Companies that help consumer debtors pursue lower payments to their creditors would have to wait until a debt settlement is reached before collecting their fees under a bill now in the legislature.
The bill, backed by the Maryland Consumer Rights Coalition, would allow these businesses to charge an upfront fee of $50 and then receive 15 percent of the total debt handled after the debt has been settled. The Maryland debt settlement industry is unregulated, with some businesses charging 20 percent of total debt upon client signup — which results in an upfront fee of $5,000 to handle a debt of $25,000, according to a coalition report.
Support for the bill, which was introduced by Del. Michael Vaughn (D-Dist. 24) to target companies preying on indebted Maryland residents, varies among Maryland companies.
“We have been very vocal supporters” of the bill, said Mike Croxson, president of CareOne, a debt settlement company that is part of Ascend One in Columbia. “It will do what’s missing in Maryland today.”
Others in the industry acknowledge that some companies have had problems with disclosure, but say they were symptoms of the industry’s growing pains and the industry has since developed secure oversight, said Dennis Strzegowski, managing partner of Mitigation America in Halethorpe.
Strzegowski said the bill now under consideration in Annapolis would make it impossible for debt settlement businesses such as his to operate if they must wait until settlement — sometimes a three-year process — to get paid.
“We hate it. It will absolutely crush business in the state of Maryland,” he said.
Mitigation America, with 12 employees, frequently informs clients how much has gone into their escrow account and how much has gone toward the company’s fee, Strzegowski said. He said clients get full disclosure and that the company ensures clients understand what they are getting into before finalizing their contracts.
Croxson also supports the bill’s efforts to enhance full disclosure and stop companies from making claims about the savings through their program. He said a statute allowing clients to receive a full refund within the first six months if they are not satisfied could be another worthwhile measure.
Read the full story Debt settlement firms split on bill to regulate fees.