It has been quite a while since we’ve made a post and a lot has happened in the settlement industry since the FTC changes took effect 3 months ago. Most of the smaller debt settlement companies have shut down operations. You can see the huge consolidation in the industry just by looking at the massive drop in members on the TASC, USOBA and IAPDA sites.

TASC had over 200 active members around 6 months ago, they are now down to 62.

What does this mean? For most consumers, you can be assured that if a company made it through this transition, they should be financially stable enough to not go out of business while you are working with them. For us, this means that most of our reviews are outdated and many of the companies we have reviewed are now out of business. We will be making a huge effort over the next few months to update existing reviews and write new reviews for companies that are still active in the industry. Companies with updated reviews will have a note at the top of their page indicating that update and the date on which the update occurred.

Keep one thing in mind. Just because a company made it through this transitional period does NOT mean you should work them. Please perform your due diligence and use this site as a reference.

Yesterday (June 29, 2010), the Federal Trade Commission (FTC) made a HUGE announcement on new rules that govern the Debt Relief industry. These rules will greatly affect the debt settlement industry’s future. The rules change a number of things, here are the highlights:

• Debt Settlement companies can no longer charge any fees until they have settled your debt
• More disclosure of information required – this includes exact program costs and length as well as negative consequences
• Can no longer make false or unsubstantiated claims about the service

These rule changes go into effect on October 27, 2010. Of these 3, the first one is obviously the biggest change. Almost all settlement companies charge 15% of your total debt amount which generally means your first 3 full payments plus part of your monthly payments for the first year. TASC has fought this change vigorously and claims it will put many settlement companies out of business.

What does this mean for you, the consumer? It means that there is going to be a very turbulent period over the next 6 months in the industry. A large amount of settlement companies will undoubtedly shut down because of this. I would strongly suggest people to try to wait things out until the end of the year if you are thinking about signing up for a debt settlement program. Another good option is to try a do it yourself debt settlement program.

REVIEW UPDATED 01/27/2011

Silverleaf Debt Solutions has updated their business model to meet the new FTC standards. They are now charging a flat 15% of the settled debt amount.

ORIGINAL REVIEW STARTS HERE:

Setup Fee: 15%
Monthly Fee: None
Settlement Fee: None

TASC Members: No
BBB Complaints (Total): 2
BBB Complaints (Closed): 2 (1 was a no response, this means Silver Leaf failed to respond to the complaint)

In Business Since: October 2009

Company Address:
14275 Midway Rd., Suite 200
Addison, TX 75001-3614

Silver Leaf Debt Solutions, sometimes spelled Silverleaf Debt Solutions, is an Addison, Texas based settlement company that has been doing a LOT of online advertising lately. Someone posted a comment to the site asking about them, so here is the review. They have only been in business since last October of last year and are members of USOBA and the IAPDA but not TASC. They have received 2 BBB complaints since starting (1 was resolved and 1 they did not respond to). Silver Leaf appears to be a front end for Lloyd Ward and Associates, a Texas based law firm. All email correspondence with the company came from the Lloyd Ward Group but contained Silverleaf branding. Their program charges the standard 15% of your debt amount.

The BBB has given Silver Leaf an F rating but that is not really a surprise considering their recent campaign against debt settlement companies. One interesting point is they claimed I would not be sued because they are a law firm. I’m not sure of the regulations on being both a law firm and settlement company but I’m quite confident that your creditors can still sue you. The settlement company and law firm combo is nothing new to the industry and I don’t think it really provides much of a benefit. You, a debt settlement employee or an attorney are all going to get pretty much the same settlement as the collectors don’t care about anything but closing out the account.

Important Questions

Money back guarantee: Minus fees.
Stop creditor calls: No, they can give them an alternate number though.
Make monthly payment to creditors: No
Can I get sued while on program: No, we are a law firm and we will negotiate with your creditors.
Tax Consequences: Depends on your creditors.
Credit Impact: Your credit will decrease but we can rebuild it.
Where do they hold money: Trust fund.

On the heels of our post about problems at the Rocky Mountain Bank and Trust, we have now heard that Noteworld, another key player in the debt settlement industry, has had its accreditation stripped by the Better Business Bureau. The accreditation was revoked by the BBB at the end of April. Noteworld appealed the decision in May but the ruling was upheld and the BBB Board noted that the “revocation is due solely to their affiliation with the debt settlement industry”.

While Noteworld’s issues are small compared to those of Rocky Mountain, this move shows that the BBB is now 100% against the debt settlement industry and their ratings can not be relied upon to give an accurate assessment of a debt settlement company (they often give debt settlement businesses an automatic F rating). This move by the BBB will only hurt consumers in the long term as their ratings are now useful for anyone seeking the aid of a debt settlement program.

For anyone interested, you can see Noteworld’s BBB rating here.

The Today show did an investigative piece on debt settlement companies, specifically Credit Solutions. The video is about 7 minutes long and follows a family who signed up for Credit Solutions program only to be misled and eventually cancel after a year on their program and paying around $6,000 in fees. Today’s Credit Solutions review is quite good and shows the company did negotiate multiple settlements for the family, they were just unable to afford them at the time. Today also talks to the BBB in Texas who has received 1600+ Credit Solutions complaints in the last 3 years. Very interesting piece that makes them look very bad!

Visit msnbc.com for breaking news, world news, and news about the economy

The Federal Deposit Insurance Corporation (FDIC) has issued a cease and desist to the Rocky Mountain Bank and Trust for “unsafe or unsound banking practices”. As you may know from reading this site, a large percentage of debt settlement companies use the Rocky Mountain Bank and Trust, usually in conjunction with Global Client Solutions (GCS), to store client monies used for settlements. The FDIC appears to think that this business practice is unsafe to the consumer and has issued a cease and desist to Rocky Mountain that you can read here.

The 28 page document goes on to outline some of these unsafe practices:

1. Operating the Bank with an excessive level of adversely classified assets.
2. Operating the Bank with a large concentration of deposits to one entity.
3. Operating the Bank without establishing appropriate policies and procedures for liquidity, BSA monitoring, compliance with consumer laws and regulations, and Information Technology.
4 Operating the Bank with an inadequate level of capital protection for the kind and quality of assets held by the Bank.

The FDIC then goes on to order Rocky Mountain to perform numerous steps to remedy this situation (about 10 pages worth of items). Rocky Mountain Bank and Trust and Global Client Solutions have both also been listed in class action lawsuits against debt settlement companies in the past few months. It will be interesting to see how, and how quickly, they can remedy this situation.

A new scam to con consumers has hit the market. A lead generation company called Legal Helpers Debt Resolution is mailing out forms which appear to be from the IRS or another government agency (see pictures below). These forms show your debt amount and claim to be a government run debt relief program called the “U.S. Debt Reduction Initiative”. They provide a toll free number so you can enroll. This mailing looks exactly like something you would receive from the IRS. It features a form number and a layout almost identical to many tax forms. Only a tiny disclaimer in extra small font tells you that this is not an actual government program.

If you receive this form, THROW IT AWAY! This company makes money by selling these “leads” to debt settlement companies. If they don’t make any money off this campaign, they will hopefully stop sending out these deceptive mailings.

Debt Settlement USA is receiving some very bad press as MSNBC has picked up the story of one of their former clients. Gary Kopycinski is a Catholic high school teacher who signed up with Debt Settlement USA after being advised multiple times to file for bankruptcy by friends and professionals. His $35,000 in credit card debt turned into around $60,000 after a year on their program. A car was repossessed and a $17,000 judgment was filed by Chase during that time. He ended up filing bankruptcy in the end after paying $3,500 in fees to Debt Settlement USA.

While this MSNBC story definitely plays up his Catholic teacher role and “wholesomeness”, it is pretty obvious that you should listen to professionals. He sought the advice of a financial counselor prior to signing up with a debt settlement company and they told him to file bankruptcy. He did not listen to their advice and ended up getting himself in even deeper. It doesn’t sound like Debt Settlement USA provided him with very good customer service and maybe they should not have even taken him on as a client but this story is decidedly anti-debt settlement.

If anyone is interested, the video portion of the story is below. It is less than 3 minutes long.

Building upon the post from a couple days ago about the GHS Solutions scam, there is now a class action lawsuit in Kentucky against GHS Solutions. The suit, headed by Brett and Linda Davis, alleges that GHS Solutions “are engaged in a continuing class-wide predatory business scheme to financially enrich themselves and defraud Kentucky Class members by violating Kentucky’s Debt Adjusting statute”. The suit goes on to list Global Client Solutions and the Rocky Mountain Bank and Trust, two companies which are used by the majority of debt settlement companies.

The suit appears to be seeking in excess of $5,000,000 in damages and goes on to outline specific issues with the business model of GHS Solutions. The Plaintiffs (Davises) paid $3,750 in fees to GHS without any actions being taken on their accounts. The entire court brief is 15 pages long so I won’t go over the whole thing but if you are interested you can download it here.

If you have received a letter from the National Debt Relief Program, similar to the one above, please read this post. Although the letter appears to come from a government agency, it is actually just marketing material from a debt settlement company. That company, GHS Solutions attempts to deceive consumers by claiming a new government program has just launched for people with over $10,000 in credit card debt. The letter goes on to promise savings of 50% off your current payments. This information is all just a farce intended to get you to sign up for their debt settlement program.

While I have no problem with debt settlement or with direct mail marketing, this advertising campaign crosses the line because it appears to come from a government agency. I’m sure many consumers have signed up simply because they believed it was some sort of government run program, which made them feel safer. If you received this letter, please realize it is just marketing material and please perform your due diligence before signing up to any program.