Growing (debt) pains

Cambridge Life Solutions offers a lifeline to indebted Canadians—using a model that’s banned in the U.S.

Growing (debt) pains


“Hello, Alan Thicke here. We’ve talked about a lot of things over the years: sitcoms, kids, health care, hockey. But the big thing on everybody’s mind these days is money.” So begins an ad for Cambridge Life Solutions, a debt settlement company that’s been operating in Canada since late 2010. In the ads, Thicke—a Canadian who played the father on the hit ’80s sitcom Growing Pains—pitches the idea that, with Cambridge Life, consumers can cut their unsecured debts by up to 70 per cent. It sounds tempting—especially with the Bank of Canada warning last week that household debt continues to grow at dangerous speeds in this country.

But the model Cambridge Life uses is a controversial one. The United States Federal Trade Commission (FTC) calls one of the core elements of its business “an abusive practice.” The model it uses, which relies on consumers paying fees to the company before it reaches deals with creditors, was outlawed in the U.S. in 2010 and is illegal in Manitoba. The company says its program takes discipline, and those who see it through often see outstanding results. Phill Allopenna, the company’s Toronto branch manager, says successful clients pay back an average of 40 cents for every dollar they owe. Critics, however, say the program can leave the unwary with more debt, less money and bad credit.

Cambridge Life Solutions is not the only company in the debt settlement business, nor is it the only one using the model now banned in the U.S. But thanks to a recent blitz of advertising—including the Thicke spots and a blanket Internet presence—it is among the most visible. When you register for a Cambridge Life plan, you agree to set up what it calls a “set aside fund” and pay into it for 12, 24, or 36 months. Once you have at least 30 per cent of your outstanding debt in your account, the company will approach your creditors and offer them deals to settle for less than you originally owed. Clients also agree to pay service fees equal to about 15 per cent of their original debt. Most of those fees get paid up front, before Cambridge Life strikes a deal with creditors. For the first three months of some programs, every penny customers pay into the plan goes to the company. In one contract Maclean’s obtained, a customer paid Cambridge Life more than $2,000 a month in service and maintenance fees for the first three months.

Allopenna says Cambridge Life never tries to hide what it charges. The fees, he says, are no different from those a lawyer or a contractor would require, and every customer agrees to them, both in a recorded compliance call and in their written contracts. But the practice of charging upfront fees for debt settlement has a muddied history in the U.S.

As consumer debt exploded there, the debt settlement business grew with it and complaints about the sector soon followed. In response, in 2010 the FTC made it illegal for debt settlement companies to charge fees before they reached a deal with creditors. This February, Manitoba followed suit, passing a regulation—modelled on an existing Alberta law—that limits settlement fees to 10 per cent of debt and bans upfront fees entirely. “We want to make sure that people already struggling with debt don’t find themselves paying large fees . . . with no guarantee the service will actually reduce their debt,” Manitoba’s Consumer Affairs Minister Jim Rondeau said in a statement.

Cambridge Life Solutions doesn’t operate in Manitoba or Alberta. But in the provinces where it does—all the others minus Nova Scotia and Newfoundland—Allopenna says clients have had their debts cut by as much as 90 per cent. He would not say, however, what percentage of clients who enrol in the program actually finish it. FTC and state investigations in the U.S. have found that less than 10 per cent of consumers typically complete debt settlement programs there, according to the U.S. Government Accountability Office. Allopenna says it doesn’t make sense to compare the U.S.—where he says the debt settlement market “spun out of control”—to Canada.

Anna Jarvis, an Ontario woman, dropped out of Cambridge Life Solutions after four months. She had built up about $10,000 in debt after separating from her husband. She always made sure to make her payments, but couldn’t chip away at her principal. When she heard a Cambridge Life ad, she thought the program might be for her. She signed up last year and started paying in, assuming the company would take care of her creditors. A few months in, one lender sent her file to a collections agency after not receiving payment. Now she’s worried she may have to declare bankruptcy over a relatively small debt. “Part of that’s my fault,” she says. “A lot of it is in there [in the contract]. But it just didn’t sink in somehow. I didn’t realize they basically wouldn’t do anything.”

Allopenna says in the vast majority of cases, Cambridge contacts creditors within 30 days of a client signing up. Only in “extremely rare” cases for “unique clients” will the company hold off, he says. However, under the Cambridge Life contract, it isn’t obliged to contact creditors until clients have at least enough money saved for a settlement.

As for Alan Thicke, he’s standing by the company. “Debt relief is a relatively new and growing product,” he said through a spokesman. “My due diligence clearly supports Cambridge as a leader in the field.”


Growing (debt) pains

  1. Meh,

    Canada’s been overdue for irresponsibly riding the consumerism train to the poorhouse like the UK and US. 

  2. I work in a collection agency, we do not deal with American Debt Settlement companies like Cambridge because of their poor service record with us.  They hardly return calls, and provide lousy settlements our clients refuse to accept.  Do not deal with them, they are just awful.

    Just search for them on the internet.  I found this: 

  3. FYI Manitoba and Alberta have enacted laws to protect consumers from “debt settlement” frims charging large upfront fees and other questionable activities.Ontario and other provinces need to follow suit to protect consumers. Here is Manitoba government announcement in Feb 2012  Alberta regulations have been on the books for a while

  4. Has anyone in Vancouver found themselves a victim of debt settlement companies?  I’d be interested to hear…

  5. I am an qualified Chartered Insolvency & Restructuring Practitioner (CIRP), accountant and trustee in bankruptcy who has built a career over the past 17 years helping people resolve their debt challenges using various different options, but in all cases, solutions that are right for the individual and that are right for the situation. These days I spend much of my time dispelling the myths and lies often given by debt settlement companies. In Canada, there are no qualifications required to be a debt consultant or debt counsellor, and the garbage people are often told is scary. Remember in most cases, a couple hours of time from a lawyer knowledgeable in insolvency and debt matters may be a fraction of what many debt consultants charge. 
    Until recently, debt consultants were never much of a problem. However when the economy tanked and USA passed legislation ending up front fees, many saw Canada as a opportunity. The Federal Government has just recently published a bulletin warning consumers of the problems which many people have experienced with the debt consulting industry.
    With regards to Alan Thicke, I can assure you that Alan didn’t consult with myself and I am not aware that he contacted any of my peers. So Alan, if you need to speak to an expert who has the education, experience, qualifications and a regulating body, I suggest that you call a Trustee or CIRP as they are recognized as the experts in the field.  Alan, or Alan’s spokesperson, I also challenge you to disclose what exactly you did as the due diligence you refer to and post same on this site. Alan, since you seem to now be the spokesperson, and clearly feel capable of stating who is “a leader in the field” I would love to know what your first hand intimate knowledge is, regarding this industry and all it’s players. I would also love to know what makes you believe that you are even remotely qualified to make such statement about the industry.
    Maybe this is just another one of your jokes, but I am not laughing.

  6. I accidentally bumped in to this forum when i googled cambridge life solutions, i wanted to get their phone number to call and see my options, my sister told me about them and she’s been with them for almost a year, and she said that she’s almost debt free now, and settled most of her debts, and most likely she will be done in 2 months, which is better than what they promised her, but she said that she never imagined being debt free that soon…and these folks made it happen..when trustees turned her down and told her to sell her condo, and wanted to charge her an arm and a leg…i understand ur frustration john, you are obviously a competitor who is trying to bash on them, but honestly, they do good work, and im going with them, and they have proof on their site!! actual letters…a lot of us are in trouble, and we need help without having to file for bankruptcy john, i realize you are trying to help, but it seems like u are just bashing blindly, 

    — Harpeet singh

    • Harpeet
      My frustration comes from hearing adverts claiming that there are government programs out there which do not actually exist, from seeing people walk through my door day after day, having been screwed by debt settlement companies. It is not about competition as you incorrectly claim. If they are unsuccessful, these people, the people they allegedly help, will be filing bankruptcy. But what is sad is that in Canada, we have excellent not for profit debt counsellors. These organizations have served communities with success for decades. Many of them are funded by the United Way, and charge a fraction of the price, with no up front fees and those up front fees by private operators are thousands of dollars.
      And what is the harm in asking Alan Thicke to post his due diligence, afterall, in one instance he claims they are “leaders in the field”  but then says its a new field. Fact is it is not new, it is what the not for profit sector has been doing for years. What people fail to understand is that the product these organizations sell is called an informal proposal. All creditors must accept or it doesn’t work. Trustees lobbied and worked with the Government to get something better. In 1992 consumer proposals were introduced and only Trustees in Bankruptcy can perform them. If soimeone is telling you otherwise, they are lying. Oh, and the difference, real simple, we only require 50.1% in dollar value of creditors to accept the proposal and the others are forced to accept it. And the fees, set by a government tarrif to ensure consumers are protected. I agree with you that Bankruptcy is not the only option. But I respect that it is a free market. Choose who you like, but regardless of who you deal with, be informed.  Get a written guarantee of the claims these companies make, understand what the effect of whatever you choose, and don’t merely assume because something worked for one person, that it will work in your situation. 
      I can assure you, I am not concerned about competition, I sell the best services, services that really work, and when I don’t think that a person needs my services, I send them elsewhere. Often to not for profit counselling services or to a knowledgeable lawyer. Oh yeah, and in my experience, a lawyer will probably charge less than a debt consultants.     

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    • You and your comments are bang on Kris.