Thought you all would like to see this. A friend of mine took it upon himself (I really had no hand in it!) to play test rat with a debt negotiation company and see what they would tell him about their services and fees. Here are his results:
For fun I called an 800 number for debt settlement and spoke to the gentleman below. the only fee he ever mentioned was the 7% (!) fee. Notice how he conveniently “forgot” about the other fees when he was talking to me. He hasn’t responded yet to my request for lower fees.
Here is the email correspondence:
From: Leonard the Debt Settlement Guy
Subject: Credit Card Relief
To: Joe Test Rat
Date: Monday, December 29, 2008, 11:48 AM
Hello Joe,It was my pleasure to speak with you today. Attached is the information you requested about our program.
Preferred Financial Solutions has been in business for over 9 1/2 years now and has settled over 130 million in credit
card debt and unsecured debt. Check out the company’s file with the Better Business Bureau by following the link
below.http://indy.bbb.org/WWWRoot/Report.aspx?site=93&bbb=0382&firm=1000045
We are a part of: http://www.usoba.org/consumers.html
All of our Attorneys are members of: http://www.abanet.org/
If you are interested in Enrolling into our program all you’ll need is your account number(s) and balance(s) from each creditor and then call me and I’ll fill out the application for you.
—–Original Message—–
From: Joe Test Rat
Sent: Monday, December 29, 2008 11:10 AM
To: Leonard the Debt Settlement Guy
Subject: Re: Credit Card ReliefLeonard, thanks for the info. I read the pdf amd came across the second to last page. I was under the impression there was only a 7% fee, but the Credit Card Relief summary page indicates a $49.95 fee and and 25% settlment fee. Can you explain those to me a little bit more? I just want to make sure my math is correct on $70,000:
7% enrollment: $4900
$49.95 for 48 months: $2397.60
25% Settlement fee on $24,500 (I think that’s 35% of $70,000) savings: $6125.00Total Fees: $13,422
48 months at $1050: $50400
I understand that the interest stops accruing and all that, just want to be sure that I completely understand the fee
structure.Thanks for your help–really appreciate it!
—–Original Message—–
From: Leonard the Debt Settlement Guy
Subject: RE: Credit Card Relief
To: Joe Test Rat
Date: Monday, December 29, 2008, 12:16 PM
You have the fee’s calculated, exactly. I’m sorry I got side tracked and didn’t get specific. I get hung up
on ‘all the fee’s are built in to your monthly payment’ $1050 per month for 40-50 mos.
Everyone…every fee will have been paid.Lenny
—–Original Message—–
From: Joe Test Rat
Subject: RE: Credit Card Relief
To: Leonard the Debt Settlement Guy
Date: Monday, December 29, 2008, 12:42 PMNo problem Leonard. I know I get the benefit of an attorney, but the $13K in fees on $24500 savings seems really excessive. Can you do anything that about those fees?
Feel like running to one of those debt settlement/debt negotiation companies now? I hope not. You can do this yourself. Read how to settle your debts yourself here.
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Incredible! But Test Rat is lucky. He could have given his money to Bernie Madoff!
Actaully, like Kristi, I am grateful for these debt settlement companies. I work with so many people who make their first stop to one of these, only to find quick disillusionment.
Get educated, then find someone you can meet face to face, or have real contact with, and start the process.
Hey Tony! Fear not, Test Rat was not actually in debt, he just decided to call these guys for fun.
This is no surprise. The debt settlement industry is full of unethical people like this. It is a shame because debt settlement companies are generally a lot more successful at reducing debts than individuals are and from my experience (I work in the industry) there are a handful of excellent companies that provide an ethical and highly valuable service.
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It annoys me to no end how quickly people call someone “unethicial”.
There was nothing unethicial about the guy’s response..(Leonard). You asked a question and he answered. Its up to you to take it or leave it.
Its always important for a sales rep/counselor to be knowledgable and upfront about the fees incurred. I don’t see that Leonard said anything wrong. I found the 25% fee plus the attorney fees to be very overpriced. The industry standard is 15% of the debt amount plus monthly attorney fees if an attorney network is used. Debt settlement is an excellent alternative to bankruptcy and by far cheaper. I have plenty of solid PR on debt settlement on my debt management guys blog. Its worth it to read up on it.