Minnesota legislature passes tougher regulations for debt settlement firms
The Minnesota Legislature passed a new law, The Debt Settlement Protection Act, that will further regulate debt settlement firms doing business in Minnesota. As reported by the Star-Tribune, the law, which goes into effect on August 1, will prevent debt settlement firms from advising consumers to stop paying their creditors and from charging excessive fees before performing any services. The law also prohibits other misleading conduct by debt settlement firms, such as telling consumers that debt collectors cannot sue them or garnish their wages if the consumer signs up with the debt settlement firm.
I’ve written several articles cautioning consumers about for-profit debt settlement organizations. This legislation has the potential to eliminate many of the most misleading practices used by debt settlement firms. But consumers still should understand that it takes two parties to settle a debt, the consumer and the creditor. And most consumers are more than capable of negotiating with their creditors themselves, without paying money to a debt settlement firm.