I’ve said matters are heating up in Ontario for debt settlements services – you know, the guys who promise 70 per cent savings on debt of $10,000 or more, with one of their front men on TV being Canadian actor Alan Thicke.
Well, for companies of the sort that Mr. Thicke is pitching, the fat is now in the fire following a press package we here at Credit Canada Debt Solutions sent out last week in league with Doug Hoyes, co-founder of Hoyes, Michalos & Associates Inc., Ontario's largest independent personal insolvency firm.
Global TV’s News Hour was among the first of many news agencies to express interest in the story about how debt settlement services are charging consumers up-front fees for so-called debt negotiations that can land people in trouble with creditors down the road. That’s because consumers are told by debt settlement agencies to stop paying their creditors and start saving for a low “lump-sum” payment of the entire debt at some future point.
But big questions remain about this process. For instance, how many creditors are willing to wait years for a lump sum payment of only 30 per cent of what is owed? Furthermore, what are consumers supposed to do about banks and creditors who naturally start to call clients about unpaid bills or even start a collection process or legal proceedings against clients deemed to be deadbeats?
Shouldn’t the debt settlement companies be contacting creditors to manage matters? Well, no, according to the debt settlement companies themselves, who say they make no claims to customers that creditors will not stop calling troubled clients.
It seems the debt settlement companies are not too concerned about anxious creditors. And why should they be? By the time the creditors get fed up and launch legal proceedings against the people who owe them money, the debt settlement agencies have collected all or a good portion of their fees up front.
Global TV dedicated a news segment to this whole matter last Monday, inviting Doug Hoyes and me to comment on the situation. You can watch the news segment here:
One of the biggest questions surrounding debt settlement services is their success rate in helping consumers. Since corporate cheerleaders like Cambridge Life Solutions President Jorge Fortune claim that the debt settlement process helps many rise above their debt problems, one might ask, just what are Cambridge’s numbers in relation to satisfied clients? But that, as Global TV discovered, is a matter that will remain secret.
Mr. Fortune (quite a name under the circumstances) has lashed out at his critics - including credit counselling agencies like my own, and insolvency experts like Doug Hoyes - for bringing the debt settlement business model into question – the very same business model that has been outlawed in the United States, and regulated in Alberta and Manitoba.
Mr. Fortune says credit counselling agencies and trustees don’t reveal their success rates, with the implication being that debt settlement companies should not have to do so either. But he is dead wrong about the transparency issue.
Doug Hoyes just released a three-year statistical sample of his company’s success rate with clients concerning consumer proposals to settle debt, which hovers around 75 per cent. Here at Credit Canada Debt Solutions, we have always been open to telling others that out success rate in negotiations with creditors averages 70 per cent.
As Doug Hoyes said in his recent blog about the issue – “Over to you, Mr. Fortune. What is your success rate?”