Network Marketing Scams - Could Prepaid Legal be a Scam?
By: Jim Green
Submitted: 2010-08-17 15:29:45 | Word Count: 631
In this article we examine one of the most popular companies in the multi level marketing industry, Prepaid Legal Services. Many people are currently asking if Prepaid Legal is a scam, just based on the latest Google search results, and this peaked our interest to find out why. We’ll examine the company and what is behind so many questions about its legitimacy.
The company is part of the MLM network marketing industry, which many automatically equate with pyramid schemes, like Bernie Madoff's famous financial scam. But the FTC ruled in 1979 that network marketing is a legitimate business model as long as payments to distributors correlate with product sales vs. recruiting bonuses. We can easily point out popular network marketing companies using what are obvious recruiting bonuses. Prepaid Legal isn't in that group, although one report available on the Internet specifically relates its structure to an endless chain scheme, that is soon apt to collapse. We don't agree with this, and will address it in a future article.
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The company began in 1972 as the Sportsman’s Motor Club. They currently underwrite and market pre-paid legal services plans through a network of more than 50 independent legal firms throughout the U.S. and Canada. Pre-Paid Legal began utilizing network marketing in 1983. The company's IPO was in 1984 on the NASDAQ, and two years later moved to the American Stock Exchange.
Perhaps current "scam" interest is coming from a claims by some former multi level marketing distributors who assert that the company’s recruiting video may not give a true picture of the efforts needed to succeed. For instance, one points out that their product has a 52% cancellation rate in year one, 65% in year two, 72% in year three, etc. Selling 100 memberships today, will retain less than 10 (according to the company’s quarterly reports) in seven years. Some speculate that policy buyers may initially have legal issues, such as a traffic ticket or need a will prepared, but don’t have any actual continuing need for legal services.
Also, according to company SEC filings, there is a high failure rate of multi level marketing associates. According to their published figure, 97% don't actually sell policies (only 3% make 10 sales) of the 450,000. In addition, 93% of the 455,000 associates make no sales at all. One reviewer also reports that there may be an ongoing effort to prop-up the stock with a company buy-back. If these reports are factual, could the company's survival actually be in question? Also, the SEC and FTC have been reportedly investigating Prepaid Legal, although the FTC’s recently closed its investigation.
Despite an abundance of glowing testimonials from Prepaid Legal's multi level marketing associates and customers, there are also many questions about this company. This may clarify why current Google search results are showing high interest in the term “prepaid legal scam” at the present time. We can only recommend that if planning to join any company to do your own research and get all your questions answered adequately, preferably from independent sources. We can’t advise any individual whether or not to join. This decision should only be made according to and after your own due diligence. Regardless of the truth behind these facts and/or rumors, there are certainly divided opinions on the question if Prepaid Legal could be considered with multi level marketing scams or not.
Author Resource:-
Jim Green is an industry analyst who investigates multi level marketing scams and helps clients to develop attraction/internet marketing systems for most effective MLM lead generation.
In this article we examine one of the most popular companies in the multi level marketing industry, Prepaid Legal Services. Many people are currently asking if Prepaid Legal is a scam, just based on the latest Google search results, and this peaked our interest to find out why. We’ll examine the company and what is behind so many questions about its legitimacy.