Debt Resolve Shifts Business Strategy, Closes Collection Agency

Online collection system provider Debt Resolve announced Wednesday that it has drastically altered its business strategy by going with an all-online collection platform. The company said that it has closed a collection agency it acquired in early 2007 and will launch a new debt resolution service aimed at consumers. In the announcement, Debt Resolve also announced results for the second quarter of 2008.

White Plains, N.Y.-based Debt Resolve, Inc. (AMEX: DRV) said that it has developed a new debt settlement interface called iSettleNow. According to the new product’s Web site, iSettleNow is slated to go live in early 2009. The new service will be driven by consumers looking to settle their debt, rather than by creditors, collection agencies and debt buyers that attempt to compel debtors to pay.

"We have expanded our business model to connect directly with consumers,” said Debt Resolve CEO Kenneth Montgomery in a statement. “We will continue to allow creditors, agencies and debt buyers to use our system, but we expect that full adoption of online collections will be consumer driven, just as it was with ATMs and online banking.”

Debt Resolve Chairman James Burchetta said, “The Company’s Board has complete faith in management to execute this exciting new online debt resolution tool while continuing to offer products directly to the collection industry.”

Even with the shift in strategy, the company commented in the statement that there is a possibility it will not survive as is. “Since the Company may not have sufficient cash to fund its operations for the next twelve months, there exists substantial doubt about its ability to continue as a going concern,” it said.

Debt Resolve said that it has drastically lowered operational expense in the past year, to $180,000 per month now from costs of around $500,000 per month a year ago.

Part of the cost-lowering plan was the shuttering of the company’s traditional debt collection business First Performance Corporation, which it acquired in January 2007 (“Debt Resolve Acquires Collection Agency First Performance Corp,” Jan. 23, 2007). Debt Resolve said that it closed First Performance on June 30, 2008, and that the collection agency had served as an incubator for iSettleNow.

Debt Resolve closed its debt buying unit, DRV Capital, in October 2007.

In financial results, Debt Resolve said that revenue for the second quarter of 2008 was $46,819, compared to $12,507 in the second quarter of 2007. Net loss for the second quarter of 2008 was $4,238,148 compared to a loss of $5,303,731 in the second quarter of 2007.

Debt Resolve has been beset with issues recently concerning its access to capital. The company is still involved in an ongoing dispute over a $7 million stock purchase agreement with a third party (“Debt Resolve Announces Further Delay in Share Sale Funding; Seeking Alternatives,” June 25). In March of this year, Harmonie International agreed to purchase $7 million in Debt Resolve’s stock, but the company has yet to fund the purchase.

Debt Resolve said in a filing this week with the SEC that as of August 11, 2008, it has received no funding from Harmonie and believes that it is unlikely to receive such funding. In the event Harmonie does not fund within a reasonable period of time, Debt Resolve intends to pursue legal action.