| In this article we take a look at one of the most | | | | rate in year one, 65% in year two, 72% in year three, |
| popular companies in the MLM network marketing | | | | etc. 100 memberships sold today will result in less than |
| industry, Prepaid Legal Services. Many people are | | | | 10 (according to the company's quarterly reports) in |
| currently asking if Prepaid Legal is a scam, just based | | | | seven years. Speculation is that initial purchasers may |
| on the latest Google search results, and this peaked | | | | have a particular legal issue at the time of purchase, |
| our interest to find out why. We'll examine the | | | | such as a traffic ticket or need a will prepared, but |
| company and what is behind so many questions about | | | | thereafter don't have continuing need for services. |
| its legitimacy. | | | | Also, per the company's SEC filings, associate failure |
| The company is based on multi level marketing, which | | | | rates are very high. As stated in these reports, 97% |
| many automatically consider to be pyramid schemes, | | | | don't actually sell policies (only 3% make 10 sales) of |
| like Bernie Madoff's famous financial scam. But the | | | | the 450,000. Similarly, 93% of the 455,000 associates |
| FTC ruled in 1979 that multi level marketing was a | | | | never make ONE (1) sale. One reviewer also reports |
| completely legal business model as long as payments | | | | that there may be an ongoing effort to prop-up the |
| to distributors correlate with product sales vs. recruiting | | | | stock with a company buy-back. If these reports are |
| bonuses. While some companies may tread this line | | | | factual, perhaps this company may be in danger of not |
| closely, Prepaid Legal doesn't appear to be in this | | | | surviving long-term. Also, Prepaid Legal has reportedly |
| category at all, although one online report equates its | | | | been under SEC and FTC investigation, although the |
| structure to an endless chain scheme, that is soon apt | | | | FTC's recently closed its investigation. |
| to collapse. We view this as speculative, but will | | | | There are many enthusiastic, happy customers but |
| investigate further in a follow-on article. | | | | also many questions about this company. This may |
| The company began in 1972 as the Sportsman's | | | | explain why current Google search results indicate |
| Motor Club. They currently market and underwrite | | | | sharp interest in the term "prepaid legal scam" at the |
| pre-paid legal services plans through a network of | | | | present time. We can only recommend that if |
| more than 50 independent law firms across the U.S. | | | | considering joining any company to first do some due |
| and Canada. Pre-Paid Legal began utilizing network | | | | diligence using trusted sources and make their own |
| marketing in 1983. The company's IPO was in 1984 on | | | | conclusions. An individual must decide on his own |
| the NASDAQ, and in 1986 moved to the American | | | | whether or not it would be a wise business decision |
| Stock Exchange. | | | | for him/her personally. But we recommend against |
| Some former distributors, making a different type of | | | | making any decision solely based on company |
| "scam" claim, assert that the company's recruiting | | | | presentations. Regardless of the truth behind these |
| video doesn't give a clear picture to new recruits of | | | | facts and/or rumors, there are certainly strong opinions |
| what they face in order to succeed. For example, one | | | | on either side of the question if Prepaid Legal could be |
| points out that their policies have a 52% cancellation | | | | an example of multi level marketing scams or not. |