuit filed against Consumer Affairs Processing Center which it states is also Consumer Affairs Legal Center, Inc. Notice the similarity of company names, Consumer Affairs Legal Center, Inc. – Consumer Affairs Law Center, Inc.

The complaint for labor allegations states The Defendants Consumer Affairs Legal Center, Inc. dba Consumer Affairs Processing Center also operated Financial Solutions Legal Center and Financial Solutions Consumer Center.

The class action lawsuit alleges that the Defendants employees people as debt analysts who were improperly compensated. – Source

Consumer Affairs Processing Center is not properly identified in the form sent to the consumer but I believe it may be the company that is incorporated in Wyoming and operating in California.

The Wyoming filings say they used to be Consumer Affairs Legal Center, Inc. but changed their name to Consumer Affairs Processing Center, Inc with its principal office located in California. The president of the company is listed as Dale Steven Weikel. – Source

Consumer Affairs Legal Center, Inc is listed as being located at the same address as Consumer Affairs Law Center, 17461 Derian Ave., Suite 220, Irvine, CA 92614. The active officers are Thomas Lynch, and Dale Weikel.

And it appears that Thomas Lynch had a previous relationship with Legal Helpers Debt Resolution. Lynch was associated with Lynch Financial Solutions that was a part owner of Legal Service Support Group, LLC, a Nevada corporation, with JEM Group, and Century Mitigations. – Source, Source

It appears that sometime between January 2011 and now the membership of LSSG was changed to Century Mitigations, Fast Track, Fusion Client Services, and JEM Group. – Source. Lucky for Lynch.

Lynch Financial Solutions is now under the control of Dale S. Weikel and says it was located at 17462 Derian Ave, Suite 200, Irvine, CA 92614. – Source

Legal Service Support Group (source) and JEM Group was terminated by Legal Helpers Debt Resolution. JEM Group is suing LHDR.

For Me, It Doesn’t Add Up

While there may be some plausible and reasonable innocent explanations I’m left with a number of concerns.

If Thomas A. Moore, Esq. is such a hot shot in the debt settlement business then why is he associated with so many different companies?
Why doesn’t Consumer Affairs Processing Center, the alleged “best services company in the industry,” even have a website that can be found?
If there is any relationship between Consumer Affairs Legal Center and Consumer Affairs Law Center are they both related to Steven Weikel aka Dale Weikel?
Steven Weikel is not an attorney registered in California and Consumer Law Center is not registered as a professional corporation so is it really a law firm as claimed?
Why does Thomas A. Moore not list his address with the State Bar of California as the address of Consumer Affairs Law Center?
Why is the address listed by Thomas A. Moore with the State Bar of California also associated with a number of defunct debt settlement companies?
Why does Moore have all sorts of sites and all sorts of debt relief companies he is associated with, Including Sierra Pacific Law Group that specializes in foreclosure defense? – Source, Source
Why does it appear Consumer Affairs Law Center operates out of a small residential house?
Why would Legal Helpers Debt Resolution take this consumers account from one backend company and switch it to a claimed law firm that is apparently operating out of a small house?

My spider senses are up on this one. It just doesn’t feel right.

And if I was a backend company that had all of my Legal Helpers Debt Resolution clients terminated from me and given to this firm, frankly, I’d be really pissed off right now. How is this better for the consumer?

If anyone has any information about any of the players in this article, please post your comments below.

@GetOutOfDebtGuy

Tipster Says CT Cracking Down on Global Clients

Steve Rhode — Mon, 09 Apr 2012 23:38:04 +0000

From How to Get Out of Debt

A debt settlement insider sent me the following email they received from Global Client Solutions.

Frankly I’m surprised more states have not taken similar action. If they had years ago the debt relief space would look much different today.

@GetOutOfDebtGuy

Legal Helpers Debt Resolution Account Being Sent to Consumer Affairs Law Center

Steve Rhode — Mon, 09 Apr 2012 21:25:38 +0000

From How to Get Out of Debt

A reader has just let me know that their account with Legal Helpers Debt Resolution is being sent to Consumer Affairs Law Center.

This is intriguing considering the mass termination of affiliates on March 30, 2012 from Legal Helpers Debt Resolution. If the notification is true, it appears Legal Helpers is taking client accounts and thus income away from non-attorney affiliates and sending them to attorney affiliates.

It sounds like a smoke screen to me if this is based on the March 30, 2012 affiliate/franchise mass terminations.

Anyone heard anything else on this?

@GetOutOfDebtGuy

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