Collection Execs Start Debt Settlement Firm to Work with ARM Industry

The growing industry of consumer debt settlement got a new participant early this year when two former collection executives struck out on their own to create a company that helps consumers settle debts and also helps credit issuers, debt buyers and collectors recovery more money owed.

Rick Wittwer and Carmine Dorio, former senior collection executives at Washington Mutual, launched CreditAssist Financial Services in January. The Euless, Texas-based company’s stated goal is to help consumers settle debts with creditors and debt buyers. But Wittwer, the company’s CEO, said the firm is not forgetting about the ARM industry.

“Getting paid is the most important thing to a collector,” Wittwer told insideARM. He believes his firm can facilitate payment far easier than other debt settlement firms.

“Consumers feel more comfortable working with a third party rather than with a debt buyer or collector,” he said. “We can get payments on accounts that have been troublesome to collectors.”

The company works much like other debt settlement firms: a consumer with multiple delinquent accounts signs up for a program with CreditAssist, and it works with creditors and debt buyers to negotiate a settlement amount. But Wittwer said that CreditAssist will employ a more proactive approach in working with creditors, debt buyers and collectors.

The goal is to launch programs for collectors that will prompt agents to actively refer their debtors to CreditAssist during a collection call, something that is not done in the industry, according to Wittwer. The programs could take the form of non-cash incentives, like lunches or other prizes, said Wittwer.

Right now, the company is using a letter referral program. Collectors insert language in the dunning letters they send referring debtors to a toll-free number or a co-branded web site operated by CreditAssist. If the consumer uses CreditAssist and pays the agency, the collector will get paid and CreditAssist receives a fee from the consumer that is typically 50 percent lower than other debt settlement companies.

The fees debt settlement companies charge to consumers were one of the primary drivers in Wittwer’s decision to open his new firm. “During our investigation of the industry, we found that these debt settlement companies were charging exorbitant up-front rates to the consumer,” he said. Wittwer said his company charges “fair” prices to consumers, around 7 percent of the total balance of debt enrolled in the program compared to the 15 percent debt settlement industry average.

CreditAssist is able to offer lower fees to consumers because the company is “plugged in,” according to co-founder Carmine Dorio. “We operate our own call centers and have core competencies in that area,” said Dorio, “so we are much more operationally efficient.”

Wittwer said that the ARM industry has been generally positive in its response to the firm. “We’ve gotten a little pushback from some, but for the most part people understand what we’re trying to do and the benefits to the industry,” he said.

So far, the company has partnered with six large national collection agencies and four debt buyers. And despite minimal direct-to-consumer marketing, the program has already enrolled nearly 500 consumers.