Not long ago I met with a debt counsellor and he asked if he could introduce his clients to me. He charges his clients a fee ranging between 5% and 10% of their unsecured debts and for that fee introduces them to a Licensed Insolvency Trustee and assists them through the bankruptcy or creditor proposal process. In a bankruptcy, he might help complete the monthly reports a bankrupt must file, and for proposals to creditors, well... because of the structure of proposals there would presumably be no need for any assistance.
He claims that because of his culture he can attract clients of that same culture and give them the confidence they need to address their financial problems. But it doesn't have to be a cultural link, he might be able to attract his clients because of his age, appearance, colour, religion, standard of life, nationality, or opinions, his perceived trustworthiness, or his charisma. And, you can find these brokers simply because an internet search revealed a promising link that took them to a convincing website where unrealistic promises of debt forgiveness can be made.
This particular fellow asked me about the options for one of his clients who has significant income. I wanted the file because it could produce around $8,500 of fees for me and even a lot more if I could formulate a successful consumer proposal to creditors.
But I won’t take the file.
I asked myself why anyone would be drawn to a billboard website where unrealistic promises of debt reduction are made. These web-based bankruptcy brokers gather your personal information, give it to a Licensed Insolvency Trustee redacted to remove your more personal stuff, and then they ask a bankruptcy trustee for the terms of a possible bankruptcy or proposal filing. Then, these brokers sell that expectation back you, charge their fee, and then refer you to this "friendly" Licensed Insolvency Trustee who, then hesitatingly gets faced with questions such as: "Did I have to deal with those people? Why did I pay them anything? Could I have come to you directly? Why are you even associated with them?" And even - "I have already paid you, he told me my payment was for you."
Dealing with these bankruptcy brokers diminishes the value of our education, skills, license, and professionalism as Licensed Insolvency Trustees. The most highly educated, experienced, licensed, and regulated individuals to help solve debt problems are Licensed Insolvency Trustees and, even better, are trustees holding a professional accounting designation such as CPA, CA, CMA, or CGA.
But trustees don't broadcast that well enough.
I told this fellow he can refer his clients to me only if he is not charging his cleints a fee. It really bothers me that he adds absolutely nothing to the process of helping people out of their jam and is able to charge a fee simply because we trustees do a krappy job informing the public of our skill base.
For many years I received referrals from a debt counsellor. He charged every one of his clients a few hundred dollars and one day he and I parted ways . I knew my revenue stream would be affected, but I began to sleep better and I drank less. I became a nicer person to my family, staff and clients, and I felt better. My yield - my average fee per file - is now much, much higher.
I still get referrals from many people and I want to keep getting them but not these types of referrals. I do not know what we can do as Trustees to get rid of the more unscrupulous bankruptcy brokers but I know my first step is going to be to refuse to accept their referrals.