Debt Collection Litigation Breeds Fear and Paralysis Among Consumers
December 09 2010 - 7:01AM
PR Newswire (Canada)
ADA, Okla., Dec. 9, 2010 /CNW/ -- Access to Pre-Paid Legal Services
Counsel Offers a Solution 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. George Snyder, PR
Director of Pre-Paid Legal Services, Inc., +1-580-421-6339, cell,
+1-580-310-4067, georgesnyder@pplsi.com Web Site:
http://www.prepaidlegal.com http://www.weinstocklegal.com
http://www.wgspc.com http://www.elsm.com
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