After seeing how they treat the thousands of consumers who have hit hard times and contacted us, I’ll always be skeptical about giving them more power. ”
Chicago, IL (PRWEB) September 13, 2010
After investigating the debt settlement industry for over a year, the FTC chose recently to adopt new rules and perhaps most controversially, an up-front fee ban for debt relief programs. By doing so, debt settlement companies will be forced to only receive fees upon the successful resolution of their clients’ accounts. Franklin Debt Relief, a leading debt settlement company, has come out in support of much of the new rule, but expressed clear concern over the impact an up-front fee ban will have on the future of the debt settlement industry.
“Allowing creditors to determine when and how much debt settlement companies are paid will disturb the balance of power and alignment of interests in negotiations,” says Franklin CEO, Robert Zangrilli. “The nature of the relationship between banks and debt settlement companies will always be adversarial no matter how you look at it or how companies charge fees, but by tying fees into the savings realized by consumers, you’re allowing debt settlement’s biggest opponent to determine their income.”
Franklin Debt Relief intends to comply with the new rules for debt relief services, and in fact, estimates that their revenues will increase by moving to a contingency fee model. Statistics from the company last month show their average settlement was 33% of the original balance, which would result in a fee of nearly 17% of the original balance if they were charging their clients a fee of 25% of the savings realized. Currently the industry average fee is 15% of the debt a consumer owes upon enrollment into a debt settlement plan.
“We know we deliver results and that we can continue to be profitable under a contingency fee model. The bad companies on thse other hand will go out of business, as will some of our smaller competitors. We’re definitely excited about the opportunities this will open up for us,” Zangrilli adds. “The scary part of this is the control it gives to banks over the debt relief industry. After seeing how they treat the thousands of consumers with credit card debt who have hit hard times and contacted us, I’ll always be skeptical about giving them more power.”