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ZipDebt Clients Enjoy Great Results! Success Tracking Update, 2006 through 2012

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In July 2010, I published “Debt Settlement Done Right,” which included ZipDebt’s success tracking statistics for the period 2006-2009. As far as I know, I was one of the first in this industry to publish actual data on my results. Today, it’s still quite rare to see a debt settlement firm publish transparent information about actual performance results vs. the claims made in their marketing materials and sales pitches. There is a reason for this. Their data would show they do a poor job, get their clients sued on a regular basis, and fail to settle most of the accounts for most of their clients.

This is the latest update to my published success tracking statistics, and the data include the pool of clients who purchased one of my programs from 2006 through 2012. The updated stats demonstrate a track record I am very proud of. I’ve achieved excellent results in coaching consumers how to settle their debts quickly and safely on their own, with no need for professional negotiators or the sky-high fees they charge.

Please note that these figures pertain to clients who settled unsecured debts (primarily credit card debt). I’m not including data for clients who required assistance with settlement of second mortgages or HELOCs, a phenomenon that is unique to the past few years of the financial crisis. The process of settlement is different for mortgages, so it would not be appropriate to mix the data together. This will be especially important in the reporting of the amount of debt settled by clients, and the overall percentage achieved, since mortgage balances are usually much larger and the settlement percentages lower than for credit card debt. But it’s also important to recognize that the timeline for mortgage settlements is not the same as for credit card debts or other unsecured accounts. In general, mortgages require a longer timeframe before settlement can be reached.

Here is the hard data on ZipDebt Success Rates for clients who did DIY debt settlement on credit cards and other unsecured accounts. For the exact methodology employed, please see the original July 2010 post.

ZipDebt SUCCESS RATES (Cumulative) 2006-2012

1. Total Number of Clients @ 2,232
2. Number of Refunds @ 62
3. % Refunds/Total @ 2.8%
4. Coaching Not Included (Basic) @ 306
5. Insufficient Contact to Determine Results @ 722
6. In Progress @ 32
7. Pool of Coached Clients @ 1,092

8. RESULT A_ COMPLETED @ 501
9. RESULT B_ 80% Finished @ 294
10. RESULT C_ 50% Finished @ 82
11. RESULT D_At least 1+ Settlements @ 148
12. RESULT E_Filed Bankruptcy @ 67

13. BASE SUCCESS RATE (= RESULT A + B) @ 73%
14. 50%+ SUCCESS RATE (=A+B+C) @ 80%
15. SUBSCRIPTION SUCCESS RATE (A+B+C+D) @ 94%

BASE SUCCESS RATE – This is the most conservative definition of “SUCCESS” relative to my program. The group of “Completed” plus “80% Finished” clients are all success stories. These are people who made the program work and achieved the desired outcome. They settled all their debts, or had settled 80% or more of the starting balances by the time their coaching subscription ended. I am proud to announce that based on this simple criteria of “getting the job done right,” ZipDebt has a base success rate of 73%.

This is an inversion of the normal success rate for a traditional debt settlement company. Most of them have a FAILURE rate higher than 73%! It is also common knowledge that Chapter 13 and credit counseling programs have a high failure rate as well. I am quite proud of the excellent results achieved by ZipDebt clients. This 73% figure for my base success rate represents HUNDREDS of success stories – these are ordinary people who cleared out their credit card debts via self-negotiated settlements.

50%+ SUCCESS RATE—It’s important to remember that this is a do-it-yourself (with coaching) program. Clients often learn enough in their first 6-12 months with me to keep going on their own after their coaching subscription has expired. Some people choose to renew to extend their coaching service, while others really take the DIY-spirit to heart and finish out on their own. Including clients who were approximately half finished with their settlements upon expiration of the coaching subscription, the success rate climbs to 80%.

SUBSCRIPTION SUCCESS RATE—Considering that 94% of clients reported at least one successful settlement during their coaching subscription period, virtually every one of these customers received full value in return for the cost of their subscription fee, and most would say their savings on the first settlement alone paid for the program cost many times over.

BOTTOM LINE: My data clearly shows that consumers are capable of negotiating settlements on their own and achieving BETTER results than those obtained by third-party debt settlement firms.

To consumers considering debt settlement: It’s not for everyone. It’s imperative that you be a good fit for this approach in terms of your financial situation, and that includes having access to sufficient resources to negotiate your settlements quickly. ZipDebt clients are so successful because they move FAST – the majority of our settlements are negotiated before charge-off, or shortly thereafter. To learn more about this very successful approach to debt settlement, please read my Free 32-page report, How to Eliminate Your Debts Quickly and Safely Without Filing Bankruptcy.

Why Consumers Should Hire A Debt Coach Before Negotiating With Collection Agencies

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I’ve been involved with debt settlement since 1997, far longer than most people working in this industry. Yet I still have to shake my head in amazement at some of the idiotic stuff debt collectors say.

Now, just to be 100% clear, I have nothing against creditors hiring agencies to collect on their delinquent accounts, and I view the collection industry as an essential part of our economy. The business of granting credit always entails some risk people won’t repay, which creates an opportunity for an industry that helps lenders enforce their contractual agreements. I’m also totally willing to acknowledge that many, if not most, debt collectors do a good job and play by the rules. Where I draw the line is with collectors who flat-out lie to people, break the rules, or make malicious statements intended to bully consumers who are suffering from legitimate financial hardships.

Just the other day, a debt collector with nothing better to do stopped by the ZipDebt Blog and submitted comments against an article I published about two years ago, titled Consumers Should Still Be Wary of the New “FTC Compliant” Debt Settlement Companies.

Normally, when a debt collector posts a snide remark on my blog, I just delete the comment and don’t bother to respond. But these particular posts provide a pretty good X-ray of the mindset of a debt collection “manager,” someone who was apparently good enough at the intimidation game to get promoted to a higher level. I always tell consumers they CAN settle debts on their own, but should get a good COACH on board to help them through the process. And this particular set of comments illustrates why. You’re dealing with people who are taught to repeat the same falsehoods many times daily, to the point where they become very convincing and even start to believe their own propaganda.

In his first comment, the collector focused on a statement I made within the article where I noted, “We have recently had instances where one major creditor routinely refused to accept the final installment on settlements negotiated by third-party firms, and clients were experiencing problems with those settlements.”

What you are saying here is the creditor accepted a structured settlement then refused to accept the final payment to settle the debt? That would be an illegal collection practice by the creditor and in no way a reflection of who negotiated the debt. Once a settlement is accepted the creditor cannot back out of it once both parties agree. That would mean they could promise settlements as a way of getting monthly payments. Maybe you should check your facts or stop lying to your readers.

Nice tone, eh? Note that I’ve never once heard from this individual before he posted this. The language tells me this is a person who is prepared to *start* from the assumed position that I am lying to my readers. He doesn’t actually know anything about me at all, has not taken the time to fully digest what ZipDebt is all about, yet is fully prepared to dismiss what I’ve written. This arrogant and condescending tone is sadly typical of many debt collectors and managers. It’s too bad, really, because I firmly believe collectors would recover far more for their clients if they displayed a little respect and compassion once in a while.

The truth is that in the months before I published that article there had been multiple instances of a specific creditor welshing on documented settlements that had been negotiated by debt settlement firms on behalf of consumer clients. I did not say it was something that always happened, or that it was happening with all creditors, merely that we had “recently had instances” where this occurred. The practice of reneging on documented settlements went on for quite some time. Here is one example that was discussed publicly on Steve Rhode’s blog, about a year after my article mentioned this.

Yes, Mr. Debt Collection Manager, of course this is illegal. Are you asking us to believe that major credit card banks and/or collection agencies never do anything illegal? Seriously? If that is the case, why did the new Consumer Financial Protection Bureau recently fine Capital One $140 million and American Express $85 million, both for multiple violations of numerous laws pertaining to collection of delinquent accounts? Why is your industry always the #1 source of complaints to the FTC, year after year after year? After everything we have seen in the past half-decade, from the subprime mortgage meltdown and credit default swaps, to the robo-signing scandal, is there anyone who still thinks the big banks won’t break the rules if it means billions in profits?

Moving to the collector’s second comment, we have the following masterpiece:

I’ve worked in debt collections for the past 5 years, 3 of them as a manager of a debt collections law firm. Some of the statements I’m seeing on here make no sense, for example; Rodney, why would you have $133k in debt when you are telling us you had the ability to pay $7,000 a month to settle. In addition to that most credit card companies are not willing to extend a low settlement 30%-40% on the dollar without the charge-off. Why would the credit card companies forgive that much debt before they get their tax write-off (charge-off). In addition to these funny statements of settling over 100k in debt in 6-10 months (which would be wealthy people taking advantage of the credit card system) thanks for raising my taxes while you have money to pay your debts.

There are so many false statements and misrepresentations in the above paragraph, I’ll have to break it down sentence by sentence:

Bogus Remark #1: “Rodney, why would you have $133k in debt when you are telling us you had the ability to pay $7,000 a month to settle.”

This refers to a comment posted by a client who had settled all his debts using my ZipDebt program. The full comment can be read here, but this is the relevant portion:

I just achieved my last settlement agreement using Charles’ program. My wife and I had 10 credit card accounts and original balances of $133k when we started the program just back in September 2010. So less than 7 months later we’ve settled (or have made settlement agreements with payments due over the next 2 months) of just under $49k.

Here we see the old-school debt collector mindset at work. If the client paid out $49,000 over seven months to settle their $133,000 of credit card debt, the immediate assumption is that the client had *cash flow* of $7,000/month to work with. Mr. Debt Collection Manager applied the standard “deadbeat” assumption to Rodney’s comment, implying he had plenty of income to pay his bills with, but chose not to. Yet the reality was that the client had experienced a huge pay cut and was forced to rely on his credit cards to survive, then burnt through his liquid savings in a futile attempt to remain current with his creditors. The total minimum payments for Rodney’s $133k were more than $3,000 per month, yet he could barely cover $500/month due to his loss of income. The $49,000 for settlements came from a LOAN against his 401(k) account, another loan from his FAMILY, and the $500/month he was able to set aside in lieu of regular payments.

The problem here is that Mr. Debt Collection Manager does not understand a very basic principle of financial accounting: Income and assets are not the same thing! Rodney could simply have filed bankruptcy instead, but chose to borrow from his retirement account and from family so he could settle instead of file bankruptcy. Mr. Manager also apparently doesn’t grasp the fact that some of his fellow debt collectors *made money* from Rodney’s decision, via commissions earned from those settlements!

Bogus Remark #2: “In addition to that most credit card companies are not willing to extend a low settlement 30%-40% on the dollar without the charge-off.”

I have to scratch my head on this one. All major creditors, with perhaps one exception, prefer to reduce the loss declared at time of charge-off by offering settlements prior to that deadline. During the financial crisis, the banks cleared out hundreds of billions of dollars in credit card receivables through the process of offering direct settlements to distressed consumers. I have thousands of such letters in my database, and about 80-90% of my clients’ settlements are negotiated before the charge-off date. The collector is totally wrong about this statement, but perhaps what he’s actually mad about is that most of this direct settlement activity (before charge-off) did not involve third-party agencies. Translation: If consumers can actually settle on their own with the banks before charge-off, that means a lot less commissions will get paid to collection agencies.

Also, a settlement *is* a charge-off, of that portion of the balance that gets forgiven via the settlement. A “manager” working at a major law firm should be well aware of these very basic accounting facts, but as you may have guessed, one doesn’t need to be a genius to manage a collection agency.

Bogus Remark #3: “Why would the credit card companies forgive that much debt before they get their tax write-off (charge-off).”

What tax write-off? There is no “tax write-off” associated with charge-off. Charge-off equals a loss to the creditor, which means lower profits, which means a lower bill for taxes. Reduced profit is not a tax benefit! It’s a loss, period. Anyone who believes otherwise is welcome to cite the relevant tax code.

Bogus Remarks #4 & 5: “In addition to these funny statements of settling over 100k in debt in 6-10 months (which would be wealthy people taking advantage of the credit card system) thanks for raising my taxes while you have money to pay your debts.”

“Wealthy people taking advantage of the credit card system”? This is completely absurd. As I noted above, the client in question was in desperate straits financially, did not have the income to make his minimum payments, and used his few remaining resources to take the responsible path of negotiating settlements with his creditors.

This type of mean-spirited debt collector cannot allow himself to think for one minute that the debtor might really have a financial problem. Nope. If you cannot “just pay your bills,” it must automatically mean you are a lowlife deadbeat, or a wealthy person trying to scam those poor credit card banks – you know, those same banks that almost brought down the entire world economy. Yep, those poor bankers are being taken advantage of and really need protection from us big bad consumers (aka ZipDebt clients :-)).

And what’s this laughable nonsense about “raising my taxes”? Talk about apples and oranges! There is no relationship whatsoever between the personal income tax rate set by Uncle Sam and losses incurred by the credit card industry. Last time I checked, Congress and the IRS were not too concerned with increasing Federal taxes every time Citibank posts a quarterly loss.

Now, if you are a consumer trying to settle a credit card debt, imagine running into this particular debt collector on the telephone. Here is an individual prepared to rattle off a string of lies with enough confidence to make his pronouncements sound like Holy Writ, who is willing to bully and browbeat a distressed consumer into making payments no matter what. Should consumers expect compassion, mercy, or even honesty and plain dealing from such a collector? Absolutely not. Arrogance, condescension, accusation, and flat-out lying are what you can expect.

Again, when you repeat the same lies hundreds of times per week, you start to believe those lies yourself and become very convincing at telling them to the next person on the list. For consumers to successfully negotiate with this type of collector, training and ongoing coaching is required. Collectors like this one are actually quite easy to handle when you know the ground rules, understand how the collection process actually works, and have some training on how to respond to these tactics. That’s what I do here at ZipDebt. I arm consumers with the tool kit needed to successfully negotiate settlements with original creditors, collection agencies, collection law firms, and debt purchasers.

It’s pretty funny, actually. Whenever I post the results achieved by ZipDebt clients proving that DIY debt settlement is a far more effective solution than hiring a debt settlement company, I’ve been attacked by people working inside the debt settlement industry. I’ve been accused of helping people “game the system,” and told my results were “too good to be true.” Based on the comments posted by Mr. Debt Collection Manager, it seems debt collectors don’t believe me either. I’m fine with that though. If they are mad at me too, I take it as a good sign that what I do works very well for consumers. 🙂

DIY Debt Settlement Myth #5: I’ll Be Protected Against Lawsuits If I Enroll With A Debt Settlement Company

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This is the fifth in a series of posts discussing the most common myths about do-it-yourself debt settlement. As consumers shop for a debt relief solution and talk with the sales reps at various debt settlement firms, one of the first questions they will usually ask is, “What about creditor lawsuits? Won’t they just sue me to recover what I owe?”

There’s no question that taking the path of private debt negotiation carries some risk of legal action. In general, the longer you take to settle your delinquent accounts, the greater the risk being sued meanwhile. (This is a key reason why we always encourage our clients to negotiate all their settlements as quickly as possible.)

However, the responses you get will vary depending on how ethical the company is in terms of key disclosures. Sales reps for debt settlement firms are always trying to find creative ways to deal with this key objection, so they can “close the sale.” Before the FTC stepped in and amended the Telemarketing Sales Rule to restrict debt settlement companies from misrepresenting their services, we used to hear a lot of outright falsehoods, such as, “They can’t sue you while you’re in our program,” or, “Don’t worry, we won’t let that happen to you.”

[NOTE: For the purpose of this article, I am ignoring the so-called “attorney model” debt settlement firms, where supposedly an attorney is assigned to monitor your file and help with any legal situations. I will discuss attorney-based companies separately in a later post in this series.]

Nowadays, after the rule change and a series of enforcement actions, we hear less of this blatant lying than before. However, sales reps working for traditional debt settlement companies still tend to downplay the risk of legal action. Further, many of the companies that generate “leads” for the debt settlement industry use mailers or online ads that give the impression that consumers are “applying” for enrollment in a formal program, either a government sponsored program or one the banks fully recognize.

Without actually saying so in plain English, these companies are trying to create the impression that a consumer who enrolls with their program will somehow be protected from aggressive collection practices. Yet time and time again, we hear consumer complaints along these lines: “I signed up with this company to settle my debts for me. One of my creditors sued and they did nothing about it. Now I have a judgment against me and had to file bankruptcy anyway, but the debt company refused to refund my money.”

There are two reasons why consumers frequently get sued by their creditors even when enrolled in a traditional debt settlement program. First, as I discussed in the previous post in this series, the banks do not actually recognize the need for third-party debt settlement. We have testimony to that effect by bank representatives during the FTC hearings on the industry. So there is no formal enrollment taking place, and therefore no procedure that will cause the bank to suspend its normal collection activity, which may include litigation.

Second, and perhaps more importantly, involvement with a debt settlement company can actually INCREASE the risk for legal action. I refer to this as the “footprint” problem of debt settlement. A negotiator cannot talk to your creditors on your behalf unless you first grant them a Power-of-Attorney. Yet once that Power-of-Attorney is received by the creditor, the account is flagged as a third-party settlement account, and the normal collection process is short-circuited. Rather than helping, the negotiator’s involvement actually hurts the consumer by accelerating the placement of their accounts to legal status, when otherwise it might have not happened (or taken much longer to develop).

Myth busted. As demonstrated by numerous complaints filed by consumers, as well as many enforcement actions by the FTC and Attorneys General for various states, enrollment in a debt settlement program does NOTHING to decrease the risk of litigation faced by consumers who are delinquent on their credit card debts. In fact, due to the “footprint” problem of debt settlement, the involvement of a debt settlement firm may actually INCREASE the risk of lawsuits and also accelerate the timeframe in which they occur.

Debt Settlement Letters – Myths & Misunderstandings Galore!

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In my 14 years as a debt settlement professional, I’ve reviewed thousands upon thousands of debt settlement letters. Last year alone we had about 1,200 of them to review and approve on behalf of our clients. If there is one subject I know well, it’s how to document a settlement! There is nothing especially difficult about it, but I continue to be astonished at the amazing amount of bad information floating around on the Internet about this subject. In this blog post, I will set the record straight. If you want advice on how to protect yourself during a settlement transaction, you’ve come to the right place.

A word to the wise: You can either listen to someone like me, who reviews settlements on a DAILY basis, or make your decision based on some discussion forum where amateurs rule the day and the occasional “expert” weighs in with his or her opinion. I have seen cases where the exact opposite of the correct advice was given by so-called experts. So ignore my advice at your own risk!

1. NO LETTER, NO DEAL, NO EXCEPTIONS – EVER!

I have only one unbreakable rule for this game we call debt settlement. No letter, no deal, no exceptions, ever! In the course of negotiating settlements, you will sometimes run into lazy or misinformed debt collectors who refuse to grant a proper letter. They may use a variety of excuses, such as “There isn’t time and we need to get this handled today,” or my personal favorite: “This is a recorded line, sir. It’s all on tape, so you won’t need a letter from us.” This, quite frankly, is nonsense. If there were a problem later, how would you ever obtain a copy of that recording? You’d have to file a lawsuit against your creditor and obtain it through the discovery process. Good luck with that approach! It can be a real heartbreaker to think you have a good settlement, only to have the creditor take your lump-sum and treat it as a regular payment on the full balance and later deny ever having approved a settlement. Without a proper agreement letter, that is precisely the risk you take. The good news, however, is that getting a settlement letter is easy enough to accomplish.

The most important point to bear in mind here is that a settlement is a CHANGE IN CONTRACT between you and your creditor. The creditor’s own agreement language (i.e., the fine print on your credit card application) will always insist that any change to the agreement must be approved by the creditor and put in WRITING. So when necessary, you can apply some verbal ju-jitsu and use the creditor’s own policy to get what you need. When verbal agreement has been reached but the collector is balking at sending a letter, take this approach:

YOU: “If I accept this settlement it will modify the terms of my contractual agreement with XYZ Bank, correct?”

REP: “Yes.”

YOU: “Well, doesn’t the fine print in your original agreement state that any changes must be made in writing?”

REP: “Um, uh, let me get my supervisor for you.”

Escalate politely if necessary, but stick to your guns all the way up the food chain. If you don’t have a proper settlement letter, then it’s your word against theirs and you should not fund the settlement, period. By following this simple rule, you will save yourself a lot of grief.

2. FAX COPIES ARE FINE

The majority of settlement letters are forwarded via fax, and this is totally fine for the purpose of documenting the transaction. The creditor may or may not follow with a hard copy by post, but the fax copies have stood the test of time and consumers have been able to safely rely on this method for years. I cannot think of a single instance where a settlement was later disputed by a creditor when the only issue was documentation via facsimile rather than hard copy.

3. YOU WANT IT ON THEIR LETTERHEAD, NOT YOURS!

In the past decade-plus, I have overseen more than 10,000 settlements. In ALL cases without exception the agreement was documented on the LETTERHEAD of the CREDITOR, collection agency, or collection attorney representing said creditor, and NEVER on the consumer’s own letterhead. This is the correct method for the consumer handling their own negotiations, and it’s also the method employed by virtually all professional negotiation firms. Only inexperienced negotiators use the method of trying to get creditors to sign self-generated settlement letters.

There are books, e-books, websites, and a number of online “coaching” programs (aka inexperienced people trying unsuccessfully to copy what I do at ZipDebt) that claim you should mail a stream of offer letters to your creditors. This is a BAD IDEA! I don’t care if there are a few examples here and there where a creditor did agree to sign an offer letter as proposed by the client. The problem is that 99% of the time this method will FAIL. The reason is that all the major credit card banks have existing template language for documenting their settlements. The language has been pre-approved by the creditor’s legal staff. So you’re not going to get a manager at one of these banks to sign your stupid settlement letter and agree to your terms! And by insisting on doing it this way, you’ll be potentially costing yourself good settlements.

The correct technique is to verbally negotiate your settlement by telephone, and then to request a proper settlement letter be faxed to you before you present payment.

Aside from the reality that bank executives won’t sign off on your settlement letter, another reason I am opposed to working it the other way is the FOOTPRINT problem associated with any letter writing campaign. If you are using some type of “settlement system” that you purchased, think about how creditors will react when they start receiving the exact same letter over and over again from lots of different consumers. Their computer systems will catch on to this quickly, and before long, these letters will be classified as THIRD-PARTY generated. That is the kiss of death for a good settlement. Once the bank realizes you are using a system – a system that they are very much NOT in favor of! – then you can expect your account to be flagged for a different track of collections than the usual one. I’ve even seen this approach trigger early lawsuits or arbitration filings by the creditor.

Let me put it this way: Sending a series of pre-formatted settlement offer letters to your creditors is like repeatedly whacking a sleeping rhinoceros on the top of the head. Sooner or later the beast is going to wake up and have you for breakfast!

4. ANATOMY of a GOOD DEBT SETTLEMENT LETTER

Here is a simple checklist on what a proper debt settlement letter must include:

• The letter must be on the bank or agency’s letterhead
• The letter must be dated
• Your account number should be clearly identified (it’s fine if they only show the last 4 digits)
• The transaction must be described as a “settlement” or “settlement in full”
• Amount of settlement payment is stated correctly
• Payment due date(s) are stated clearly and correctly
• Individual payments sum correctly to the total amount to be paid on the settlement

Notice what this list does NOT include. It does not include a requirement for a physical signature. Surprised? Don’t be. About 99% of settlement letters don’t get physically signed. Trust me on this. It’s ok. Just like I have never seen a single settlement go sour because the creditor sent the letter by fax, I’ve also never seen a settlement go bad because the letter lacked a physical signature.

Guess what else is missing from this list? You’ll notice that there is nothing about how the settlement gets reported to your credit report. Why? Because it doesn’t matter. You can argue until you are blue in the face, and you’ll never get a creditor to alter the language by which it reports settlements, nor should you care in the first place. All settlements get reported as “settled for less than full balance,” or words to that effect, and they carry the same credit score code no matter what words are used. If it doesn’t get reported correctly, you can dispute the entry later on with the three major credit bureaus. But you can forget trying to have your creditor forgive 50% or more of your debt and also help you clean up your credit at the same time! It simply doesn’t work that way, and many an amateur has blown a perfectly good settlement over this point. Negotiate your settlements, THEN worry about your credit!

If you need professional advice on documenting your settlements, steer clear of the myths and misunderstandings you’ll find online, and give us a call at 866-515-2360. What we do is not based on theory, but rather on what has WORKED and has proven EFFECTIVE for thousands of clients in resolving problem debt.

NEW! DOCUMENT REVIEW SERVICE
Update: October 31, 2013


ZipDebt now offers document review for settlement letters and collection letters or notices. Have your document reviewed by Charles Phelan for a one-time low fee of $100. One business-day turnaround. Click here for more information or to order document review.