Debt settlement industry wants to operate in Ohio
Wednesday, November 21, 2012
- Organization: Dayton Daily News
Companies that charge up-front fees for working with consumers to settle tens of thousands of dollars in credit card debt are pushing for a bill in the lame duck legislative session that would allow them to operate in Ohio.
The “debt settlement” industry has been advocating for legislation in Ohio for five years and hopes to be successful this time around, said lobbyist Rick Oxender, who represents the 40-member American Fair Credit Council.
“They want to be licensed. They want to keep bad apples out. They want regulations and they want consumer protections in place,” Oxender said.
But opponents, including the Ohio Poverty Law Center and Policy Matters Ohio, are warning that what the debt settlement industry wants is permission to operate in Ohio outside the state’s consumer protection laws already in place.
“They want to legalize a loophole and be able to charge a lot up front,” said David Rothstein of Policy Matters Ohio, a non-partisan, left-leaning think tank in Cleveland.
State Rep. Richard Adams, R-Troy, chairman of the House Financial Institutions Committee, said he will hold another hearing on House Bill 542 on Wednesday and will have a better idea then whether the legislation will gain momentum needed to clear both the House and the Senate by the end of the year. Any bills not approved by Dec. 31 when the legislative session ends would have to be re-introduced next year.
House Bill 542 would require debt settlement operators to be licensed by the state Department of Commerce and bonded and they would be prohibited from using unfair or misleading practices. But it would also exempt debt settlement operators from the Debt Adjusting Act, which is already on the books, and the bill does not place a cap on how much the operators may charge customers for services.
Oxender said the average client that uses a debt settlement company has $30,000 in unsecured debt spread over six credit cards, is college educated, and has a household income of $70,000.
It is unclear whether Ohio Attorney General Mike DeWine will weigh in on the legislation.
In March, DeWine filed suit against a California man and his two companies for taking money for debt settlement services but failing to deliver on promises made.
The lawsuit charges Jeremy Nelson and his businesses with violating Ohio’s Consumer Sales Practices Act and Debt Adjuster Act, which are laws on the books to protect consumers.
“With the average American carrying thousands of dollars in credit card debt, debt settlement services can seem very appealing,” DeWine said in a written statement. “But far too many of these businesses fail to deliver on their promises and leave consumers in a worse financial situation.”
On his website, DeWine warns consumers to steer clear of debt settlement service programs, saying they can be “risky and expensive.”
“A debt negotiation company may charge you high fees in exchange for helping you reduce your debt. Company representatives might tell you to stop paying your creditors and promise to pay them on your behalf. Unfortunately, the company may fail to pay your creditors and/or fail to negotiate. Any time you stop making payments to your creditors, you risk damaging your credit rating, and owing more in late fees and interest. We suggest contacting your creditors on your own to try to negotiate a lower interest rate or payment plan,” the AG’s website says.