Debt Settlement Providers May Need to Change Legal Options Offered to Their Clients

Debt settlement providers often offer third-party services to their clients, such as companies offering separate settlement accounts and low-cost legal services. Recently, the American Fair Credit Council (AFCC) announced new policy changes regarding the third-party services that will likely affect those third-party offerings, including low-cost legal services offered to consumers enrolled in debt settlement programs.

Veritas Legal Plan, the leading provider of ancillary legal services to the debt settlement industry with over ten years of experience, recently voiced its objections to the AFCC’s new policy changes. Veritas understands that offering a legal plan can increase the duration and graduation rate of consumers enrolled in a debt settlement program, but it believes the AFCC policy changes are over-reaching and biased towards companies who offer loans.

Veritas points out that there are no laws prohibiting earning a fee for offering an optional product, and Veritas has always been mindful in setting fair fee caps to ensure consumers are not harmed. But every state has its own regulations about the fee amounts that can be charged, and often investigate debt settlement providers because of their third-party services. In one case in Illinois, a debt settlement provider was required to refund fees related to the third-party services, and then banned from offering debt settlement programs to Illinois residents.

Based on the AFCC’s position on third-party services, coupled with the Consumer Financial Protection Bureau’s acknowledgement of that position, some companies have decided that the AFCC no longer reflects the views of the small to mid-size companies who rely on their services. Many debt settlement providers believe companies like Veritas provide much needed legal services, and appreciate the ability to earn referral fees for optional products. However, with increased state investigations and the AFCC’s policy change, many debt settlement providers may need to identify other third-party service providers who can add value to their customers.

About the Author

David Haber is a Senior Associate with Global Legal Law Firm who works closely with debt settlement providers to address state investigations and adapt to new regulations.  Global Legal Law Firm also has years of experience tracking the legal developments in the electronic payments space and helping clients develop strategies for various laws and prevailing interpretations across the United States.  We have helped clients with compliance advice, drafting and negotiating business contracts, defending state and federal regulatory actions, and representation in civil litigation matters involving electronic payment companies and business disputes.