Debteye (YC S11) Wants To Be Your (Much Cheaper) Credit Counselor(techcrunch.com)
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Debteye (YC S11) Wants To Be Your (Much Cheaper) Credit Counselor
http://techcrunch.com/2011/07/26/yc-funded-debteye-wants-to-be-your-much-cheaper-credit-counselor/
43 comments
I spent ~4 years working for a UK charity that provided a free debt advice service and I assure you that it's perfectly possible to get free high quality debt advice from somebody who is not going to derive a financial gain from the advice they give you.
The problem you are referring to largely comes from the businesses trying to sell people IVAs etc. Those products are not bad in themselves but they are heavily mis-sold to people who should really be going bankrupt instead.
web forums are sometimes OK for advice but it's a bit iffy in my experience. I wouldn't use a lawyer - very costly and usually a little outside the scope of their regular work.
The problem you are referring to largely comes from the businesses trying to sell people IVAs etc. Those products are not bad in themselves but they are heavily mis-sold to people who should really be going bankrupt instead.
web forums are sometimes OK for advice but it's a bit iffy in my experience. I wouldn't use a lawyer - very costly and usually a little outside the scope of their regular work.
It's great that other countries have legitimate debt counseling services, especially when it's free. Unfortunately from my personal experience (years ago during my school days), I haven't seen a decent US based debt counseling service; even the "non-profits" were slimy. (Maybe things have changed, but since this venture is around; I have my doubts.)
1) They are ridiculously expensive. They base their fees as a percentage of your total debt. Most of these organizations refused to talk to me simply because I had less than $10,000 in credit card debt. To me this was the first sign that the majority of the industry in the US was a scam.
2) One of the key benefits they offer is interest rate and payment renegotiation. I do not believe it was much different from you calling the credit card company yourself and simply asking for it. I know first hand because I asked what rates these companies could offer me and I was able to get that rate or even below with one phone call (to each of my credit card companies). This simple service wouldn't be so horrible and unfair if the fees weren't so exorbitant.
If after they renegotiate the terms of your credit debt, and somehow the credit card company jacks up your rate again (even if you have done nothing wrong in that period): a) they do not monitor your debt, and b) they will not renegotiate the terms. The only thing they really monitor is your payments to their organization. I vaguely remember reading some fine print that they wouldn't be liable for missed payments (their fee and your credit card payments, are billed as one payment to their organization - they pay the credit card companies for you).
3) There were even nastier sketchy organizations that were essentially asking you to default on your unsecured debt. The service they provided was just to redirect your official phone number and address to their office, so you wouldn't have to deal with people harassing you for repayment. On the surface, they only asked for 10% of your debt and they didn't have a minimum limit. However they wanted you to make payments to their company for the full amount of your credit card debt as a 'savings account' that you would get back (minus their 10% fee); which happens only after you paid your total debt amount in full (to them). Honestly I wonder if they would even give your 'savings' if you did pay in full after your credit was completely ruined.
If this company is sincere, I really hope they succeed. That industry desperately needs an honest company.
1) They are ridiculously expensive. They base their fees as a percentage of your total debt. Most of these organizations refused to talk to me simply because I had less than $10,000 in credit card debt. To me this was the first sign that the majority of the industry in the US was a scam.
2) One of the key benefits they offer is interest rate and payment renegotiation. I do not believe it was much different from you calling the credit card company yourself and simply asking for it. I know first hand because I asked what rates these companies could offer me and I was able to get that rate or even below with one phone call (to each of my credit card companies). This simple service wouldn't be so horrible and unfair if the fees weren't so exorbitant.
If after they renegotiate the terms of your credit debt, and somehow the credit card company jacks up your rate again (even if you have done nothing wrong in that period): a) they do not monitor your debt, and b) they will not renegotiate the terms. The only thing they really monitor is your payments to their organization. I vaguely remember reading some fine print that they wouldn't be liable for missed payments (their fee and your credit card payments, are billed as one payment to their organization - they pay the credit card companies for you).
3) There were even nastier sketchy organizations that were essentially asking you to default on your unsecured debt. The service they provided was just to redirect your official phone number and address to their office, so you wouldn't have to deal with people harassing you for repayment. On the surface, they only asked for 10% of your debt and they didn't have a minimum limit. However they wanted you to make payments to their company for the full amount of your credit card debt as a 'savings account' that you would get back (minus their 10% fee); which happens only after you paid your total debt amount in full (to them). Honestly I wonder if they would even give your 'savings' if you did pay in full after your credit was completely ruined.
If this company is sincere, I really hope they succeed. That industry desperately needs an honest company.
Thanks for your reply. I've seen many of the problems you mention in the UK too (except for 3 which is totally evil).
I'm surprised the US doesn't have a charity offering a similar service to what we do in the UK; over here debt advice is a regulated industry and registered advisers work for a wide range of organisations - charities, local authorities etc. A friend of mine even interviewed recently for an gardening club that wanted to hire a debt adviser to help it's members.
With respect to (2) you are totally right. If you phone your bank asking to reduce the size of your payments they will jump at the chance to do it. The reason is simple - reducing payment amounts increases the lifetime of the loan and therefore increases your overall amount of debt.
I'm surprised the US doesn't have a charity offering a similar service to what we do in the UK; over here debt advice is a regulated industry and registered advisers work for a wide range of organisations - charities, local authorities etc. A friend of mine even interviewed recently for an gardening club that wanted to hire a debt adviser to help it's members.
With respect to (2) you are totally right. If you phone your bank asking to reduce the size of your payments they will jump at the chance to do it. The reason is simple - reducing payment amounts increases the lifetime of the loan and therefore increases your overall amount of debt.
well it was also an interest rate reduction as well as a payment amount reduction. I was able to take 6-8 points off from my various creditors at the time.
That's exactly right! in fact credit counseling as it exists today is essentially "client-side" collections. We're essentially trying to change that by 1. recommending behavior modification techniques focused around budgeting and responsible spending, 2. finding current avenues to find savings from creditors and reduce your monthly burden and so you see an immediate benefit and 3. reduce your long-term dependence on credit, at all. In a sense we are compiling the best advice out on the market today and packaging it into an easy to use software and guides you through the process step by step.
Good luck and godspeed.
Completely agree. It made me cringe to read that the founders are already "credit councilors." It's possible that they could have the debtor's interests in mind, but unlikely given the state of that industry.
The best advice I have found is from Dave Ramsey. http://www.daveramsey.com
The best advice I have found is from Dave Ramsey. http://www.daveramsey.com
I would agree with you here, and I hope you will judge us on our product rather than the "state of the industry" One HUGE difference between ourselves and credit counselors is that we don't get any sort of pay out from creditors, our clients are the only ones we have a responsibility to, whereas credit counselors, even non-profits, take what's called a "fair-share" fee from creditors, which is basically a % "donation" based on how much the credit counselor collects. We believe this aligns our incentives a lot closer to our customers!
For what it's worth, businesses that fix incentive alignment problems fall firmly into the "things I want to see more of" category. CarWoo is a good example, I hope you guys blow it out of the park.
Dave Ramsey's books (audiobooks, in my case: I downloaded the Total Money Makeover [ http://www.audible.com/pd?asin=B002UUKIR8 ] with an audible credit when Merlin Mann mentioned [but did not endorse!] Dave by pointing out that he will not accept credit cards for payment on his website since he does not think anyone should have or use a credit card [ever]) are what enabled/motivated me to finally get out of debt and save up enough money to start Falcon Empire.
Apologies for the multiple run-on sentence.
Apologies for the multiple run-on sentence.
Are you speaking from experience or just from watching all the scummy TV commercials and hearing about the related litigation?
So I actually tried the product unlike 99% of commenters here and here is my feedback:
- The custom dropdowns made it more difficult for me to sign up because you can't use keys on the keyboard to jump to different locations in the lists like you can everywhere else.
- The mechanic to change the monthly payment I can afford on the plan you guys laid out for me was horrible. Clicking the arrow repeatedly to change a numeric value? At least having the option to edit it by typing would be nice. I had to click a lot to change the amount from $10,000 (which I initially input) to $300.
- I can't possibly take the plan seriously when one of the cons is "Risk of lawsuit" with no other details.
- Love the general concept. As someone with some debt, this could help me.
- It pulled up my debts FAST after I filled out the initial form. Almost frighteningly fast. I was impressed, then pretty worried that you might be skirting laws and regulations surrounding pulling this type of information. With nothing more than my SSN and basic personal details (address, etc) you handed me very detailed information about my debts on a silver platter. Most companies verify the identity of a user before this step with some kind of an intermediate challenge step.
Keep on keeping on. Cool product idea.
- The custom dropdowns made it more difficult for me to sign up because you can't use keys on the keyboard to jump to different locations in the lists like you can everywhere else.
- The mechanic to change the monthly payment I can afford on the plan you guys laid out for me was horrible. Clicking the arrow repeatedly to change a numeric value? At least having the option to edit it by typing would be nice. I had to click a lot to change the amount from $10,000 (which I initially input) to $300.
- I can't possibly take the plan seriously when one of the cons is "Risk of lawsuit" with no other details.
- Love the general concept. As someone with some debt, this could help me.
- It pulled up my debts FAST after I filled out the initial form. Almost frighteningly fast. I was impressed, then pretty worried that you might be skirting laws and regulations surrounding pulling this type of information. With nothing more than my SSN and basic personal details (address, etc) you handed me very detailed information about my debts on a silver platter. Most companies verify the identity of a user before this step with some kind of an intermediate challenge step.
Keep on keeping on. Cool product idea.
Thanks for the advice, we'll definitely fix a lot of this stuff in the coming releases over the next couple of weeks, keep your eye out! and thanks for giving us a shot.
The identity verification is the Name + Address + SSN match, which is all that's required for presentation of the data that we showed you. If you wanted to see your score or more detailed repayment history information there would be a short identity verification quiz
The identity verification is the Name + Address + SSN match, which is all that's required for presentation of the data that we showed you. If you wanted to see your score or more detailed repayment history information there would be a short identity verification quiz
Hate to be a naysayer, but there is really a negligible amount of money in debt counseling. It's the finance equivalent of shoe repair. Yes, a few small well positioned operations can make a living on it, but no large company is going to bother with that business. Clients are flaky, have no money and like to do chargebacks. Every situation is a bit different, there's a lot of customer service issues and most people who would be low maintenance customers are do-it-yourselfers. Good luck!
Very interesting idea, but doesn't another YC company (ReadyForZero) already do something similar? It sounds like Debteye has more options to negotiate/restructure debt, but I see a lot of overlap here.
YC isn't afraid to invest in companies that do similar things - both ZumoDrive and DropBox were YC companies.
For the record, ZumoDrive didn't do ZumoDrive when they were in YC. They did Versionate, a versioned Wiki.
Your observation does still stand, though.
Your observation does still stand, though.
We target a slightly different market than ReadyForZero, RFZ targets customers who are trying to set up a structured approach to paying off debts on their own, whereas we help guide those customers who may not have the finance resources to be able to pay off on their own.
Right. I use RFZ and I assume only people who are current and can afford making more than minimum payments can take full advantage of RFZ.
Also, it currently focuses on getting rid of Credit Card debt, using a high-interest-first strategy.
And speaking of RFZ, I had to log on to RFZ in order to fill out my cc debts on Debteye[1], whereas on RFZ I just gave them my login information and they "figured" it all out. :D
[1] I even filled in my, shudder, SSN on debteye.
Also, it currently focuses on getting rid of Credit Card debt, using a high-interest-first strategy.
And speaking of RFZ, I had to log on to RFZ in order to fill out my cc debts on Debteye[1], whereas on RFZ I just gave them my login information and they "figured" it all out. :D
[1] I even filled in my, shudder, SSN on debteye.
I went through the process out of curiosity, and I got to a page asking me to enter my bank account information. Huge, huge red flag for someone who doesn't know you from a hole in the wall. Why would I give you my bank account information at this point? Am I already approved? Is this a loan? What happens? When is my first payment?
All of these went through my head before I tried to find a way to cancel my account (couldn't).
I like this idea, but there is simply not enough information about what you're going to do with my financial life. How exactly are you going to help me?
All of these went through my head before I tried to find a way to cancel my account (couldn't).
I like this idea, but there is simply not enough information about what you're going to do with my financial life. How exactly are you going to help me?
Thanks for the advice! we'll definitely add more guidance here. Basically when you reach that step we don't do anything with your information until we've reached out to you and confirmed the plan details and walked you through what the product is. Very valid points about lack of education throughout the registration process.
Gotcha. Also, the minimum payment that I was able to select was about $200 more than my current credit card minimum payments. I also was able to select a "how much I can pay" number that wasn't allowed:
"The payment plan and terms selected are not compatible"
That's what I get after I click "Choose this plan and start". It took me a few times to figure out why I got that error. I had to fiddle with the monthly payment to get it above a number that was "compatible".
"The payment plan and terms selected are not compatible"
That's what I get after I click "Choose this plan and start". It took me a few times to figure out why I got that error. I had to fiddle with the monthly payment to get it above a number that was "compatible".
I'd be curious to know if this service is limited to helping people set up payment plans? I'd be pretty concerned if this is the case - I used to work in this field for a charity providing debt advice in the UK and pretty much rule number #1 is to advise somebody of all of their options, including stuff like bankruptcy.
A service that does not do that is doing a pretty bad job imo. If you have spent any time with people who have debt problems you would know that by the time they seek help they are in a situation whereby (for a large % of cases) bankruptcy or court-ordered payment plans are the only viable option they have. Getting somebody onto a payment plan when they should be going bankrupt is doing them a huge disservice.
I considered some years ago going into this market myself but I could never get past the need for face to face meets with clients. Getting them to accurately provide you with enough information that you can give them proper advice is hard enough in person, let alone online.
In any case, I'll be interested to watch this and see how you guys get along with it. Good luck.
A service that does not do that is doing a pretty bad job imo. If you have spent any time with people who have debt problems you would know that by the time they seek help they are in a situation whereby (for a large % of cases) bankruptcy or court-ordered payment plans are the only viable option they have. Getting somebody onto a payment plan when they should be going bankrupt is doing them a huge disservice.
I considered some years ago going into this market myself but I could never get past the need for face to face meets with clients. Getting them to accurately provide you with enough information that you can give them proper advice is hard enough in person, let alone online.
In any case, I'll be interested to watch this and see how you guys get along with it. Good luck.
djm - This service is not limited to setting up payment plans, and will include education, budgeting, and community. We definitely don't try to push any one method over the other, and will in fact suggest that the customer reaches out for legal aid in certain situations.
Hi, thanks for your reply. It's good to know you're trying to provide a comprehensive service.
I'm still pretty sceptical however because I think you will encounter a lot of cases that are difficult to diagnose just by looking at a persons data.
For example, the first ever case I dealt with was an autistic lady who had been scammed into buying broadband when she didn't have a computer. She only understood that she had signed up to the service when she started getting debt collection letters for not paying the bill. If I hadn't met her in person and only seen her data I probably would have just set up a repayment plan instead of writing to the ISP and challenging her liability for the debt which is what I actually did.
You'd be surprised how many odd cases like this pop up.
I'm still pretty sceptical however because I think you will encounter a lot of cases that are difficult to diagnose just by looking at a persons data.
For example, the first ever case I dealt with was an autistic lady who had been scammed into buying broadband when she didn't have a computer. She only understood that she had signed up to the service when she started getting debt collection letters for not paying the bill. If I hadn't met her in person and only seen her data I probably would have just set up a repayment plan instead of writing to the ISP and challenging her liability for the debt which is what I actually did.
You'd be surprised how many odd cases like this pop up.
I definitely agree. There will always be a place in the market for face to face consultations. After all, credit "counseling" is an act of counseling, not just hard financials. To us the four pillars of financial stability (for customer already in financial distress) are Education, Budgeting, Counseling, and Community. We can obviously provide some of these but not others. The idea here is to leave the counseling to the experts, but be able to offer something to the vast majority of Americans who go through credit counseling today but only really need a little extra push to get them on the right track again.
> Here’s how it works: first, the service prompts you to enter your bank login credentials...
No.
No.
That's just stupid, read on. You don't give them this info, you give it to Yodlee, the same people behind Mint.
I'm curious how this will stack up against groups in the National Foundation for Credit Counseling members. (http://www.nfcc.org/) Then again, they may end up joining that group. I'm not affiliated with NFCC, but I understand they offer much of what Debteye offers already.
Found it quite jarring that the home page (http://www.debteye.com/home) and blog (http://blog.debteye.com/) look like completely unrelated organisations visually. Am I missing something?
Great idea but hope you guys are changing the UI/UX. The diagonal lines being blue and the text being blue cause the eye/brain to want to close the shape which is quite distracting. Take a look at the contrast and fixing the anti-aliasing.
Really think about the emotional response you want to trigger in your customers. For a lot of people this is a very harrowing experience and the design should provide comfort. There's a evolutionary psychological response called the savanna preference, it triggers a clinically tested calming emotional response. Should work wonders. If you have questions about how to trigger different emotional responses (trust, calm, etc) in the design, feel free to reach out. Plan on writing a blog post about it at some point in the future.
Really think about the emotional response you want to trigger in your customers. For a lot of people this is a very harrowing experience and the design should provide comfort. There's a evolutionary psychological response called the savanna preference, it triggers a clinically tested calming emotional response. Should work wonders. If you have questions about how to trigger different emotional responses (trust, calm, etc) in the design, feel free to reach out. Plan on writing a blog post about it at some point in the future.
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Personal debt reduction is primarily about behavior modification, much like losing weight. I don't see much in this startup that focuses on changing people's habits.
On the contrary, a lot of what we try to do is longer-term behavior modification - "gamification" of the "get out of debt" process if you will. Once you sign up you'll get monthly and weekly "goals" that we encourage you to complete, simple things which take no more than 10-20 minutes each, but will effect longer-term change in the way you use and view credit. Alot of this isn't visible from the front-end yet, but we'll be adding more material as times goes on.
If you assume the debt consulting is working for the debtor, then yes, it would be reasonable to assume they would be better at negotiating terms than the average layman. There is a very dangerous assumption in this sentence.
If you ever have a credit related problem, and are considering talking to a credit counselor, jump into a vat of pond scum. There, I just saved you several thousand dollars, and you'll feel cleaner in the bargain.
(Serious advice: you will get better advice from either a lawyer or the Motley Fool Credit Cards and Consumer Debt forum than from credit counselors.)