OBJECTIVE: Pass model legislation during the 2010 Regular Session of the Kentucky General Assembly establishing operating standards and regulation of debt settlement companies.
STRATEGY: The objective changed when House Bill 166 was introduced the first week of the session to broaden Kentucky’s existing debt adjuster laws. The fee and other limitations contained in the proposed bill would have eliminated the operation of debt settlement companies thus denying Kentucky consumers a viable alternative to traditional debt consolidation and credit counseling.
Debt-settlement companies serve only the consumers and do NOT receive any fees, contributions or other forms of compensation from any entities other than the debtor client. In contrast, consumer credit-counseling companies receive “contributions” from credit card companies and “fair shares” from banks, as well as monthly fees from the indebted client. These funds greatly subsidize the consumer credit-counseling companies. Debt-settlement companies negotiate each accountindividually, while consumer credit-counseling companies have existing agreements with the creditors on all aspects of repayment terms.
Capitol Solutions, with the support of the House Majority Caucus Chairman (also a HB 166-co-sponsor), was able to immediately secure a meeting with the primary bill sponsor and its advocates. Supporters of HB 166 (skeptics of debt-settlement companies) included the Attorney General’s office, AARP and consumer credit counseling, legal aid and consumer finance companies.
The bill was amended to remove objectionable language to TASC while still allowing for the fair regulation of the industry.
RESULTS: Debt-settlement companies can continue to profitably offer and expand their services to Kentucky consumers while registration/regulation requirements will provide protections for consumers against non-legitimate providers in the industry.