Bill would tighten regulations for debt settlement companies

Bill would tighten regulations for debt settlement companies »Play Video
There are two kinds of players in the credit counseling and debt management game: The truly non-profit and the "looks like non-profit" that are really after your money.

House Bill 1491 is an effort to make sure you don't end up even deeper in debt, when you reach out for help.

Non- profit credit counseling and debt management services do much more than make special payment arrangements with your creditors. And like any other business, they have expenses.

They have to pay for office equipment and office space. They have to pay employees, and the cost of housing counseling and extensive consumer education classes on finances, handling credit, and managing a budget.

Depending on how much debt you've racked up, and how much you can afford, your fees at a truly non-profit service can run from $20 to $40 dollars per month. But some companies that claim to help are strictly in it for the money.

A new bill introduced in Olympia aims to prevent for-profit debt settlement companies that promise to negotiate your balance and even reduce your total debt by as much as 50 percent. Some for-profit companies misleadingly collect high monthly fees of $60, $100 or more every month with no results.

House Bill 1491, the so-called Debt Adjuster Bill, puts a cap monthly fees. It also requires debt adjusters in this state to be non-profit and give you a signed contract plus signed monthly statements showing how much you paid and where the money went. All debt adjusters would have to be audited every year.

Consumer advocates say the aggressive attack could protect thousands of people from predators looking to cash in on debt.

"If this passes in some form or another, you're going to see a lot of for-profit debt settlement companies pull up stakes, and leave Washington," said Bruce McClary of Clearpoint Credit Counseling, a non-profit counseling service with offices in Seattle.

The debt adjuster bill gets its first public hearing Wednesday, Feb. 6 at 1:30 p.m. in Olympia.

You can read the original bill here, and there's also a link for submitting your comments if you can't get to the hearing.