Ohioans seeking to settle their credit card debt could be affected by a pending bill in the Ohio Legislature. House Bill 173, currently pending before the House Financial Institutions, Housing and Urban Development Committee would change existing regulations governing debt settlement companies.
Debt settlement companies are third parties who intervene between a debtor and creditor, offering to settle creditor debts for a small percentage of the amount owed. In a typical case, the debtor stops paying the creditor and instead makes regular payments to the debt settlement company, who then attempts to negotiate a settlement on behalf of the debtor.
Currently, these companies are regulated under a 2004 statute known as the Debt Adjuster’s Act (Ohio Revised Code § 4710.01 et. seq.), which, among other provisions, limits fees charged by debt settlement companies to the greater of 8.5% of the debtor’s monthly payments or $30. Additionally, the Federal Trade Commission finalized rules in 2010 prohibiting companies from charging fees before debts are settled.
House Bill 173 would create separate regulations for debt settlement companies. Under the bill, these companies would be exempted from the requirements and fee caps of ORC 4710.02 and – as in the 2010 FTC rules – prohibited from charging up-front fees to debtors. Fees would no longer be capped, but companies would be subject to additional regulations, including registering with the Department of Commerce and disclosing a variety of information to debtors.
The Columbus Dispatch recently published an article summarizing opposing views on the bill, and the Ohio Legislative Service Commission has a full analysis of the legislation.