ADA, Okla., Dec. 9, 2010 /PRNewswire/ -- Recently, national
news media have begun to focus new light on the alarming
irregularities in the U.S. debt collection industry and the
widespread use of litigation as a debt collection tool. Pre-Paid
Legal Services, Inc. (NYSE: PPD) and its 38 independent provider
law firms from markets throughout the U.S. and four provinces of
Canada are focusing on this
industry issue.
During the first half of 2010, Pre-Paid Legal Services
independent provider law firms responded to more than 79,000 legal
service requests from PPD members (customers) related to collection
issues, or seven percent of the 1.1 million requests during the
six-month period.
Repairing the System
In its July 2010 report,
"Repairing a Broken System," the U.S. Federal Trade Commission
said, "The system for resolving disputes about consumer debts is
broken."
While at one time, the telephone was the primary tool utilized
by collection agencies, major industry debt buyers -- using
data-driven debt processing tools -- are now focusing on litigation
and the justice system as means of collecting debts. Using this
systemic process, the corporate debt buyers may skip some consumer
communication and proceed directly to litigation.
In its July 2010 report, "The Debt
Machine," the National Consumer Law Center, a consumer advocacy
organization, said, "Lenders, debt buyers and other creditors have
learned how to use small claims and other low-level courts as a
low-cost machine for turning claims into judgments against
consumers who have fallen behind on payments."
"This approach is flawed because it taxes the court system with
an over abundance of collection suits and because it's often
utilized as a 'scare tactic' against consumers," said Harland C. Stonecipher, founder and Chairman of
the Board of Pre-Paid Legal Services, Inc.
PPD Provider Attorney Perspectives
Jeff Lippman, an attorney with
Weinstock, Friedman & Friedman, P.A. (www.weinstocklegal.com),
PPD's independent provider law firm for Maryland and Washington, D.C., believes the problems for
consumers are three fold: fear, ignorance and inaction.
"People get nervous when they receive a collection letter. This
can quickly turn to fear when they are confronted with the prospect
of a lawsuit. This may lead to paralysis and inaction," he said.
"If they would only face the problem, armed with the right
information and assistance, they would have a much better chance of
resolving or challenging the issue," Lippman said.
Michael Fiffik, an attorney with
Welch, Gold & Siegel, P.C.
(www.wgspc.com), PPD's provider law firm for Pennsylvania, believes this approach to
collections highlights the weaknesses in this aspect of the justice
system.
"Neither the consumer nor the collection agency are properly
served by this approach. Poorly gathered collection data from the
collection agencies and uninformed, under represented consumers
equals a recipe for injustice," Fiffik said. "It's garbage in and
garbage out. This is not justice under the law," he said.
Evans, Lowenstein, Shimanovsky & Moscardini, Ltd.
(www.elsm.com) Attorney David Bloom
– the PPD provider law firm for Illinois -- has said, "Creditors have a right
to collect the debts that are owed to them, but they should not be
able to garnish wages or take other such actions unless they can
absolutely prove that the debt is owed."
According to Bloom, "In many cases, it's simply a question of
knowing the language and procedures involved in such
litigation.
"One PPD member contacted our office about a debt he didn't
think he owed. Under his Pre-Paid Legal Service plan, we drafted a
letter to the attorney for the collection firm requesting proof of
the debt. They couldn't produce these documents and therefore they
dropped the legal action," Bloom said. "In all too many instances,
these debt buyers and their legal counsel are counting on
uninformed consumers to simply pay up whether the debt is authentic
or not," he said.
In 2009, the Federal Trade Commission received an estimated
88,200 consumer complaints about third-party debt collectors, and
coupled with in-house debt collector complaints, this totals an
estimated one out of five complaints to the FTC about this
industry.
Given these numbers and the aggressive methods now being used
particularly among debt buyers, Chairman Stonecipher offers some
simple, practical advice.
"Talk to your attorney before you talk to theirs, and if you
don't have one, Pre-Paid Legal Services can help," he said.
About PPD Provider Law Firm Network System -- PPD
maintains a rigorous monitoring system and conducts surveys which
provide feedback on the customer service experience of PPD members
with the provider law firms. This is one of the distinguishing
characteristics of PPD's "Provider Law Firm Network System." The
average tenure for provider law firms in the PPD network is more
than 12 years.
About PPD -- We believe our products are one of a kind,
life events legal service plans. Our plans provide for legal
service benefits provided through a network of independent law
firms across the U.S. and Canada,
and include unlimited attorney consultation, will preparation,
traffic violation defense, automobile-related criminal charges
defense, letter writing, document preparation and review and a
general trial defense benefit. We have an identity theft
restoration product we think is also one of a kind due to the
combination of our identity theft restoration partner and our
provider law firms. More information about us and our products can
be found at our homepage at http://www.prepaidlegal.com.
Forward-Looking Statements -- Statements in this press
release, other than purely historical information, regarding our
future plans and objectives and expected operating results,
dividends and share repurchases and statements of the assumptions
underlying such statements, constitute forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of
1934. The forward-looking statements contained herein are based on
certain assumptions that may not be correct. They are subject to
risks and uncertainties incident to our business that could cause
actual results to differ materially from those described in the
forward-looking statements. These risks and uncertainties are
described in the reports and statements filed by us with the
Securities and Exchange Commission, including (among others) those
listed in our Form 10-K, Form 10-Q and Form 8-K, and include the
risks that our membership persistency or renewal rates may decline,
that we may not be able to continue to grow our memberships and
earnings, that we are dependent on the continued active
participation of our principal executive officer, that pending or
future litigation may have a material adverse effect on us if
resolved unfavorably to us, that we may have compromises of our
information security, that consumer purchases of discretionary
items may be impacted by a downturn in the economy, that we could
be adversely affected by regulatory developments, that competition
could adversely affect us, that we are substantially dependent on
our marketing force, that our stock price may be affected by short
sellers, that we have been unable to increase our employee group
membership sales, that our active premium in force is not
indicative of future revenue as a result of changes in active
memberships from cancellations and additional membership sales and
that we have repurchased more than half of our outstanding shares.
Please refer to pages 16 through 19 of our 2009 Form 10-K and pages
7 and 8 of our June 30, 2010 Form
10-Q for a more complete description of these risks. We undertake
no duty to update any of the forward-looking statements in this
release.
SOURCE Pre-Paid Legal Services, Inc.