Debt Collection Litigation Breeds Fear and Paralysis Among Consumers

    
    Access to Pre-Paid Legal Services Counsel Offers a Solution




    
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<p>ADA, Okla., <span class="xn-chron">Dec. 9, 2010</span> /CNW/ -- 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 <span class="xn-location">Canada</span> are focusing on this industry issue.</p>
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<p>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.</p>
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    Repairing the System

    
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<p>In its <span class="xn-chron">July 2010</span> report, "Repairing a Broken System," the U.S. Federal Trade Commission said, "The system for resolving disputes about consumer debts is broken."</p>
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<p>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.</p>
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<p>In its <span class="xn-chron">July 2010</span> 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."</p>
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<p>"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.</p>
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    PPD Provider Attorney Perspectives

    
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<p><span class="xn-person">Jeff Lippman</span>, an attorney with Weinstock, Friedman & Friedman, P.A. (<a href="http://www.weinstocklegal.com">www.weinstocklegal.com</a>), PPD's independent provider law firm for Maryland and Washington, D.C., believes the problems for consumers are three fold: fear, ignorance and inaction.</p>
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<p>"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.</p>
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<p>Michael Fiffik, an attorney with Welch, Gold & Siegel, P.C. (<a href="http://www.wgspc.com">www.wgspc.com</a>), PPD's provider law firm for Pennsylvania, believes this approach to collections highlights the weaknesses in this aspect of the justice system.</p>
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<p>"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.</p>
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<p>Evans, Lowenstein, Shimanovsky & Moscardini, Ltd. (<a href="http://www.elsm.com">www.elsm.com</a>) Attorney <span class="xn-person">David Bloom</span> - 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."</p>
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<p>According to Bloom, "In many cases, it's simply a question of knowing the language and procedures involved in such litigation.</p>
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<p>"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.</p>
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<p>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.</p>
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<p>Given these numbers and the aggressive methods now being used particularly among debt buyers, <span class="xn-person">Chairman Stonecipher</span> offers some simple, practical advice.</p>
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<p>"Talk to your attorney before you talk to theirs, and if you don't have one, Pre-Paid Legal Services can help," he said.</p>
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<p>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.</p>
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<p>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 <span class="xn-location">Canada</span>, 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 <a href="http://www.prepaidlegal.com">http://www.prepaidlegal.com</a>.</p>
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<p>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 <span class="xn-chron">June 30, 2010</span> 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.</p>
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For further information: George Snyder, PR Director of Pre-Paid Legal Services, Inc., [phone], cell, [phone], [email protected] Web Site: http://www.prepaidlegal.com http://www.weinstocklegal.com http://www.wgspc.com http://www.elsm.com