The purpose of this blog post is to warn consumers looking into do-it-yourself (DIY) debt settlement that a lot of bogus information is being published online about the DIY approach to debt negotiation and settlement. Just as most of the online information published by debt settlement firms is misleading at best, a lot of the DIY material coming out now is produced by that same crowd, and is therefore equally misleading or simply wrong. So there are copycats, imitators, and direct rip-offs of my ZipDebt program popping up all over the Internet. Buyer beware! These folks are completely clueless about what it takes to coach consumers on settling their own accounts.

A little background information will help you understand what’s going on. First of all, debt settlement is not my invention, although when I started in 1997 I was one of the first people negotiating credit card debt on behalf of U.S. consumers. My current approach to debt settlement, however, IS my invention. As far as I know, I was the very first person to provide a do-it-yourself (DIY) training program for debt settlement, combined with *personal one-on-one live coaching support*. There may have been one or two flimsy DIY debt settlement e-books floating around before I started ZipDebt in 2004, but I’m not aware of anyone before that working the way I do. When I started ZipDebt, no one else was out here with me in the trenches, working directly with consumers, *coaching* them to negotiate and settle their own debts without third-party representation. So I guess that makes me a pioneer. And one definition of “pioneer” is the guy with the arrow sticking out of his back.

I started feeling those arrows in my back about a decade ago, when I published online the original version of my consumer report about debt settlement, “How to Eliminate Your Debts Quickly and Safely Without Filing Bankruptcy.” Not long after that, I discovered that someone had copied my booklet word-for-word, signed their name to it, and then published it on their own website. After a phone call from my attorney, the other fellow backed down, blamed the “error” on his web designer, and pulled my report from his website.

That scenario was repeated many times over, and to this day, whenever I read various websites published by debt settlement companies, I still find exact wording of mine all over the place. It tends to show up in company FAQs, as well as the side-by-side comparison chart that I invented to visually illustrate the difference between minimum payments, credit counseling, and debt negotiation. And the sales presentation too. As a writer, I’ve come to expect the rip-offs and copycats, and I mostly ignore them unless they are so far over the line that I feel compelled to take action. I don’t get too excited about such things because I know that the imitators will be gone in a year or so anyway. They never last. How could they? They aren’t prepared to do the hard work necessary, or they would not have copied me in the first place, right?

Nowadays though, I see knockoffs, copycats, and imitators all over the place. “Do it yourself debt settlement! Save thousands in fees!” Ads like this are starting to pop up all over the Internet. What’s happening is that the debt settlement industry is under tremendous pressure from consumer groups and various regulatory officials like Attorneys General at the state level, and the Federal Trade Commission as well. (For further discussion, please see my blog post, “Debt Settlement Industry in the Crosshairs.”) Hardly a week goes by where we don’t see another debt settlement firm sued by an Attorney General or the FTC. (Here is a link to an article discussing the recent shut-down of one of the industry’s worst violators – Allegro Law Group.) It’s getting tougher and tougher to make a go of it as a third-party debt settlement firm. Also, there are clear indications that industry regulation is coming soon. It’s been too long in coming, but it’s very likely that a new Federal bill will get passed in the next 12-18 months. That bill, depending on how it finally turns out, will probably regulate the industry out of existence, at least as it exists in its current form. Gone will be the huge fees, rip-off contracts, and lack of licensing requirements. Very few settlement firms will survive what lies ahead. The people who own these companies are seeing the writing on the wall.

So let’s say you own a settlement firm and you see the train wreck coming. What’s the logical solution? Hey – let’s set up a do-it-yourself settlement program! Do a little research, and up pops ZipDebt. Hey, if this guy can do it, so can we! Let’s buy a copy of Phelan’s course, change it up, and sell DIY settlement instead.

I’ll leave out a very complicated discussion as to the marketing costs of debt settlement, and skip to the bottom line. These companies will fail at trying to do the DIY settlement model the way I do it. I’m not bragging or being arrogant here – it’s just that I already know it won’t work because the cost to market debt programs *in large volume* greatly exceeds the fees that a consumer is willing (or should be willing) to pay to learn how to do something themselves. Companies get away with charging huge fees for traditional third-party settlement programs because consumers have the illusion that they are buying a professional negotiator’s services all the way down the road. But paying 15% of your debt to handle it yourself simply will not fly. So there will be all kinds of ridiculous fee models, and none of them will work because of one simple fact: As long as they gun for large monthly volume of enrollments, they will have to purchase “debt settlement leads” at great expense. And it will cost these companies more to acquire a new client than they will be able to charge for the service. The result is a very unprofitable business model. If you have ever wondered why ZipDebt has no true competition, that is the reason. My monthly budget for advertising? Zero dollars. I only make a living at this because I am NOT trying to “sign up” gazillions of new clients on a monthly basis. Besides, I am trying to keep what little hair I have left, and coaching people is a LOT of work! 🙂

Now, not everyone out there dabbling in DIY settlement is out to soak the consumer, and I do not mean to imply that is the case. I don’t have a monopoly on this approach, which after all, is really nothing more than teaching people how the collection process can be turned to their advantage. It’s not exactly rocket science! However, the quality of the advice I’m seeing out there is very poor, and I want consumers to understand that just because someone claims they can coach you on DIY settlement does not mean they know what they are talking about.

Here’s a good example of bad advice: One article I read recently on the DIY approach informs consumers that debts are best settled *after* charge-off takes place at the 180-day point. WRONG! That is horrendously bad advice, since with most creditors you’ll be better off negotiating a settlement BEFORE charge-off, where you can get a better deal with the creditor before a collection agency gets in the game (and with far less risk of litigation). The reason this person wrote that comment was because they did not know any better – they had been promoting a regular debt settlement company, and with those outfits, most debts *do* only get settled after charge-off. Why? Because the banks don’t directly talk to settlement firms! (And also, settlement firms charge so much up front on the fees that the average consumer doesn’t have any money to settle with before then anyway.) If you took the information in this article at face value, you would have a very false impression of the way DIY settlement should be conducted. But this person, posing as a “guru” in the debt industry, gave people the exact wrong advice, based on his prior knowledge of how third-party debt settlement works.

Another example – I just reviewed a website that offers an e-book for sale on DIY debt settlement. On the sales page for the e-book, the author makes the statement that it is not necessary, when settling with an original creditor (i.e., the bank itself), to obtain a written agreement on the settlement. Further, the author states that the banks will not agree to issue such letters anyway, and because the phone calls are recorded, it’s safe to settle on the basis of a verbal agreement.

Folks, this is the single WORST piece of debt settlement advice I have ever seen. There really is only one unbreakable rule in this game – no settlement letter, no deal, no exceptions – EVER! Granted, there can be some “tricks of the trade” involved in extracting such letters from creditors, but it’s not a difficult thing to accomplish. I assure you — ZipDebt clients NEVER agree to settlements without first having proper documentation in hand. The reason the above “professional” advice is so horribly wrong is because, quite simply, the banks are not to be trusted! Recorded conversations mean nothing, because you will never be able to obtain a copy of that recording unless you sue the creditor to obtain it. Good luck with that if something goes wrong!

We insist on settlement letters because people who settle on a verbal basis have no leg to stand on when the bank continues trying to collect on the unpaid balance and simply pretends the settlement was never authorized. Also, sometimes banks “accidentally” sell the forgiven portion to a debt purchaser. Then it’s your word against theirs, and guess who will come out on top. When you have a settlement letter, you can put that situation to bed in five minutes by faxing over a copy of the agreement letter. Without a letter, it’s almost impossible to resolve that type of situation.

If you want to negotiate and settle your debts, ZipDebt has all the information you need to do the job quickly and safely. Skip the websites, e-books, and “forums” filled with amateur advice, and come to the source! Learn the state-of-the-art tactics for settling your debts, from someone who does this on a daily basis, day in and day out, week after week, month after month, year after year. Just as you should not fall for the settlement company sales pitches, you should also be skeptical of this new crop of “experts” on do-it-yourself debt settlement. The moral of the story is the usual one – let the buyer beware!