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Review 7/15/2010
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THE TRUTH ABOUT MORGAN DREXEN AND DEBT SETTLEMENT COMPANIES
I am a former employee for MORGAN DREXEN (MD) and the reason for writing this post is to warn people against this misleading and cheating company. Please understand that MD and other “debt settlement” companies are only the middleman between you and real debt settlement attorneys. What they do is gather “clients” for a group of attorneys and get a commission for doing so. Here is a breakdown of the company and how it works:
After signing up each client is assigned a “Client Coordinator” (whom you´ll never speak to unless you want to cancel) because we are trained to tell you that they are away, on another call or any other excuse. This “client coordinator” is nothing but a contact between you and your assigned attorney, they have no real legal power. PLEASE UNDERSTAND THAT YOU ARE A CLIENT OF AN ATTORNEY, NOT MORGAN DREXEN. All MD does is paralegal work for the attorneys. They make their money from you for doing basically nothing. Once you sign up they will assign you an attorney and will send an “AUTHORZATION TO NEGOTIATE LETTER” to your debtors which basically states you are being represented by so and so attorney to negotiate on your debts. These are some of the law firms MD works with:
Willamson lawfirm, Levinsohn Consumer attorneys, Howard Nassiri.
PRACTICES
MD´s call center is located in BOLIVIA (South America) this is where I worked and served as a customer service agent. So mind you, ALL YOUR INFORMATION, including Social Security number, credit card numbers, bank accounts, medical information is readily available for foreigners to see and use, although the integrity of the agents (my co workers) is unquestionable and you would have nothing to worry about. All we would actually do is screen clients by asking them all their information and password so we could transfer clients to the right department. So we were basically screeners and nothing else but still had access to all your documents which are scanned an uploaded. When you sign up they fail to fully explain how the program works, they lead you to believe that MD will start negotiating right away and that calls from creditors will stop, They will get you to sign up really quick and charge you $100 right away before you get a chance to get the Welcome Kit and read the DISCLOSURE STATEMENT.
When you sign up they will calculate a monthly payment amount based on how much you can afford and how much your total debt is altogether. So let´s say you enroll 4 credit cards (CC) and the total amount of your debt is $12, 000 and this amount is divided like this CC#1: $1,000 CC#2: $2,000 CC#3: $3,000 and CC#4: $6,000. Now let´s say your assigned “enrollment fee” (or attorney fees that you have to pay FIRST when you enroll) is $1,500. Now let´s say all you can afford to pay monthly is $200. That monthly payment amount will not change during the course of your enrollment but now let´s apply it to real life. Keep in mind that out of those $200 you have to subtract the $50 “maintenance fee” that MD charges for doing nothing so in theory all you will be paying towards the enrollment fee is $150. So after doing the math it will take you 10 MONTHS (almost a year) just to pay off the enrollment fee and in the mean time your accounts will accrue LATE FEES AND ridiculously HIGH INTEREST all while your credit rating is ruined. That could double the amount you owe in the first place. And the larger the amount of the debt, the bigger it will snowball into. We were instructed to tell clients not to worry about it because we would settle those accounts for about 40% and you would not pay all the interest and fees. LIE! (Although some credit cards do, not all of them settle for 25%, 30% or 40%. Some credit cards will not take less than 80% of what you owe).
Okay, so now you´ve paid off the enrollment fee. Now your monthly payment is going towards what MD calls a “Trust Account” which is basically like a savings account. MD usually tries to settle the smallest account first so that they look like they are getting things done. So from our example, they will try to settle CC#1 which at the beginning was $1,000 and let´s say after 10 months of not paying it turned to $1,500 with late fees and higher interest. In order for MD to send a settlement offer they need about 30% of what you owe. So from our example they would need about 30% of $1,500 (current balance of CC#1) which would come up to about $450. So based on your monthly payment of $150 it would take you 3 more months to come up with $450 to make the first settlement offer. So it would basically take you 13 MONTHS (more than a year) to pay off a $1,000 debt. But that is not it, so CC#1 which was $1,500 was settled for $450, so in theory MD saved you $1,050 ($1,500- $450) now you have to pay the 25% settlement fee first before they move on to the next account which for this account would be $262 (25% of $1,050 or amount saved). Now DID YOU REALLY SAVE ANY MONEY?? You ended up paying $450+$262=$712 out of a $1,000 so you saved a miserable $288 right? WRONG!! What about 13 months of maintenance fees?? $50x13=$650. And this is ONLY for the first account!! Imagine the remaining three accounts which are much higher. Imagine what CC#4 ($6,000) will turn into by the time MD tries to “settle” it. How much will you have paid in monthly fees and god forbid you have to go to court for it and have to pay extra legal and court fees.
FURTHER BREAKDOWN OF FEES
In the case your assigned attorney reaches a settlement with your creditor, MD gets a 25% commission or “settlement fee” from the money they saved you (for instance if you owe $10,000 and they settled that debt for $4,000 MD charges you 25% of the $6,000 you “saved”) so basically they are keeping or charging you $1,5000 for DOING NOTHING.
These are the fees that MD charges “clients” and don´t tell you at the time they sign up:
A $900 “enrollment fee,” (also called engagement or attorney fees) which is usually more than that based on how much you owe. This fee has to be paid FRIST before ANYTHING gets done.
A $50 “maintenance fee” that comes out of a client´s monthly payment that is supposedly used for faxes and postage costs. So, for example, if a client´s monthly payment is $150, out of that amount MD keeps $50 again for doing NOTHING and the rest goes towards paying the “enrollment fee” which they claim is the attorney fees.
As for legal help, don´t expect that the attorneys will be available to answer all of you questions. Unless you receive a SUMMONS you will NEVER even speak to the attorney assigned to you. You will have a legal appointment over the phone about once or twice but if your case goes to court MD will send you a LIMITED SCOPE letter which is kind of like a menu at a restaurant with all the costs for additional legal help. These charges range from $45 for a phone consultation with a local attorney up to $100 for other legal services. So don´t expect that the attorney will be there to help you right away, they have hundreds of clients and in the case you are served with a summons they will only have you fill out a document for ANSWERS that you have to deliver YOURSELF to the court.
There are numerous other fees for late payments, check handling and moving payment dates around.
From the moment we are hired we are trained to mislead “clients” by telling them to STOP paying their debts, not to answer any calls from creditors, and not to worry about any threats because they are “scare tactics” designed to scare clients and get them to pay their debts. If your debt is delinquent it will get sold to a collection agency, if the collection agency is unable to collect it will be assigned to an attorney who will most likely serve you with a SUMMONS and SUE you for the amount owe. This is serious. That is why I was appalled and felt horribly about telling clients “not to worry about it” and that it was only “scare tactics.” If there is no money in your trust account there is practically nothing that can be done.
What infuriated me the most is the thousands of elderly Americans that barely survive on Social Security and are being CHEATED by this company. These are people who are sick dealing with cancer and other illnesses and were still worried about not missing a payment. These are hard working, honest people who want to do the right thing and pay their debts and they are not aware that this company is taking their money and actually doing more harm than good and are scared to death when they are served with a SUMMONS to appear in court. I would not want anybody doing this to my parents or grandparents, some calls were heartbreaking and I would ask people to cancel out of the program.
The most devastating effect of dealing with companies like MD is once you stop paying creditors they will obviously call you and send letters because they want to get paid. By failing to make payments your CREDIT RATING will be severely affected and will stay there for 7 YEARS!! We were trained to tell customers or clients (you) that once debts were “settled” that their credit rating would improve right away. Depending on the delinquent status of the debt (how long it is past due) clients would start getting letters and calls from attorneys which we were instructed to tell clients to fax to MD right away so that “the client´s attorney can take care of it right away” All MD would do is notify the creditor´s attorney that they were enrolled in the program and sent them a copy of the Authorization to negotiate letter. If you were just starting the program it would take you at least a year before any settlement offers were sent out.
In conclusion you DO NOT NEED debt settlement companies. You can go DIRECTLY to any attorney specialized in consumer debt and not pay unnecessary fees that will only enrich cheating individuals that prey on the desperation of people. They are only middlemen who get a commission based on getting clients for the attorneys they work with. We were basically paid to tell client LIES while their credit was ruined. It may have worked for some people who were able to afford large monthly payments and start settling accounts right away (while still paying unnecessary fees anyways) but for the average client it took an average of three years to graduate the program. Bottom line is you can do it yourself. Call your credit card and try to negotiate yourself by showing hardship documents (medical expenses, etc) if they don´t want to work with you then try to find a local attorney DIRECTLY who will help you. Not all creditors will settle and if they do, it will vary greatly how much they´d be willing to settle for. It depends on how much income you make, assets you own, hardships you are going through like medical expenses and unemployment and many other factors.
PLEASE keep in mind that I am in no position to give ANY LEGAL ADVISE and everything I have shared in this post is based on my experience from working for Morgan Drexen as a customer service agent in BOLIVIA and my disgust at their business practices. I hope this has helped in some way to answer your questions. Please watch the report below on the TODAY show from the BBB website and read the article for further insight.
http://www.bbb.org/us/article/bbb-talks-debt-settlement-on-the-today-show-20670
http://specials.msn.com/A-List/Jailed-for-debt.aspx?cp-documentid=24753001&imageindex=1&cp-searchtext=jailed%20for%20debt&FORM=MSNIIT
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