Honesty Pays Off

As mentioned here Provanta clients must have a financial hardship for us to work with them. When a client is forthcoming and presents us with detailed hardship, it very often pays off well. A client with a particularly serious hardship is always a bonus for negotiating.

For example, a Provanta client was out of work for a extended period of time, due to his donating a kidney to his daughter and living off credit cards. A Provanta negotiator presented his hardship with supporting documentation to a creditor and was able to settle an account that had a current balance of $13,067.00 for $2,456.00 or 18.80%.

The opposite is true of those clients who are not as forthcoming. A client that is less than honest with us at enrollment may see a higher settlement percentage. An example would be a client that has assets they did not tell us about such as real estate, or open lines of credit. Many times the creditor or agent will have access to more information about client, such as a current credit report. It very difficult to negotiate a good settlement for a client when it is discovered on the credit report that they just financed a new Hummer.

(Ref. 1505)

[tagsdebt settlement, financial hardship, debt collector[/tags]

The Most Commonly Asked Question of the Day

“Can I keep a credit card out of the program to be used for minor expenses each month or if there was an emergency?”  The unfortunate, and fortunate answer, is no, you cannot continue to use credit cards while in a debt settlement program if you want to receive favorable results.

The reason why I say the answer is unfortunate is because I understand the comfort of having an emergency credit card handy.  Like most Americans I began using credit cards the day I turned 18 and was set loose on a college campus full of low-interest, introductory credit card offers.  Relying on credit cards for your daily needs and desires is a hard habit to break and like most other vices such as smoking, it is hard to quit cold turkey.  We probably live in one of the most superficial and materialistic times in history and this has been heavily influenced by the credit card companies’ clever marketing message that tells us it’s okay to acheive the American Dream on credit or you can have your cake and eat it too as long as you are willing to pay for that cake 10 years from now because that’s how long it may take you to pay off that credit card bill.  When I realized this, I realized the comfort of using credit cards is not all that comforting after all.

Even though the credit card habit is hard to financially and mentally break, it can be one of the most rewarding and liberating things you can do for yourself.  You are no longer subject the credit card companies’ change in policy, increases in interest rates or minimum payments.  You can plan your life around goals like retirement, a dream house, paying for your child’s college education instead of planning your life around making next month’s minimum credit card payments.   

From a debt negotiation standpoint, we simply cannot help you get out of debt if you continue to use debt.  Our goal is negotiate with your creditors, establish your financial hardship, and work out a settlement arrangement for you.  From our experience, your creditors are likely to review your credit activity during this process.  If they see you are still actively using credit cards they may question your commitment to the program and ask themselves, why should we allow your client to pay us less than she owes, when she is still accummulating debt and paying those creditors in full?   

As for emergencies that may come up during your program, there are often ways to work around those emergencies without relying on credit cards.  Our clients often contact us when they have an unexpected expense and we review their options, review their expenses, and find ways to rearrange their budget.  We will help you through your emergencies as best we can.  So if you have a fear of not being able to use credit cards, think of the thousands of people Provanta has helped in the past 15 years and believe me, if they can get through 2-3 years without credit cards, you can too!  

Transparency

Probably the primary reason in going to a blog format for our corporate website was to demonstrate transparency in those elements of our services that might be of some concern to potential clients. The nature of our services are such that we set about to solve serious problems that some people find themselves in. You may be able to do without many of the goods and services you could buy — or consider buying — because not having those goods and services is not really a problem in your life. But when you can’t sleep at night, or when financial hardships cause friction between spouses, resulting in lots of stress on the kids, then there might be undue motivation to engage the sorts of services we have to offer.

Accordingly, we want to be particularly careful that you’re really, really sure that you want to do this. It’s not a walk in the park. It’s “surgery,” in a sense, and though the light at the end of the tunnel is indeed bright, warm and pleasant, the path to that light is not without risks and unpleasantness. You need to understand that potential, accept it, and commit yourself to doing the best you can to tolerate it. Some people can’t, and we want you to know that.

I could probably write a nice long post about all the aspects of transparency, why it’s good for everyone, and why it’s the future of business. But if I did, it would surely not be as good as Greg Swann’s post on the same topic. Greg is a Phoenix Realtor, a longtime friend and business associate, and he practices transparency against the prevailing tide.

Weekly Settlement Statistics

Total for the week of May 5-11, 2008:

• Total Debt Settled – $67,104
• Total Settlement Amount – $25,975
• Settlement Percentage – 38.7%
• Total Cases Settled – 13

Best Settlement:

• Current Claim – $3,620
• Settlement Amount – $762
• Percentage – 21.1% (negotiated with an original creditor)

Worst Settlement:

• Current Claim – $5,589
• Settlement Amount – $3,912
• Percentage – 70% (negotiated with an original creditor)

As always, gratitude and appreciation is extended to the creditors, collectors and collection lawyers who were instrumental in forgiving $41,129 in debt last week to the benefit of themselves (stop spending good money to maintain a bad position) as well as to the benefit of our clients with financial hardships.

Did You Know All This?

While we at Provanta celebrate and applaud the do-it-yourselfer, it’s a step that ought not be taken lightly without really considering what you need to know in order to set yourself up for success. Let’s consider one aspect of settling your debts, working with debt collectors.

Here’s a post from a lawyer explaining just a bit about the Fair Debt Collection Practices Act (FDCPA), as enforced y the Federal Trade Commission (FTC):

“No, A Debt Collector Can’t Threaten You With a Baseball Bat”

At Provanta, our negotiators know the legal rights of its clients. What’s more, the collection agencies know that Provanta knows, so this in itself tends to protect clients from the worst abuses. Even still, our clients file a significant number of complaints every year on the FTC website.

An Exceptional Offer for Deserving Clients

It’s always great news when we reach a settlement agreement for a client.  It’s even better news when the settlement produces a gross savings of over $16,000 for the client.

These clients are a married couple raising a family and have been in the program about 32 months.  They initially had 10 accounts and owed over $85,000 in credit card debt.  Provanta had already settled 6 of the 10 accounts.   This latest settlement was reached with major credit card company.  The current balance on the account was approximately $23,000 and the creditor was willing to accept a settlement of 30%, just a little over $7,000 and forgive the other $16,000.  Please keep in mind that this is an exceptional settlement, one that does not happen often.  Our average settlements are closer to 40% which is why this is such great news for our clients. 

Though the end result for this client is fantastic, it was a long journey to get to this point.  The creditor had consistenly rejected all of our settlement offers in the past.  At one time, the creditor even sent our client’s account to Arbitration because they did not want to consider settlement as an option.   We persisted with the creditor anyway, maintaining the posture that our clients simply did not have the means to pay the high balance.  We took advantage of every opportunity to remind the creditor that our clients had a financial hardship.  They were renters, they owned no assets and they had been unemployed and without income for 9 months before they finally decided to contact Provanta.  Our clients are not in our program because they thought this would be an easy way to get out of paying their debt.  They’re in our program because financially, it was one of the most effective ways for them to resolve their accounts and still pay the creditors something, albeit a lower settlment.   

Our persistence with this creditor paid off in the end.  Now we just have 3 more accounts to settle before these clients are completely debt free.

(Ref: 1504)

An Unhappy Client’s Story

I was finally able to resolve an an issue with a former client, today.  Although he withdrew from the program extremely unhappy, I am proud to say that I was able address his concerns, offer a solution, and officially end our relationship amicably.

The client had been in the program for about 24 months when he decided to withdraw.  His program was estimated to take 36 months but none of his accounts had yet been settled.  He was understandably upset at the current status and demanded a full refund of all fees he paid to Provanta.

When I first received his withdrawal letter, I was very concerned.  It is highly unusual that we would have not settled any accounts for him in the past two years.  Though Provanta cannot guarantee how long any particular account may take to settle, two years is a long time without any results for a client who has been committed to the program (i.e., he has a perfect settlement savings schedule, followed our advice on how to deal with creditor calls, informed Provanta of all significant changes in his situation, etc).  I was determined to find out happened and whether we could have prevented this situation from occurring.

In my research, I was able to affirm three things:  1) Provanta was dilligent in all efforts to contact his creditors and negotiate possible settlements.  2)  His creditors had offered several settlements to Provanta as a result of our dilligence and hardwork.  3)  The settlement offers made by his creditors were high in our opinon, which is based on our experience with these same credtiors in the past.  The unfortunate conclusion was that his creditors were not ready yet to offer settlements that were uniformly workable for our client.  Instead of just accepting their high settlement offers for the sake of closing an account, Provanta remained determined to settle our client’s portfolio of debt in an equitable and wholly workable way in consideration of all creditors. We believed we would eventually obtain such settlements. However, in spite of signing up for a 36-month estimated program, the client decided to leave early.

In my response to this client, I openly stated that I understood the reasons for his dissatisfaction.  I was just as disappointed as he was at the current status of his accounts and quite frankly, I also would have liked to provide him more results him by this time.  I admitted that his situation was rare because most clients who are on track with their program have at least one, if not more accounts, settled by this time.

Personal feelings aside, however, I had to remind him that Provanta cannot control how long the negotiation process will take on any particular account or for any particular client.  The experiences of our past clients can give us insight as to what other clients may expect but we cannot guarantee that all programs will follow the exact same formula and time frame.  Simply put, we cannot force creditors to settle an account before they are willing to.

This was a difficult situation for me because on the one hand, Provanta had performed all the services according to the client’s Enrollment Agreement.  It is true that we have not settled an account yet, but we cannot produce results for someone who has withdrawn, especially one who has withdrawn before the estimated completion date.  Provanta had fully earned all the fees he had paid.  On the other hand, the client is understandably dissatisfied with his program.  Although he acknowledges that everything I described in the previous paragraph he was still frustrated.  This was not an ideal situation for the client or Provanta.

In the end, I offered a him a small refund of the fees he had paid even though he did not have a valid claim for any refund.  It is not something we do often, and rarely something we do when Provanta has zero obligation to do so, but we did so anyway, simply as a gesture of goodwill.  He agreed with my analysis of the situation and he respectfully accepted the refund.

Confused or Dishonest?

A collection attorney from the state of Florida called Provanta in regards to a delinquent account for one of our clients in another state.  Our negotiator made a calculated offer of around thirty percent of the current claim to settle the debt in full.  The attorney countered at seventy percent, to settle.

Our negotiator asked why he was demanding such a “high amount” to settlement the account, considering the fact that there are other creditors, and it’s our job to find a Pareto optimal solution, of sorts.  The attorney responded, “…because we have filed suit on the account.”  Our negotiator then asked in which state the suit was filed (The negotiator knew the attorney was not licensed to practice law in the same state where the client resided). The attorney replied: “Florida.”

Our negotiator asked the attorney for additional information, such as the docket number and the date the client was served, etc.  At this point the attorney became confused with the questions presented, not being used to being challenged on a common debt collector ruse. Once our negotiator informed the agent that our client doesn’t reside in Florida, the frustrated attorney hung up.

(Ref. 1503)

A Common Creditor and Collector Ruse

Occasionally a client will wish to close one of his credit card accounts that had previously been included in his debt settlement program. When asked for the reason, the client typically informs us that the creditor claims they do not work with companies like Provanta (we can always prove otherwise), but that the creditor is wiling to work something out with the client directly. As a result, the client then wants to try to settle this particular account on his own. 

The collection agent is being less than honest with our mutual client.  In this situation, we must explain that creditors will often do or say almost anything to avoid having to work with companies like Provanta, because they know our goal is to achieve for our clients the lowest possible settlement, and we’re extremely effective at it. And it’s not about simply saving the most money, but rather to get the settlement figures low enough across the board, in order to settle all the accounts in a structured way that’s equitable for all. But collectors, whether part of the original creditor, or an agent, often prefer to work with the client directly, bypassing Provanta, because negotiating with a client who’s a novice to debt negotiation is easier than negotiating with our trained professional representatives who’ve “heard it all a million times.”  The creditor has a better chance of getting more money directly from our client than through our program, resulting in an inequitable result when considering the portfolio as a whole. They’re just trying to jump to the head of the line.  

It’s important that our clients understand that though they have the final say in everything, Provanta is unable to work effectively if the client is undermining our efforts by communicating directly. Moreover, doing so only encourages the creditors to keep calling and pushing, trying to undermine the our client’s confidence in Provanta. It becomes a self-fulfilling prophecy: the creditor or collector refuses to deal with Provanta, because they don’t need to, because they can deal direct. I can’t blame them, but this is a direct effect of the creditor/collector’s ruse, and the client falling for it. By giving their creditors the silent treatment, our clients are sending a message loud and clear: that they are committed to the debt settlement program, and that the fastest way for the creditor to get resolution and some recovery is to work with Provanta. 

Hardship

One of Provanta’s settlement negotiators received a call on a client’s behalf from a collection agency. This was on an account with an original balance of $1,406 in May of 2007 ( a year ago, as of this posting), and this balance — or, really: claim — has since grown to $2,050, an increase of 46%. The agency is now the successor in interest, i.e., they purchased the debt — likely for only a few cents on the dollar based on the 1400-figure.

Our negotiator informed the collector that another collection agency had already and recently accepted a settlement offer on another of the client’s accounts, and that no funds are currently available. This debt buyer adversary was none too please at receiving this information, and thereupon demanded that our client begin making minimum monthly payments. This is something we hear from collectors and creditors on a daily basis, of course. Our task, then, is to get them to understand that all of Provanta’s clients are in our program due to financial hardship and cannot commit to minimum monthly payments — promises they can’t keep — on all their obligations; i.e., settlement is the option they’ve chosen, and typically so over a quick and easy full discharge of all unsecured debt through bankruptcy proceedings.

Our negotiator then explained the client’s hardship to the collector, which is one of a common and typical nature for many of our clients. Many of our clients begin their financial decline through divorce, one or the other typically becoming responsible through court order for debt incurred within the marriage. This particular client owns no real estate, has no liquid assets, and owes in excess of $50,000 in delinquent, unsecured debt.

After the collector ran through the usual gamut of scare tactics, including commencing litigation (cheap threat: equivalent to a debtor threatening bankruptcy right out of the gate), our negotiator calmly explained that it’s going to cost her company far more in time and money to take a single mother of two to court than they will ever get back on a $2K account.

We’ll look to settle this account in the future, once sufficient funds have accumulated to make a non-insulting settlement offer.

(Ref. 1502)

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