Consumer Credit Counseling Rhode Island
The Uniform Debt-management Services Act
New legislation targeting debt counseling and settlement services seeks to protect consumers from fraud. Industry and consumer groups have split opinions on the law’s usefulness.
Understanding the ins and outs of the Uniform Debt-Management Services Act (UDMSA) is like learning how to survive on twigs and berries when lost in the woods—undoubtedly useful expertise, but something you hope you’ll never need.
The UDMSA is legislation that covers debt settlement and Credit Counseling Services, which helps people who may be in need of debt consolidation programs. Currently, these services are regulated at the state level, which means debt-ridden consumers in California who seek help are probably treated differently than their counterparts in Maine. It also means that there’s no national oversight of credit counselors, debt consolidation programs, and debt settlement companies. The National Conference of Commissioners on Uniform State Laws (NCCUSL) believes consumers stand to benefit from a more consistent approach to the regulation of these services. For this reason, the NCCUSL is asking state governments to adopt the UDMSA.
Understanding UDMSA
The UDMSA has three main sections: registration, agreements, and enforcement. Provisions include:
- Debt counselors must register in their state as a consumer debt-management service. This process requires the counselor to provide the state with thorough background information on the company’s financial condition, management, and ownership.
- Debt counselors must be insured against fraud and give the state a $50,000 security bond.
- Debt counselors must disclose certain information to consumers before entering into an agreement. Consumers must be aware of fees, services offered, and risks and benefits of working with a debt counselor.
- Contract verbiage and fees charged are regulated by the UDMSA.
- Consumers have the right to cancel the contract within three days.
- If debt payments are collected from consumers, those funds must be held in a trust account and are subject to certain accounting rules and reporting requirements.
- Consumers may file a civil suit against a debt counselor to recover damages resulting from a violation of the UDMSA.
Debt consolidation in the states
Utah, Rhode Island, Delaware and Colorado (effective January 1, 2008) have adopted the UDMSA. Hawaii, Illinois, Missouri, and Wisconsin are currently considering it, as well.
Proponents of the UDMSA say it provides for much-needed national regulation of an industry that’s prone to consumer exploitation. Opponents argue that the UDMSA doesn’t give regulators enough power to enforce fair treatment of consumers. Two groups—the National Consumer Law Center and Consumer Federation of America—contend that the UDMSA authenticates debt settlement services, but doesn’t prohibit for-profit companies from charging excessive fees for them.
If you get lost in the woods of excessive debt, an ethical credit counselor can lead you out. Unfortunately, whether or not the kinks in the UDMSA are fixed, debt-ridden consumers will always be subject to exploitation by unethical service providers. If you’re seeking debt consolidation help, protect yourself by interviewing several prospective counselors and getting a legal opinion on the contract. Within a short time, you’ll be well on your way to getting out of the woods.
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