Illinois legislators have sent a bill to Gov. Pat Quinn that would limit the ability of debt settlement companies to charge fees for their services. But the legislation also could limit choices that consumers have regarding how to handle debt.
Andrew Housser, chief executive of debt settlement company Freedom Financial Network, in a letter to the Chicago Tribune wrote that these firms have helped thousands of consumers deal with debts that might require bankruptcy otherwise.
"HB 4781, the so-called Illinois Debt Settlement Consumer Protection Act, which awaits the governor's signature, would put debt settlement out of business due to draconian restrictions that cap fees well below what it costs to provide the service," he said.
Through the bill, debt settlement companies would have to register with the state. They also could only charge a one-time subscription fee until they provide the settlement services. Once they do so, the amount they charge is capped to certain percentage of the savings achieved by the consumer.
The law, which was spearheaded by Illinois Attorney General Lisa Madigan, was created to fight against debt settlement companies that charge consumers upfront fees without providing any service, which could leave people worse off than when they started. For more about Madigan's actions concerning this topic, see story.