DALLAS (YBH) – Very rarely do the Huffington Post and Yes, But, However! agree on an issue fully. The Huffington Post leads today with a New York Times article profiling the shadier side of the debt consolidation and settlement business.
Debt consolidation firms pitch sunny days to vulnerable consumers.
According to the New York Times piece, the business is full of scammers who extract large fees from financially strapped customers while achieving little in the way of settling outstanding debt.
The article highlights the experience of Linda Robertson and her dealings with a firm called Financial Freedom of America (the company has recently renamed itself as Financial Freedom Processing), based in Dallas. While not committing outright fraud, it is clear that FFOA/FFP is much more interested in charging exorbitant fees to customers than settling debt.
To get a real feel for what the company thinks of its customers, note the following statement from the company’s CEO Corey Butcher as to why he thinks people “fail” to become debt free from their program:
“It comes from a lack of commitment, it’s like going and hiring a personal trainer at a health club. Some people act like they have lost the weight already, when actually they have to go to the gym three days a week, use the treadmill, cut back on their eating. They have to stick with it. At some point, the client has to take responsibility for their circumstance.”
FFOA/FFP bullies vulnerable clients into giving them their bank account numbers and signing a contract to pay them a set monthly sum. They also advise clients to consider skipping out on credit card bills so that FFOA/FFP can later negotiate a settlement with the credit card company on their behalf. While clients “save” money for the implied settlement, FFOA/FFP quietly sucks out thousands of dollars in “administrative fees.” Putting your credit score at risk for a decade is not exactly the same as ignoring a gym membership contract.
If you are curious, Corey Butcher’s use of a fitness metaphor is less than accidental. Before he was “fighting” credit card companies, Mr. Butcher ran a fitness club in Dallas called White Rock Athletic Club. Users on CitySearch and InsiderPages.org roundly pan the sales tactics of the White Rock Athletic Club, which is now associated with Gold’s Gym, as “very pushy” and “used car salesman” like.
Both debt consolidation businesses and some health clubs use the same technique to close sales: building a customer’s confidence that benefits will be magically delivered once a contract is signed. Neither explicitly promises a financial balance sheet like Suze Orman or a body like Charles Atlas, but both make use of the all-too-human desire to get somewhere better without work or sacrifice. No more spare tire, no more crushing debt. A light at the end of tunnel, if you will.
Mr. Butcher’s firm, Financial Freedom Processing, is associated with two other debt consolidation businesses in Dallas: Debt Consultants of America and Debt Professionals of America. Ostensibly, they are different businesses. However, all three companies were once located in the same building and provide essentially the same service.
My least favorite U.S. Senator, Chuck Schumer, has introduced a bill, along with Missouri’s Claire McCaskill, to crack down on firms like Financial Freedom of America. The question I have is, why were they ever allowed to operate in the first place?
Ms. McCaskill said that, “Debt settlement companies prey on people who are desperate and vulnerable, often through misleading and fraudulent promises of help.” We couldn’t agree more.
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John Romano is the publisher and editor of Yes, But However!, a musician, a former political correspondent for BBC Radio London, and a serial web entrepreneur. Follow him on twitter: twitter.com/yesbuthowever or John Romano on Google+John Romano article archive.
