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Multi Level Marketing Scams – Is Prepaid Legal a Scam?

In this article we examine one of the most popular companies in the network marketing industry, Prepaid Legal Services.  Many people are currently asking if Prepaid Legal is a scam, just based on the latest Google search results, so we took interest and wanted to research the issue.  We’ll examine the company and what is behind so many questions about its legitimacy.

The company is part of the network marketing industry, which many automatically equate with pyramid schemes such as the one made famous by Bernie Madoff.  But the FTC ruled in 1979 that network marketing was a completely legal business model as long as payments to distributors were made based on product sales vs. recruiting bonuses.  While some companies may tread this line closely, Prepaid Legal doesn’t appear to be in this category at all, although one online report equates its model to an endless chain scheme, that is soon apt to collapse.

The company was founded in 1972 as the Sportsman’s Motor Club and currently underwrites and markets pre-paid legal services plans through a network of more than 50 independent law firms across the U.S. and Canada.  Pre-Paid Legal began utilizing network marketing in 1983. The company went public on the NASDAQ in 1984, and two years later moved to the American Stock Exchange.

Some former distributors, making a different type of “scam” claim, point out that the company’s recruiting video may not give a true picture of the efforts needed to be successful.  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 the company’s quarterly reports) in seven years.  Speculation is that initial purchasers may have a particular legal issue at the time of purchase, 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 associates.  According to their published figure, 97% fail to sell policies (only 3% made 10 sales) of the 450,000.  In addition, 93% of the 455,000 associates never make ONE (1) sale.  One reviewer also reports that there may be an ongoing effort to prop-up the stock with a company buy-back.  If these facts are accurate, perhaps this company may be in danger of its own survival, and in fact was reportedly  under SEC and FTC investigation,  although  FTC’s investigation recently closed.

There are many enthusiastic, happy customers but also  many questions about this company, which may explain why current Google search results are showing high interest in the term “prepaid legal scam” at this time.  We would suggest that anyone considering joining any company first do some due diligence and make their own conclusions.  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.  But regardless of the truth behind these facts and/or rumors  there are certainly strong opinions on either side of the question if Prepaid Legal is a scam or not.

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(14) Comments

    • Kevin Venner 10:18 pm

      Pre-Paid Legal Services offers a fairly decent product depending on the state you reside and law firm you must use, but the opportunity has much to be desired. I spent 10 years with Pre-Paid Legal Services, Inc. and for most of that time I qualified at the top of its pay plan as an Executive Director. I received a plaque from the founder, Harland Stonecipher, for the Millionaires Club. Look at the facts and you will find BETTER opportunities for long-term residual income. After 30 years in business, PPLSI has never hit a billion dollars in sales because the retention rate for its members sucks wind. No retention equals NO residual income. Even an Idea Whose Time Has Come needs good management and service, so when they can master the customer service issues then maybe they will be one of the few MLM companies to hit a billion dollars in sales. I sold my PPLSI business and I am glad I did. However, I do still own the product because I know how to use the service and most people get frustrated with the PPLSI attorney system. I even recommend the plan to business owners, but the “opportunity” is only for those people who can get out and sell door-to-door or to groups. The turnover for associates has always been horrendous.

    • Jim 6:02 am

      Kevin,
      Thanks for sharing your first-hand experience. Retention is the “elephant in the room,” for more than just this company. Companies that don’t get “real” about it and start addressing the issues won’t remain, long-term.
      Jim

    • Glory Yamauchi 9:26 am

      Almost everyone that makesmoney on the internet (even the millionaires) do so through affiliate marketing. Being successful in affiliate marketing involves knowing the formula that makes other affiliate marketers successful. For instance, autoblogging. Autoblogging is one of the least well-known forms of making money for quite some time… particularly because it’s quite difficult to make a good auto-blog. Yet, when done right, it can provide you with a constant passive income with the only real work required being the setting up process. Video Marketing, and several other marketing strategies are all designed to drive traffic to your site, can be incorporated steadily in order to raise the position your site appears in the SERPs when any one searches for a term related to your site. And yet, even this can be totally automated.

    • As a Newbie, I am always searching online for articles that can help me get further ahead

    • Jim 10:06 pm

      Thanks for stopping by. If you want to really get some great content, join our weekly webinars at http://training.mlmwizard.net. This week’s will be especially good!

    • Very balanced and objective take on Pre-Paid Legal. Thank you!

    • Jim 10:04 pm

      Thanks for the comments. Hope to see you back soon.

    • Jim 10:50 pm

      Thanks for the feedback.

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    • Armandina Tehan 3:18 pm

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    • Now you get to run your business more like a business. 00 per
      month with unlimited use of phone calls and multiple other services.
      Recently, Prepaid Legal introduced a product known as Identity Theft Shield.

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