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AARP Urges Illinois Governor to Sign the Debt Settlement Consumer Protection Act

HB 4781 Would Give Consumers the Strongest Protections in the Nation against Fraudulent Debt Settlement Agencies

SPRINGFIELD, Ill., May 7 /PRNewswire-USNewswire/ — Burdened with piling debt in a down economy, thousands of Illinois consumers contact debt settlement agencies in search of help – only to find huge fees, deceptive business practices, and often times no solutions to their problems. But legislation passed by the General Assembly on May 6 will help protect Illinois consumers who have fallen victim to unfair debt settlement practices, with the strongest consumer protections in the nation. No other state has passed similar types of measures.

House Bill 4781, backed by AARP and dozens of consumer advocates, and sponsored by Representative Marlow Colvin and Senator Jacqueline Collins, passed both chambers of the General Assembly, with strong bipartisan support. The bill will provide much-needed protections for debt settlement consumers.

“Older individuals tend to accumulate higher credit card debt, and often fall prey to unscrupulous debt settlement firms,” said AARP Illinois Senior Manager for Advocacy and Outreach, Nancy Nelson. “AARP commends Representative Colvin and Senator Collins for their leadership on this issue. On behalf of our 1.7 million Illinois members, we urge the Governor to enact this critical piece of legislation.”

AARP surveys found that more than one in five debtors were over the age of 55; 27 percent of AARP members reported having difficulty paying off credit card debt; and nearly half – 44 percent – consider credit card debt to be a major concern.

Debt settlement companies typically advertise that they can settle all of a consumer’s credit card debt in 24 to 36 months for less than 60 percent of the amount owed. But what they are not telling consumers is that in the vast majority of cases most of the debts are not settled, even after all fees have been paid.

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Industry data reveals that 1,000 debt settlement firms handle $18 billion in debt across the nation, with the average customer owing about $30,000 in credit card debt.

HB 4781 would protect Illinois consumers by, among other things:

  • Prohibit all up-front and monthly fees except for a one-time $50 application fee;
  • Cap fees at 15% of the savings achieved from settling a debt;
  • Prohibit debt settlement companies from advising consumers to stop payments to creditors;
  • Allow cancellation of a contract at any time, with prompt refund of fees;
  • Require debt settlement companies to be licensed and bonded by the state;
  • Prohibit deceptive promises through advertising or marketing, of specific debt reduction results.

Source: AARP Illinos

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Steve Rhode

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