This has been a largely unregulated industry, as what they do hasn’t quite fit into either lenders or banks.  Therefore, no one monitors what these companies have been doing up front, and only when some people complain later on do these companies have to try to justify themselves.  And, unfortunately, many times there’s nothing that can be done because the consumers signed legitimate contracts, with legitimate being highly speculative, but as always, buyer beware.

It was with this in mind that some states, such as Oregon, are now passing laws to try to regulate these types of companies.  The Oregon House of Representatives recently voted 46-14 in favor of requiring debt management agencies to register with the state Department of Consumer and Business Services. It also limits fees that agencies can charge, caps the amount they can take for settling debt, regulates advertising and specifies other protections for consumers.

That part wasn’t so bad for these companies.  What they, and some of the representatives who voted against it didn’t like, was the cap amounts themselves.  The bill set a one-time maximum of $50 to open a file; reasonable costs for counseling up to $50; and up to 15 percent of funds consumers deposit in trust accounts, not to exceed $65 per month. Also, the agency can take no more than 7.5 percent of the difference between the original debt and the amount paid in settlement at the end of the process.

This contrasts greatly with those debt consolidation companies that take money from the consumers on both ends of the spectrum, up front when clients need help the most, then on the back end, after waiting until their clients credit has been destroyed, with a cut of the savings they’ve induced with creditors.

Of course, Oregon isn’t the only state that’s getting into the act.  Along with assistance from the Federal Trade Commission, 24 other states are starting to take a better look at not only debt consolidation companies, but also companies that purport to repair the credit reports of consumers.  It seems that an overwhelming majority of these companies turn out to be shams, taking consumers cash up front, then often not taking even the basic steps of making one or two phone calls on their behalf.

Consumers who wish to look into ways to consolidate their debt, or protect their credit reports, need to be aware that often, the best person to work for them is themselves.