The success of any retail or direct sales organization is in the quality of its products. If the products do not deliver what the consumer is expecting, then no matter how monetarily successful the business is, sooner or later it will come under scrutiny by legal entities or lose customers and fail. A good example of this is the ongoing struggle of the Pre-Paid Legal scam.

The Federal Trade Commission (FTC) has very specific requirements for multi-level-marketing. MLM, or network marketing, is a strategy used by direct sales organizations to compensate their associates through the sale of products to consumers and through building a network of associates in a downline from which they receive additional commissions and bonuses. The FTC strictly requires that commissions are based on the sale of a product, not on sign-up fees or requirements to purchase more product than can be sold.

The Pre-Paid Legal scam began with a product somewhat like buying insurance for health, auto or home. Although most people hope they never have to file a claim, the risk of a disaster keeps them making monthly or yearly payments, even if they never collect on the money they have spent. Prepaid Legal Services insure people against possible attorney fees and legal service fees with a monthly fee of about $30 – about $1.25 per day.

Sounds like a good deal? Maybe, until folks tried to use the services and discovered that their particular situation was not covered (in fine print at the bottom of the page), and that the lawyers would not defend their clients if the case came to court.

Cases pending in Mississippi against Pre-Paid have also accused the company of being an illegal pyramid scheme. Things are not looking good for Pre-Paid Services.

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