Debt Settlement Firms Recruit Veteran Cincinnati Lawmaker To Protect Them From Ohio Fee Caps
– “Too many of these companies are taking the last dollar out of consumers’ pockets – and far from leaving them any better, pushing them deeper into debt, even bankruptcy.” – former chairman of the Federal Trade Commission Jon leibowitz, July 29, 2010.
– “With the average American having thousands of dollars in credit card debt, debt settlement services can seem very appealing. But far too many of these companies are breaking their promises and leaving consumers in an even worse financial situation. “ – Ohio Attorney General Mike DeWine, March 12, 2012.
Sneaking through the Ohio legislature, without getting a word of the media coverage, is a bill that would knock a Buckeye State welcome mat down in an industry riddled with fast-paced artists.
So-called “debt settlement” companies are among the many potential saviors of people drowning in credit card debt. In this system, customers are usually asked to stop repaying their debts, but to accumulate sequestered sums of money that companies can return to creditors in exchange for a lower repayment amount. It is only after they are successful that they are supposed to charge a fee.
But abuse skyrocketed in the late 2000s during the Great Recession. US General Accounting Office Identifies Allegations Involving “Hundreds of Thousands” of Consumers Across Country complain about “fraudulent, abusive or deceptive practices”. The FTC banned settlers from debt charge an upfront fee in 2010. In 2013, more than half of the states had reduce costs companies hired to help dissipate debt.
Ohio was way ahead of the pack. In 2004, its Republican-controlled legislature and Republican Governor Bob Taft Fee ceilings adopted about businesses that help people “adjust, compromise or pay off” their debts. One limits “consulting fees or contributions” to $ 100 per year. Another caps a debt management or similar plan fee at 8.5% of a person’s monthly debt payments, or $ 30, whichever is greater.
But the debt settlement industry, led by its American Fair Credit Council trade group, has stepped up its lobbying efforts to repeal fee caps. There is not only a couple, but eight registered lobbyists working on his behalf in the Ohio Legislature.
Which lawmakers have determined that Ohioans need better access to debt relief merchants who can charge what they want?
In the House, it would be Bill Seitz, Township of R-Green. He presented the same bill as a senator in 2015, but his colleagues accepted a pass. The AFCC was however grateful and made Seitz his keynote speaker at a conference the following April – in New Orleans. The two-day affair took place at Ritz Carlton Hotel in the French Quarter. AFCC picked up Seitz’s $ 929 travel and accommodation tab.
The 2017 edition of the bill makes the most progress in the Senate, where another Republican from the Green Township, Lou Terhar, is the only co-signer of the sponsor of the invoice John Eklund of northeastern Ohio. The Senate Insurance and Financial Institutions Committee held three hearings, but did not plan to vote.
CityBeat asked Seitz and Terhar why they would eliminate the caps on the state’s debt relief fees. Terhar never responded. Seitz, by e-mail, took the position that the Ohio Debt Adjuster Act, and therefore fee caps, do not apply to debt settlement companies.
This is contrary to previous interpretations. The Ohio Legislative Services Commission, which analyzes all bills, considered a similar, industry-friendly bill introduced in 2013 by Terhar and Dale Mallory, a Democrat from Cincinnati who is no longer in office. He wrote that debt settlement services probably fall according to the definition of “debt adjustment” and are subject to Ohio fee caps.
The jurisprudence of the Ohio courts also contradicts Seitz’s position.
In a 2012 lawsuit against California debt colonizer Jeremy Nelson, Attorney General DeWine cited the Ohio Debt Adjuster Act when he accused Nelson of charging higher fees than the law allows. Franklin County Common Pleas Judge Colleen O’Donnell ruled in favor of the state in 2014. In her 11-page order, she found that Nelson met the definition of a “claims adjuster” and broke the law.
Colorado reinstated fee caps
The lack of media coverage of Ohio bills denies notoriety of the debt settlement industry. The US Department of Justice has repressed on rogue players. The Consumer Federation of America compares hiring debt settlement agents to play the lottery. US Consumer Financial Protection Bureau Says Debt Settlement Can Leave People more in debt than they were. The Center for Responsible Lending says fees can be high, even when all or most of the debt is not negotiated.
Pamela Maggied, bankrupt Columbus lawyer, testified against Senate Bill 120 on October 3.
“These harassed and desperate people are not always able to separate the unscrupulous and the greedy from the legitimate,” she said. “Often they think they don’t have time to shop, study and evaluate alternatives; they just grab the nearest rope.
“Lifting state limits on fees that can be charged by adjusters could make their situation worse,” Maggied said. “It could make Ohio a better place for an unscrupulous debt adjustment company to ply their trade, and put more desperate Ohioians in financial stalemate.”
In 2011, Colorado did what Seitz and Terhar are asking the Ohio legislature today: to remove its fee caps, which had been set at 18 percent of total debt owed. After the repeal, the fees increased by up to 25 percent, observed state. Now, under a new law, “debt management” companies must adhere to rigorous standards for registration, disclosure, business practices and fees.
“Colorado data showed that more than half of consumers who participated in the program did not complete it – and terminated the program within two years,” said Kalitha Williams, from the liberal think tank Ohio Policy Matters, before the Senate Insurance and Financial Institutions Committee on October 3.
The most common ways to deal with crushing credit card debt is to bring in a consumer counseling company, which is usually a non-profit, and file for bankruptcy. The fees of consumer advisers are subject to state fee ceilings. Lori Pollack, Executive Director of the Financial Advisory Association of America, claims that fees are systematically waived or reduced for customers in difficulty.
“The profiteers of poverty”
Randy Williams, President of A debt coach in Florence, Ky., is one such credit counselor. He was stunned by the move to open the floodgates for debt relief companies by removing fee caps. Bigger companies, he says, play by the rules and provide a legitimate service. The rest, he considers it as “fly by night”.
Williams offers his point of view on the debt settlement method in a video on its website. Removing the cost cap, he said, would be like releasing a lion on a flock of sheep.
“I find it interesting that the elected representatives of the people are trying to change the law to harm the people they represent,” Williams said. “I guarantee you that no one ran for office on this platform. The people of the West Side need to know what’s going on.
Dr Troy Jackson, director of the AMOS project, a non-profit social justice group in Walnut Hills, praises Seitz’s work on mass incarceration, but says his bill for the debt settlement industry is flawed.
“At a time when our nation calls for protections for consumers who suffer from the profiteers of poverty, Representative Seitz has the audacity to go after those who profit from the poor,” Jackson said.
“Far too many in Cincinnati, Ohio and the United States find themselves in a perpetual spiral of increased debt and higher interest, reminiscent of the days of sharecropping and corporate stores,” he says. . “When it comes to standing up for the profiteers of poverty, Representative Seitz is on the wrong side of justice, on the wrong side of his district and on the wrong side of history.”
CONTACT JAMES McNAIR at [email protected], 513-914-2736 or @jmacnews on Twitter