Charles Phelan

If you read this blog on a regular basis, you know I frequently write about the debt elimination scam. I’m usually coming at it from the angle that companies offering these services are fraudulent. The owners know they are ripping people off by selling a system that simply doesn’t work. But every once in a while I hear from someone who’s not trying to sell debt elimination as a service. They write as individuals, true believers in what I call the “conspiracy theory of global finance.”

The tendency to believe in conspiracies is rampant in our society. The Kennedy assassination, fluoridated water, UFO phenomena, the 9/11 attacks, vaccines — these subjects have all been the focus of conspiracy-minded individuals, some of whom are obvious candidates for the “tin-foil hat” award. I guess aluminum foil is supposedly pretty effective at blocking alien mind-control signals… ?

One of the most popular areas for conspiracy-mongering has been the global financial system. Some of the theories are overtly anti-Semitic, blaming Jews for all the financial evils in the world, while other are more subtle in their rhetoric. The bizarre legal and financial theories behind the debt elimination movement are in the latter category.

It’s all about the secret wheeling and dealing that happened in the early decades of the 20th century and resulted in the establishment of the Federal Reserve system and fractional reserve banking in general. Once you believe that the core financial system of world commerce is an insidious scam – you know, the system that has helped lift the living standard of billions of human beings around the world — then all remaining logic and critical thinking goes right out the window.

What follows is a classic example, starting with an opening email salvo from my new cyber pen-pal (name changed for privacy):

“Hello,

I came across your website and found it interesting, however it is grossly misinformed. I have personally discharged over $40,000 worth of unsecured debt using the exact methods you claim to be fraudulent.

I did this using the FDCPA regulations, a couple of simple letters, and information found in the book “Modern Money Mechanics.” Banks actually commit fraud when “loaning” money in several ways. One way is that a bank leads people to believe there is an actual loan made in acquiring a credit card or student “loan”, when in fact the money is created out of thin air by making an entry into a computer. Furthermore, the money that is created is entered as a CREDIT in the person’s name.. which is in capital letters. This is known in Black’s Law Dictionary as the Strawman.

The fact of the matter is that the entire credit industry IS operating fraudulently. When you research it as I have over the past three years, just HOW fraudulent is absolutely mind boggling. I realize as I write this that you have a vested interest in NOT telling people the truth, or perhaps even wanting to know it yourself because it would effectively put you out of business. However the fact remains that you are telling people blatant lies out of ignorance.

Were you to do some research and discover the truth for yourself, you might then work for real justice in the world, and perhaps change your product and service to something which is based in Truth rather than that which is perpetuating a myth and which is harming everyone.

In the meantime, you might find a couple of movies intersting (sic) :
“The Money Masters” – available on YouTube or DVD.
“Money As Debt” – Available on YouTube also.
If you would like copies of the actual letters I used please let me know and I will be happy to forward them to you.

Sincerely,
Allen”

OK, so in his very first email message to me this tactful fellow accuses me of being grossly misinformed, having a vested interest in deceiving the public, and telling blatant lies out of ignorance. Nice way to start off a dialogue with a total stranger, right?

Now, I have a confession to make. I actually enjoy sparring with these folks. It’s pretty sick, I admit it, but it’s a form of amusement and entertainment for me, what can I say. My first reaction was to launch into attack mode, but I figured I would give this guy the benefit of the doubt first. Here’s my reply:

“Allen,

You are “grossly misinformed” about my supposed lack of knowledge of the system you are such a fan of, but I don’t have time to debate with you. I’m too busy helping people who have been ripped off by “crusaders for justice” like yourself, who told them they could legally walk away from their debt obligations with no consequences, only to find they got laughed out of court, lost their cases, and started seeing wage garnishments.

Extraordinary claims require extraordinary proof. Please tell me the name/county of the court where your cases were heard, along with the civil case docket numbers. Don’t send me any documents directly, please. Only documents that I can retrieve directly from the court will meet the standard of evidence required here. Let’s have the case citation(s) where a judge ruled in your favor on the basis of the “no money lent” argument.

Sincerely,

Charles J. Phelan
President/Founder
Manchester Publishing Company, Inc.”

This is my standard technique for dealing with “experts” who write to me, tell me how full of baloney I am on this particular subject, and then claim they were successful using the techniques I warn consumers against. My first response is always the same. “Prove it.” Give me the documents, *court* documents where a real-life judge pounded the gavel and agreed with your cockamamie legal theory that “no money was lent” by the creditors. I’ve been asking for proof for nearly a decade. I’m still waiting.

So how did he reply? By backing up his mental dumpster and unloading it in my email inbox:

“Actually I’m not a fan of a fraudulent system that takes advantage of others, which is why I work to bring it down rather than to support it by buying into the lies.

I didn’t go to court on any of the cards that I got charged off.. which was every one of them. Contrary to what most people believe, it’s actually quite easy to do because the banks don’t WANT to go to court, or their little scam would be revealed and a finding against them would set a legal precedent that bring the whole house of cards down around the world.

All I did to accomplish that was exactly as I said in the earlier email. I challenged the banks for fraud on the contract and fraudulent conveyence (sic) and the debts were charged off for the following reasons:

1. There is NO legal and binding contract.. only a promisory (sic) note which creates the funds to discharge.

2. There is NO disclosure of the actual accounting procedures. If there were the banks would be forced to tell people that the monies created were created as a CREDIT to the account of the Strawman, and NOT a debit. This means that the individual has legal right to the monies from the start and is under no obligation to pay them back.

They entire system is a scam that originally began in 1913 and was subsequently pushed through Congress a few years later. When done correctly the FDCPA, and the FCRA can easily be used to get an unsecured line of “credit” charged off. It is also possible to obtain the remainder of the monies in a given account in cash. As I said, the money was assigned as a credit and not a debit to the individual and is therefore legally ours to begin with.

As I said earlier, if you want to know more, watch “The Money Masters”, “Money as Debt”, and read “The Creature From Jeckyl (sic) Island”. That will bring you up to speed on what the World Bank and the Federal Reserve is REALLY up to.

In closing, I’m sure there are idiots out there who scam people. In fact I recently read about one in Florida who took thousands and never did the work promised. But that there are idiots in every walk of life, and a few bad seeds don’t change the fact that what I am saying is true. If you want, I’ve given you enough information that you can find out for yourself. And as I said, once you do, I can provide you with the necessary tools if you decide you want to alter your course a little.. and I won’t charge you a penny.”

OK, so where do I start? This is so wrong on so many levels that it’s difficult to know where to begin. But let’s begin with the obvious. No legal paperwork. All this person accomplished was to get their debts charged off. Um, hello? That happens automatically! Don’t pay a credit card bill for six months, and voila, charge-off time. A charge-off just means the creditor records the loss on their books. It doesn’t mean they will stop trying to collect afterwards.

Anyway, I was getting a bit annoyed with this chap’s self-satisfied smug tone, so I decided to let him have it with both barrels.

“Allen,

Listen carefully, please. Both your emails were very insulting in tone and approach. You’re writing to a professional, not some clueless newbie. I do this for a living. I’ve seen it all, every trick in the book. I have been aware of everything you are describing for a decade or more and know a hell of a lot more about it than you apparently do. You’re just another in a long line of people who thinks he has discovered some big conspiracy, and can’t resist emailing me to tell me how wrong I am. What a laugh. I read Jekyll Island years ago. It’s complete crap from start to finish. Griffin is a John Birch whack-job, and his book was thoroughly debunked by legitimate scholars long ago. That’s as deep as your “research” went? Griffin? LOL.

If you don’t have court cases ruling in your favor, then all you did was temporarily chase away some collection agencies via the various documents utilized by the monetary protest crowd. Creditors drop cases all the time, or choose not to sue, for a variety of reasons that have absolutely nothing to do with what you think it does. You, like everyone else tilting at windmills out there, are completely clueless about what a pile of bulls**t you have chosen to put your faith in. You apparently don’t even understand what a charge-off is! You didn’t “get” your creditors to record charge-offs. That happens automatically. You’ll get sued sooner or later by a debt purchaser, or two, or three. If you enjoy the legal fight, bully for you. But 99% of consumers don’t want to go that route.

Did you, or did you not, purchase goods and services to the tune of $40,000 via the credit cards? Are you saying you received NO value whatsoever from the purchases made with the credit you claim was illegal? If you had not had those credit cards, how would you have obtained those $40k worth of goods or services? Don’t you understand what “consideration” means in the context of a business transaction? From my perspective, all you did was stiff your creditors to the tune of $40k. But that apparently does not conflict in any way with your values or ethics. Sorry. Call me old-fashioned, but I’ll side with the OCC, FTC, and every single state AG out there, and continue to advise consumers to steer clear of conspiracy-theory-based techniques that simply do not work for the vast majority of people who attempt to implement them. I’ll continue to do what I know DOES work — good faith negotiation and settlement. If you want to preach otherwise, get your own website.

Sincerely,

Charles J. Phelan
President/Founder
Manchester Publishing Company, Inc.”

A little harsh, perhaps, but hey, he started it, right? (You have to give as good as you get sometimes with people who are a bit thick in the skull.) His response?

“My apologies if I was coming off like I was being condescending.. I wasn’t. As with you, I am a professional and hold two degrees.. one in Electrical Engineering and a Doctorate in Philosophy.. so obviously I didn’t just fall off the potato truck.

My only intent from the start was to inform you of the truth, not to try and make you believe it. I’ve researched this for over three years, and the information I have portrayed /is/ accurate. However, you are certainly entitled to believe that Jeckyl (sic) Island isn’t true, or that the system we are living with is ethical and in integrity. The choice is entirely yours.

Please don’t bother responding, no further dialog on the subject is necessary or desired.
The best,
Allen”

Translation: “Gosh, you hurt my feelings. I don’t want to play anymore.” So there ends the exchange, which is too bad, because I was having so much fun. You’ll notice, however, that he failed to answer a single relevant question that I raised. “I know I’m right, and you can’t confuse me with facts to the contrary.” That was the essence of his defense. Our monetary system is a scam, therefore I never spent any real money, blah, blah, blah.

The core point I was trying to get across to this person was the concept of business “consideration.” I focused on that because someone who has two college degrees really should know better (not to mention they should also be able to spell better). How can you study Philosophy, obtain a PhD, and not understand basic logic? The debt elimination promoters often rely on the assertion that no consideration was received by the debtor because the creditor was not out any of their own actual money. Baloney! You can read the linked Wikipedia entry on consideration for further detail, but the core idea is that in a business contractual situation, consideration must be involved for it to be a valid contract, where consideration is defined as value paid in exchange for a promise. Simple enough.

By arguing that no value is received by the debtor because the bank is extending credit and not loaning money directly, the true believer in debt elimination is overlooking basic reality. When you use a credit card to purchase goods or services at a retailer or other business, the mere fact that you had the convenience of using credit constitutes consideration. Look at it this way. If you did NOT have a credit card, you’d have to write a physical check or pay in full with cash, right? Because the creditor extended you a credit facility in the form of that little piece of plastic, you didn’t need to pony up money out of your bank account to pay for the item. That fact alone means you were extended consideration in the transaction, because otherwise you would not have been able to conclude the transaction under such convenient terms and would have had to directly negotiate credit terms with the merchant. So this blows away any and all objections by the debt eliminator that no consideration is involved. Crash. Down comes the whole kooky house of cards.

Anyway, all this person accomplished was to rip off his creditors for $40,000, *temporarily*. Since he never resolved anything, and thinks that the process stops with charge-offs (which is actually when the collection process just starts kicking into a high gear that can last for *years* to come), he will be exposed to multiple lawsuits in the coming months and years. This is my beef with all such mumbo-jumbo “magic bullet” techniques. They never result in any of the debts actually getting resolved in a final manner. A debt settlement letter accomplishes that resolution. You pay X dollars by such-and-such a date, and you’re done, period. And you have it IN WRITING FROM THE CREDITOR. Game over. On to the next debt, etc.

I doubt the above will convince a true believer. But I figured I would go ahead and post this exchange for its educational value. If I can spare one consumer from falling into the insidious trap set by the scam artists who sell these bogus “programs” for thousands of dollars, then I’m happy to keep sparring with true believers in the conspiracy theory of global finance. Anybody else out there want to take a shot at convincing me I’m wrong on this subject? 🙂

Since the financial meltdown in September 2008, I’ve been asked on a daily basis what effect the financial crisis will have on debt settlement. Will it be easier to settle now? Will the banks get tougher and make it more difficult to settle since they’re hurting for cash? The purpose of this long overdue blog post is to provide readers with some answers on this subject.

So far, it’s still “business as usual” in the world of debt settlement. Just as the passage of the new bankruptcy law back in 2005 had a lot of people wondering if it would negatively affect debt settlement, so also the financial crisis has everyone curious about the same thing. Yet the change in the bankruptcy law had very little effect at all on the settlement strategy, and I believe the same to be generally true of the financial meltdown.

Having said this much, I should note that I have noticed some *slight* changes – a little softening by one creditor here, a little more willingness by another creditor there to discuss settlement, and so on. I’ve also noticed, however, that the banks are doing more outsourcing to collection agencies, and this outsourcing is taking place earlier in the collection process than it used to. The reason is because the banks are being hit with a bubble of delinquent credit card accounts and do not want to add staff internally to handle the collections.

Normally, the major credit card banks handle their own collection activity internally up to the point of charge-off, and only outsource after they have officially written off the debt. Since collection agencies in general are more difficult to deal with than the banks directly, this is making some creditor negotiations a little more complicated. But at the end of the day, I’m still seeing the same settlements in situations like this that I would have expected had the client been still talking directly with the bank and not an outside agency. So we call this the “rent-an-agency” effect, and where it seems to be a new tactic for a particular creditor, it’s not having any measurable effect on the outcome of the negotiations.

My prediction is that as time goes by, and the wave of charge-offs increases in 2009, it will get a little easier to settle with the major banks. But I don’t think it will make a huge difference one way or the other. Let me put it this way. There are a number of important factors that go into a successful outcome on a debt settlement program. The financial crisis will be one of those factors eventually, but not a make-or-break factor.

The news is neutral to slightly positive from my perspective, and will probably continue to become better and better for the consumer in terms of settlements. But the effect of the crisis will never be anywhere near as important as a client’s ability to raise the funds needed to settle with! That will always remain the most important single factor in achieving success with the debt settlement strategy.

So if you’re looking into debt settlement, now is as good (or better) a time as any!

On September 25, 2008, the Federal Trade Commission held a workshop on the debt settlement industry. Representatives of the credit card industry, consumer protection groups, the credit counseling industry, the debt settlement industry, and the FTC were present at the day-long event.

Over the past few years, concern has mounted within various state and Federal regulatory agencies that the debt settlement industry is harmful to consumers. And the purpose of the workshop was to provide a forum for discussion of different viewpoints on the industry. A transcript of the workshop is available directly from the FTC website.

I’m not going to blog about the whole content of the conference, a lot of which pertained to such matters as fee structures, regulatory compliance, deceptive advertising practices, and so on. What I want to focus on, however, is a statement made by Ms. Virginia O’Neill, from the American Bankers Association. I’ve been arguing for years that, to put it as bluntly as possible, the debt settlement industry is unnecessary because consumers can obtain the exact same (or better) settlements by negotiating on their own. Yet time after time, consumers quote the typical settlement company sales pitch. “They told me they bundle their settlements, and I’ll get a better deal by going through them, since they’re settling all the time with these banks.” I already debunked this sales claim in a previous post. And today, in further support of my position, I will quote Ms. O’Neill at length:

“When the FTC asked us to look into it [i.e., the debt settlement industry], what we did to get sort of an industry view was to reach out to members of several working groups, our payment systems and our credit card council and raise discussions with them about the things that FTC wanted to hear. I also had very detailed one-on-one conversations with seven large credit card banks. My point is to let you know what I am saying I do believe is representative of the industry view on this. Obviously all the banks aren’t in lock step but my remarks today represent a majority opinion. Their message was very simple and it is that they do not see debt settlement industry as a necessary player. They see it as very harmful. Both to the consumer and I know you’ll be less concerned with this, but to the bank. They don’t see it as providing any value. They want above all to come out of this with y’all understanding that the banks when they agree to a settlement that has been presented by a debt settlement company it is no different than an agreement that they might have reached had that customer come to them directly. The banks do not — when they consider a person who is in hardship, they take a very careful look at that person’s individual hardship, their finances and their accounts and that’s what they make their decision based on applying their own parameters and policies. It doesn’t matter that a debt settlement company is in there. The analysis never changes. So this notion that a consumer needs to go to debt settlement that they can’t possibly get the same kind of a deal is just simply false.”

There’s a lot more, but I’m sure you see my point. I’ve been saying the same thing all along. But I would add to the above. It DOES matter that a settlement company is involved, but it matters in the WRONG way. Also as part of Ms. O’Neill’s presentation, she discussed what banks do when they receive third-party notification from a debt settlement company. What they do is suspend normal collection procedures, which are designed around CONVERSATIONS DIRECTLY WITH THE CONSUMER TO EXPLORE OPTIONS, and they handle the account the way they would if the consumer had hired an attorney-at-law. Unfortunately, this normally means that the bank also escalates to a third-party representative, and this can often include placement of the account with a local collection attorney. Why should the bank do otherwise? If their customer gets a third party involved, why shouldn’t they do the same thing? They do, and I see this difference on a daily basis. People who I hear from AFTER they have hired a settlement company (that sent in their power-of-attorney document) quickly begin to hear from collection agencies or attorneys, or see arbitration claims filed against them. But the folks who talk directly to their creditors have a much more straightforward path to settlement of their accounts.

Based on some of the feedback gathered in this FTC Workshop, I believe the debt settlement industry will eventually be regulated (either by Federal or State laws) the way “credit repair” has been regulated. About 10 years ago, a Federal law was passed called the “Credit Repair Organizations Act,” and it essentially nailed the coffin shut on legitimate credit repair. The law accomplished this by forbidding credit repair companies from charging in advance of performing their advertised service. It’s pretty tough to run a business on that type of financial model. And for settlement companies, it would literally be impossible to do so. My expectation is that fees will be capped to the point where very few companies would be able to survive as currently structured. Meanwhile, until this unregulated and risky industry is scrubbed clean, consumers are strongly advised to avoid third-party debt settlement companies. Settle your own debts! You can learn how to successfully negotiate and settle by obtaining one of my training and coaching packages at a tiny fraction of what a settlement company would charge you.

When you discuss debt settlement with most any debt settlement company, they will talk in terms of a typical 36-month program. Some companies, in an attempt to cast their fishing net even wider, will expand program duration to 48 months, or even 60 months. When I worked out the numbers given me by one caller, the settlement company had quoted her an 89-month settlement program! (This may be one good reason why the company that quoted this absurd program has racked up more than 1,500 BBB complaints!)

The purpose of this post is to explain exactly why the “36-month debt settlement program” is a myth that bears no relationship to the reality of how debt settlement works.

Way back in the year 2000, when I was helping build one of the nation’s first large-scale debt settlement companies, we had to figure out a way to enroll the maximum number of clients into the program. The easiest way to do that was to focus on the size of the monthly payment to fund the settlement process. Let’s say a client had $30,000 of credit card debt. Typical monthly payments in those days would have been about $600, or about 2.0% of the total. Obviously, the client could not sustain the $600/mo, which is why they were looking at other options. Backing off a half-percent to 1.5% made all the difference in the world. So we talked in terms of the 1.5% as the monthly funding pace, where a $30,000 debt client needed to fund the program at a pace of $450/mo, or 1.5% of the total balance. This relief of $150 per month was frequently enough for the client to breathe a little easier, and get away from “robbing Peter to pay Paul” every month.

Translating that $450/month to a settlement program, we assumed average settlement percentages at 40%. In those days, we charged 25% of the savings, so 25% of the 60% of savings yielded a fee of approximately 15% of the total debt. (See my post on the history of debt settlement fees for further insight – this is where the current standard 15% fee came from.) Add 40% to 15% and you get a total payout of 55%. Take 55% of $30,000, divide by $450, and voila – you get roughly 36 months, or three years. For someone who’s been in debt for many years, struggling to pay those endless minimum payments on the “forever plan,” getting out of debt in only three years sounds pretty good.

So far so good. However, the above calculation has two major problems. First, it ignores the fact that the debt balances climb when you’re not paying to hold the figures in line. So that $30,000 of debt would probably climb to more like $36,000 before everything got settled. Second, the assumption of 40% average settlements is too low, since the true average is more like 50%. In the “good old days,” a 40% average was do-able, but with the increase in legal pressure coming from the banks and the debt purchasers, the settlement percentages have climbed to around 50% over the years.

But in those days, it was totally possible to weather the storm for 3 years and expect to come out the other side with all your debts settled. So a 36-month program made a lot of sense for many clients seeking to avoid bankruptcy. However, there was never anything special about 36 months. It was just an artificial result based on how we calculated the payment level. In other words, we “backed into” the calculation to arrive at the 36-month outcome. Yet company after company copied our model without understanding the rationale behind it. You can just hear some of the greed-oriented conversations that must have taken place at those startups: “Hey, if 36 months is good, I bet we can sign up a lot more people every month if we lower the payment commitment and stretch the program to 48 months!” Presto. Now you have companies quoting 4-year programs. Wait? What about 60 months? Why not? Heck, why not take 6 or 7 years?

Debt settlement has changed. What worked a decade ago doesn’t work the same way anymore. Nowadays, a 36-month debt settlement program is absurd. Creditors sue much earlier in the process than they used to. (In fact, if you hire a settlement company that notifies the creditors of their involvement, you might see litigation within a few months, never mind 3 years!) And the debt purchasing industry has also become very aggressive, suing people left and right, using the courts to do their collection work for them. It’s simply unrealistic for most people to expect to survive 36 months without seeing lawsuits filed against them by one or more creditors long before they reach that goal. But you would never know any of the above by talking with a sales rep for the average debt settlement company. All that gets left out of the conversation, and the prospective customer is sold the illusion of a bank-recognized program (such as credit counseling), where it’s no problem to take 3 years to settle everything. The truth is that the banks don’t even recognize debt settlement as a legitimate industry. So there is no “program” there that protects the client from escalated creditor collection activity.

Another problem with the above approach to calculating program duration is the “cookie-cutter” effect. Let’s say you have $40,000 of debt spread fairly evenly across 8 cards, each with a balance around $5,000. Well, under those conditions, you can reasonably expect to settle some of the accounts before charge-off at 6 months (if you do it yourself, that is!), and a few more in the second 6-month period, and so on. If one of the accounts gets away from you and you’re forced to set up a full-balance payment arrangement, it’s still a better outcome than Chapter 13 bankruptcy over 5 years. But what if you have one $30,000 account and two $5,000 accounts? What then? Obviously, the above cookie-cutter approach to backing into the numbers is totally inappropriate. Sure, you’ll get the smaller ones settled ok, but it will take so long to save up to settle the whopper account that a lawsuit is all but certain before you reach the 36-month goal post.

Here’s the reality: It’s necessary to ANALYZE the list of creditors and take into account large balance accounts and their impact on the program. You cannot just take ANY list of debts into debt settlement and expect to be successful based on the cookie-cutter method of calculating the necessary funding pace and duration.

So what is a safe time frame? There is no such thing as a zero-risk debt settlement program, but it’s very unusual to see creditors litigate during the first six months, and lawsuits during the first 12 months are the exception rather than the rule. As you push well into the second year of the process though, the risk begins to climb. So my current advice to clients is that you should be in a position to raise enough money to settle your debts in a 12-18 month timeframe or less. This automatically means that most of the people enrolling in debt settlement programs are simply not good candidates for this strategy in the first place. It’s no wonder these companies rack up so many BBB complaints.

Folks, I’ve personally seen debt settlement change the lives of thousands of people for the better. But it has to be a good fit for your situation before you go down this road. In my training course, the first part of the material is designed to walk consumers through a financial self-analysis that leads to a firm decision one way or the other on whether this is the correct solution for their situation. This is one major reason why I offer my material with a money-back guarantee. I don’t want people to pursue debt settlement if it’s not a suitable strategy, and unless they have good odds at a successful outcome. If the math makes sense, debt settlement can work miracles! If the math doesn’t work, it can be a nightmare.

In my June 30 blog post, I announced the publication of the new 2008 version of my training course, The Debt Settlement Success Seminar. As noted, the course content is revised, expanded, and improved. The new course contains nearly 8 hours of audio training material versus the original 5 hours, and the new content reflects the experience I’ve gained working one-on-one with around 1,000 consumers since I published the first version of the course in 2004.

My goal has always been to keep this program AFFORDABLE for consumers who are struggling financially. But it takes a lot of work and a heavy time commitment to personally coach people via email and telephone support, and it has become necessary to adjust my pricing. However, in order to keep my program affordable, rather than raise prices I’ve decided to keep the pricing structure the same and simply adjust the service period instead.

Here are the current packages:

1. PREMIUM PROGRAM ($777) includes the audio seminar, telephone strategy consultation, unlimited email and telephone coaching for 12 months, and document review service for 12 months. Clients who wish to extend their Premium service after the first 12-month period may do so at a cost of only $350 per 6-month extension. (NOTE: I recommend this package level for clients with $50,000 or more of debt. Why pay a debt settlement company $7,500 or more when you can pay less than 10% of that amount and get the job done properly?)

2. ENHANCED PROGRAM ($397) includes the audio seminar, telephone strategy consultation, unlimited email coaching for 6 months, and document review service for 6 months. Clients who wish to extend their Enhanced service after the first 6-month period may do so at a cost of only $300 per 6-month extension.

3. BASIC PROGRAM ($197) includes the audio seminar and the telephone strategy consultation, but does not include follow-up coaching or document review.

IMPORTANT NOTE:

I believe that a deal’s a deal! So if you downloaded my free 32-page consumer report during the period from June 1st, 2008 through today, or if you submitted a request for the free 20-minute consultation, I will honor the previous pricing/service structure on orders placed through September 30, 2008. Simply place your order through the shopping cart, and then let me know what email address you used to subscribe to the report or request the consultation. I’ll reply with confirmation regarding your service period based on the program level you choose.

Remember, regardless of which program level you select, my program will PAY FOR ITSELF many times over by improving your negotiation results. Just read a few of my recent client testimonials, and I’m sure you’ll agree that my modest fees are simply a no-brainer compared to any other solution. And as always, I stand behind my ironclad 365-day money-back guarantee.

In my post of February 29, I discussed a “new” variation on the debt elimination scam I’ve frequently written about in various blog posts and articles. I put “new” in quotes because it’s not new at all.

The basic idea is that the debt “expert” takes over the debt from you and becomes responsible for it after that point, leaving you free of worry since the debt is no longer yours. One company has been aggressively promoting this bogus tactic through a network marketing organization.

Now, another con artist has started to employ the same technique. This particular individual has been involved in a long-running credit repair scam in the guise of a consumer advocacy program. He claimed to have an inside contact at the Federal Trade Commission, and that he was working closely with the government to have thousands of consumer debts declared “invalid.” I guess his customers got tired of waiting for non-existent results, so now he has changed the game and is using the assignment tactic.

Here’s a direct quote from this scammer’s documentation:

“Be it duly noted that pursuant to Title 42 United States Code, Section 1981(b), et al., You (Original Creditor) are hereby notified that I have assigned/transferred all of the rights, benefits and liabilities of our agreement along with the administration and servicing of the aforementioned debt, if any, from the original creditor to the following third party:”

(I’ll ignore the fact that this is badly worded even in the context of what it’s trying to accomplish, since this paragraph does not even clearly state that the intent is to transfer the responsibilities of the *debtor* to a new third party debtor.)

He also states: “For case law please review, Hale v. Henkel, 201 US 43 (1906).”

Let’s have a look first at Title 42 of the US Code, Section 1981. You can look up the exact language online, but the gist is simple enough. The original purpose of this code section was to ensure that everyone has the right to make and enforce contracts without regard to their skin color. It was an anti-discrimination measure. So all Americans have the right to make and enforce contracts. So far, so good. But the credit card agreement you signed represents an EXISTING contractual obligation that you already entered into. You already exercised your right under Section 1981 when you accepted the terms of the credit card agreement by actually using the card for purchases. Section 1981(b) of the US Code does nothing to overturn or negate existing contractual obligations. So this is just a bit of “smoke and mirrors” on the part of the scammer, who is citing US Code to make his document look more official.

Now, what about Hale v. Henkel, 201 US 43 (1906)? More smoke and mirrors. The case overview indicates the following as the substance of the case matter:

“Under the practice in this country, the examination of witnesses by a Federal grand jury need not be preceded by a presentment or formal indictment, but the grand jury may proceed, either upon their own knowledge or upon examination of witnesses, to inquire whether a crime cognizable by the court has been committed, and, if so, they may indict upon such evidence.”

OK, so what? What does this have to do with assignment of debt? Exactly NOTHING. In other words, the assignment document this scammer is using is roughly equivalent in legal value to a piece of toilet tissue.

Next, let’s have a look at typical language included in a credit card agreement, as it pertains to assignment. Here is an actual excerpt from one major bank’s agreement:

“We may at any time, and without notice to you, sell, assign or transfer any sums due on the Account, this Agreement, or our rights or obligations under the Account or this Agreement to any person or entity. You may not assign to anyone the Account or any of your rights or obligations under this Agreement unless we expressly consent to and permit such assignment. If we do, you and any successor or assignee will comply with our requirements and procedures for doing do.”

Almost sounds like the bank is guarding against bogus assignments, doesn’t it? You bet they are. They have seen this trick attempted countless times before. The language is clear enough. The bank has the right to assign or transfer the account. You, on the other hand, do NOT. That’s just the way it is, folks, and wishing otherwise will not make it so.
If you are currently looking into debt relief options, and someone tells you they can “take over” your debt obligations for you (in exchange for a hefty upfront fee, of course), then you know you’re dealing with a scammer. It doesn’t work, period. Don’t make a bad situation worse by paying huge fees to a rip-off artist!