NATIONAL CONFERENCE OF COMMISSIONERS ON UNIFORM STATE LAWS
211 E. Ontario Street, Suite 1300, Chicago, IL 60611
312-915-0195, Fax 312-915-0187, www.nccusl.org
Contact: John McCabe, NCCUSL Legislative Director, 312-915-5976
Katie Robinson, NCCUSL Communications Officer, 312-915-5962
For Immediate Release:
NEW ACT REGULATES THE FAST-GROWING DEBT COUNSELING FIELD
Uniform Debt-Management Services Act Completed
July 28, 2005 – Millions of Americans are in serious financial trouble, with consumer debt exceeding $2 trillion; the average American household has more than $7,000 in credit-card debt. Many are turning to debt-counseling services and debt-settlement firms for assistance with their debts. Under the new federal bankruptcy act (the Bankruptcy Abuse Prevention and Consumer Protection Act, which goes into effect on January 1, 2006), many more will be required to seek this help. Under the federal bill, a condition to filing for consumer bankruptcies will be a briefing by a debt counseling service.
A state statute, just approved today by the National Conference of Commissioners on Uniform State Laws (NCCUSL) at its 114th Annual Meeting in Pittsburgh, could go a long way to regulate the credit counseling industry. The Uniform Debt-Management Services Act will bring guidance and regulation to the debt counseling industry.
The consumer credit counseling industry arose as a means of assisting individuals to pay their credit card debt without resorting to bankruptcy and to enable creditors to collect debt that would otherwise be discharged in bankruptcy. But over the last decade, the industry has changed significantly, and a new generation of agencies – many rife with deceptive practices – has appeared.
While there is clearly a need for better debt counseling to help consumers get out of financial trouble – according to the Administrative Offices of the U.S. Courts, in 2004, 1,137,958 individuals filed for Chapter 7 bankruptcy while 449,129 filed for Chapter 13 bankruptcy – there is currently very little oversight of these debt counseling services. There is no federal regulation of debt counseling services, and the states do not have detailed and uniform regulations governing debt counseling.
“The Uniform Debt-Management Services Act addresses the problems that have developed and enables the states to take a common approach to regulation of the credit counseling industry,” says John M. McCabe, Legal Counsel/Legislative Director for NCCUSL. “A uniform approach is particularly important because the great majority of agencies operates in multiple states and would otherwise be subject to multiple and sometimes conflicting requirements. The completion of this act is also especially timely given the recent passage by Congress of the new federal bankruptcy law, which requires consumers to consult a debt counseling service before declaring bankruptcy.”
The purpose of the new Uniform Act is to bring guidance and regulation to the consumer debt counseling industry. The Act is a comprehensive statute which provides rules for, among other things, registration requirements, bond requirements, disclosure requirements (including a list of goods and services – and the charges for each – that the agency will provide to the consumer), and penalties for non-compliance.
The Act applies to both credit counseling services and debt settlement services (credit counseling services generally help a consumer repay all of his or her debt, while debt settlement services generally attempt to persuade creditors to settle for less than the full amount of the consumer’s debt). The Act gives states the option of applying to both for-profit and not-for-profit agencies.
The drafting committee on the Uniform Debt-Management Services Act was chaired by William C. Hillman of Boston, Massachusetts. Other committee members included: Boris Auerbach, Wyoming, Ohio; Robert G. Bailey, Columbia, Missouri; Marion W. Benfield, Jr., New Braunfels, Texas; Michael A. Ferry, St. Louis, Missouri; Benny L. Kass, Washington, DC; Morris W. Macey, Atlanta, Georgia; Merrill Moores, Indianapolis, Indiana; Neal Ossen, Hartford, Connecticut; Hiroshi Sakai, Honolulu, Hawaii; and Stephen C. Taylor, Washington, DC. Michael M. Greenfield of St. Louis, Missouri, served as the committee’s reporter.
NCCUSL, now in its 114th year, comprises more than 350 practicing lawyers, governmental lawyers, judges, law professors, and lawyer-legislators from every state, the District of Columbia, Puerto Rico and the U.S. Virgin Islands. Commissioners are appointed by their states to draft and promote enactment of uniform laws that are designed to solve problems common to all the states.
A uniform act must be considered at two annual meetings by all commissioners before it can be approved. After receiving NCCUSL’s seal of approval, a uniform act is officially promulgated for consideration by the states, and legislatures are urged to adopt it. Since its inception, NCCUSL has been responsible for more than 200 acts, among them such bulwarks of state statutory law as the Uniform Commercial Code, the Uniform Probate Code and the Uniform Securities Act.
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