Friday, April 10, 2009

My Thoughts on PrePaid Legal

So my dad sent me a birthday card, which included a check. He asked me to use the money to register under him in Prepaid Legal, the multilevel marketing company that sells pre-paid legal services and discounts. He has a plan to register a few thousand Native Americans he is working with through another program (and believes he can get many to sign up under my name thereby guaranteeing me a perpetual income). This caused me to investigate the Prepaid Legal company.

What is a pyramid scheme? Is any hierarchical organization a pyramid, and is that the same thing as a pyramid scheme? I'd say there is a critical difference between a typical pyramid organization (like the US government) and a "pyramid scheme." Both function by giving the fewer people at the top more power/authority than any of the many individuals at the bottom; however, a "pyramid scheme" takes it one step further by advantaging the few at the top by exploiting the many at the bottom--that is what makes it a scheme. In a pyramid scheme the suckers on the bottom spin thier wheels with hope of extending the pyramid below them, but the program usually reaches critical mass before most people get in and so they never really profit anybody but those few early members at the top.

So, is Prepaid Legal a pyramid scheme? Like Amway before them, they claim they are not a pyramid scheme because they company does not profit from recruiting new people below them but instead by selling legitimate goods and services. As long as the company is built on actual goods and services thier argument is correct. But as I think back on Amway I recall that it encouraged people to sell products--sure--but there were below average quality and above average prices that no real consumer would ever purchase. The products were a cover for the real source of profit. To make real money you got people below you selling the crappy products, and that is what made Amway a pyramid scheme. So the defining issue then is... does Prepaid Legal profit mostly from selling legitimate and competitive legal services, or from recruiting people below and getting them to sell non-competitive services (who then want to get people below them to sell services). Is the emphasis on providing quality services for a fee, or the acquisition of sales people below you (who pedal a crappy product as cover for the pyramid scheme)?

As I search the web I see lots of blogs and other commentaries that say Prepaid Legal's services are a joke. Many people say they provide far less than they claim. Others say Prepaid Legal has outrageous cancellation rates (50%-75% in the first 3-5 years) that suggest the legal services are just a cover--a convenient way to pretend the whole scam is about a product/service and not about pyramid recruiting schemes. I cannot verify the quality/legitimacy of thier services because I've never used them.

So I must conclude that I do not know if Prepaid Legal is a pyramid scheme, but it appears that that may very well be the case. It depends on if the services are bogus or actually legitimate. Has anybody ever used thier services before (anybody who does not sell Prepaid Legal)? Can anyone vouch for the quality of the services (who does not have an alterior motive as a sales rep for the company)?