Highlights of the Uniform Debt Management Services Act

The act was completed by the NCCUSL in 2005. Four states have already adopted it:

  • Delaware, effective Jan. 17, 2007
  • Rhode Island, effective March 31, 2007
  • Utah, effective July 1, 2007
  • Colorado, effective Jan. 1, 2008

Hawaii, Illinois, Missouri and Wisconsin all introduced the legislation during 2007 [source: UDMSA].

Registration
One of the act's requirements for agencies includes strict guidelines for registering with the state.

Utah
Although the act didn't go into effect until July 1, 2007, Utah was actually the first state to enact it. Legislators in Utah considered the UDMSA for less than two months before approving it [source: Tenenbaum].

 

Among other things, when a firm registers with the state, it must:

  • pay an application fee
  • provide evidence of not-for-profit and tax-exempt status, if applicable
  • show its last five-year history of debt management services
  • give salary information for its five highest-paid employees

Services
Firms must now be more up-front and comprehensive about their services and fees to help educate the consumer. Because of the act, registered firms now have to:

  • give an itemized list of all goods and services offered
  • provide finance education through counselors
  • include warnings about consequences to taxes and credit reports

Fees
The act also imposes limitations on fees and other charges. Although the fees can vary, firms must also be clearer about the fees they are charging. In addition to annually reviewing fee rates, agencies are required to:

  • disclose all fees, including setup fees, monthly charges and settlement fees
  • limit credit counseling setup fees to $50
  • limit debt settlement setup fees to either less than 4 percent of the debt owed or a maximum of $400

In addition, a firm must provide services without fees if a person can't afford it. However, this requirement only applies if the person has filed for bankruptcy protection or if the firm has tax-exempt status.

Prohibitions
Agencies now have to be careful of several limitations in the act. The UDMSA limits many practices that the NCCUSL considers unlawful. These regulations help keep the consumer safe when doing business. The act does not allow firms to:

  • misuse funds they are holding in a trust
  • perform legal services
  • give employees bonuses or commissions based on their number of clients
  • buy the consumer's debt
  • lend money or give credit to a client, unless by deferring a fee that will not be charged later as a larger fee [source: Tenenbaum]

These are just a few of the ways that the law is now on the consumers' side. The UDMSA also requires that all registered agencies have a toll-free telephone line staffed during normal business hours so consumers can speak to an actual person during the day.

Although the act has yet to be passed in many states, consumers can rest easier knowing there is a uniform model to follow and someone is looking out for their best interests.

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