 A new law inked by Gov. Pat Quinn on Tuesday would mandate all debt
settlement companies to apply for a state license and subject the
companies to legally enforced contracts with debtors. The new law
would also limit the initial fee of debt settlers to $50 and cap how
much the settlers could charge for their services.Quinn said the
law would put a halt to a troubling trend.
"Debt settlement companies in Illinois have abounded in recent
years and have used their devices to entice consumers into many
arrangements that end up costing the average person thousands and
thousands of dollars. ... We cannot allow that to happen," he said.
Illinois Attorney General Lisa Madigan helped spearhead the
legislation after her office received hundreds of complaints
concerning entities that promised to help reduce or eliminate debt
but did not.
"We have not found a legitimate debt settlement operator, we
haven't heard of one, that's come to our office. We have gotten
literally over 600 complaints. Normally it's people who have ended
up in bankruptcy, people who have been sued, people who have lost
thousands of dollars, and been provided with no services," she said.
Madigan explained that these debt settlement companies will
target individuals with significant debt -- upwards of $10,000 --
and provide financially unsound advice.
Some companies will tell debtors not to pay their creditors on
time and to transfer funds to the companies to help with legal
disputes. The supposed "advice" only exacerbates financial troubles.
The settlement companies will also charge high fees upfront to
siphon the remaining money from debt-ridden individuals.
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Brent Adams, head of the Illinois Department of Financial and
Professional Regulation, said his agency would present a draft of
potential regulations focused on curbing unscrupulous debt
settlement companies. The proposals will be filed with the office of
Illinois Secretary of State Jesse White.
Adams said his agency also would post a new website that provides
information on the new law as well as online applications for a debt
settler's license.
"A consumer who is reaching out for a lifeline extended by a debt
settlement company should not be exploited by the very company that
they hope will save them," Adams said.
Madigan advised that those with debt stay disciplined and look to
nonprofit advisers for help.
"It is hard work, it is setting aside your money and paying off
your bills, but it is a much better option than giving your money
away to somebody who is providing you with absolutely no services,"
she said.
[Illinois
Statehouse News; By KEVIN LEE]
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