See Ya Later, Aggregator!

At the first official meeting of the National Association of Tax Debt Resolution Companies (NATDRC) in Washington D.C., May 20-21, we will be discussing the regulation of companies utilizing deceptive advertising claims and misleading trade practices that solicit unsuspecting consumers (by advertising on the internet, radio, and TV) believing that they are hiring a legitimate tax professional—i.e., an attorney, CPA, or Enrolled Agent—to represent them before the IRS/State. Nothing can be further from the truth.

Due to the bursting of this country’s financial “bubble,” including the meltdown of big Wall Street firms, the ensuing real estate downturn, record-breaking unemployment, Americans living beyond their means via credit, and the prolonged great recession in general, thousands of so-called credit card debt settlement companies sprung up overnight luring consumers in and promising to settle their (credit card) debts for “pennies on the dollar.” Many of these so-called companies, which were in reality lead aggregators/generators, simply sold consumers’ private, confidential, and personal information behind the consumers’ backs to others who would attempt a settlement/resolution. Many of them simply took the money and ran. These unscrupulous operators lured clients in via large spends on deceptive and, at best, misleading advertising via the internet, radio, and TV.

Due to the overwhelming number of consumer complaints, the Federal Trade Commission (FTC) amended the Telemarketing Sales Rule in August 2010, making it illegal for these firms to accept up-front payments from consumers and prohibiting them from collecting a “fee” until a final, successful completion was reached with the consumers’ credit card companies. This was a much-needed and welcomed “death knell” that put over 80% of these “bad” companies out of business.

However, these companies, not to be undone by the FTC, thought it would be an easy “crossover” into the tax debt relief industry as the targeted end consumer essentially has the same profile and demographic as the credit card debtor. Additionally, many unscrupulous tax debt relief firms, instead of doing their own marketing and controlling the intake criteria, relied on others to get them leads. Since these lead aggregators are not regulated (unlike CPAs, attorneys, or Enrolled Agents) they can get away with making outrageous claims in order to solicit consumers who in reality do not qualify for tax relief in the first place.

For the most part, tax debt lead aggregators’ marketing and advertising is deceptive and misleading. Generally, they don’t tell consumers that they are being “referred” or “matched” to one of their affiliate companies. These aggregators do not do the actual case work; the cases are farmed out. Generally, once the consumer releases their personal information, the consumer’s relationship with the aggregator ends. In getting a tax matter resolved, clients would probably have better odds by betting on the craps table in Vegas. The aggregators exist solely to get consumers to respond to their questionable solicitations and then ship them off to another company.

As with unsecured debt, though (credit card, medical, etc.), anyone can proclaim expertise as long as you have a phone and a persuasive voice. There are no experience, education, licensure or registration requirements. You can do this “work” without having graduated high school. These firms are now trolling for unsuspecting consumers in the tax problem resolution industry.

Credible tax problem resolution firms must employ the only three types of individuals in the world who are allowed to represent clients before the IRS. You either must be a CPA, an attorney or an Enrolled Agent in good standing with your respective licensing/governing body. Starting to get the picture?!

Hundreds of these former disreputable firms are now holding themselves out as “experts” in the tax debt resolution arena. They don’t do the work but “farm” it out, for a handsome fee, to others who will. This and the much publicized demise of the other large nationally marketed firms such as Roni Lynn Deutch (“the Tax Lady”), J.K. Harris, and TaxMasters, have given the credible tax problem resolution firms a huge black eye.

The Solution

The National Association of Tax Debt Resolution Companies (NATDRC) is aggressively promoting federal and state legislation to make it illegal for tax debt resolution firms to affiliate with a lead aggregator. It would also prohibit lead aggregators themselves to solicit/market to both tax problem resolution practitioners and the end-consumer.

Anyone or any firm offering services concerning tax problem resolution must be the responsible and qualified person to do so. This includes being able to place their own name(s) on IRS Form 2848, Power of Attorney. Only a CPA, attorney, or Enrolled Agent can sign this and be authorized as the taxpayer’s representative. Companies (specifically lead generators) who can’t make this claim should be prohibited from generating and/or aggregating leads to be handed off or sold to others.

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Tags: certified tax resolution specialist, tax attorney, tax resolution, tax resolution services