SS 037-23 Scope Statement

States that have authorized companies to utilize the “percentage of debt” model subject to fee maximums include: Louisiana (12 percent cap), New Hampshire (10 to 15 percent, depending on the duration of the plan), Michigan (15 percent), Minnesota (15 percent), Washington (15 percent), Delaware (18 percent), Iowa (18 percent), Idaho (20 percent), Montana (20 percent), and Virginia (20 percent).[9]

States that have authorized companies to utilize the “percentage of savings” model subject to fee maximums include: Connecticut (10 percent), Illinois (15 percent), Maine (15 percent), Iowa (30 percent), Minnesota (30 percent), North Dakota (30 percent), Rhode Island (30 percent), and Virginia (30 percent).[10]

In addition, Oregon has authorized a “hybrid” fee structure, allowing companies to charge fees totaling up to 15 percent of the enrolled debt plus up to 7.5 percent of the savings achieved.[11]

Other states either prohibit for-profit debt settlement services, impose fee structures that predated the Telemarketing Sales Rule, or do not establish a fixed maximum percentage that such companies may charge under a “percentage of debt” or “percentage of savings” model.

8. Anticipated economic impact of implementing the rule (note if the rule is likely to have a significant economic impact on small businesses):

As noted in section 6 above, the proposed rule seeks to authorize additional fee structures that align with the requirements of the Telemarketing Sales Rule, but it would not eliminate or reduce the maximum fees that current licensees may charge under existing fee structures authorized by Wis. Admin. Code ch. DFI-Bkg 73. For that reason, the Division does not anticipate the proposed rule would materially impact existing licensees.

For consumers, updating Wis. Admin. Code ch. DFI-Bkg 73 to allow alternative fee structures subject to fee caps is likely to increase the number of licensees offering debt settlement services, better ensure that such companies will address consumer complaints (because their license may be at risk if they do not), and better safeguard them from being charged unreasonable fees for the services provided.

Contact Person:

Matthew Lynch

Chief Legal Counsel

Wisconsin Department of Financial Institutions

PO Box 8861

Madison, WI 53708-8861

[e-mail]

1

Morgan Drexen, Inc. v. Wis. Dep’t of Fin. Insts., 2015 WI App 27, ¶ 11, 361 Wis. 2d 271, 862 N.W.2d 329 (quoting JK Harris Fin. Recovery Sys. LLC v. Wis. Dep’t of Fin. Insts., 2006 WI App 107, § 15, 293 Wis. 2d 753, 718 N.W.2d 739).

2

Wis. Stat. § 218.02(7). See also Wis. Stat. § 227.01(13) (defining a “rule” to include a “general order of general application that has the force of law and that is issued by an agency to implement . . . specific legislation enforced or administered by the agency”).

3

Wis. Admin. Code § DFI-Bkg 73.01. An adjustment service company may also accept voluntary contributions in limited amounts from the customer’s creditors, see id., but that practice is atypical for companies engaged in debt settlement.

4

16 C.F.R. §§ 310.2(o), 310.4(a)(5)(i).

5

16 C.F.R. § 310.4(a)(5)(i)(C).

6

Wis. Stat. § 227.01(13) (general orders are considered rules subject to chapter 227 rulemaking requirements).

7

Wis. Stat. § 218.02(7).

8

See generally 16 C.F.R. §§ 310.3, 310.4.

9

La. Rev. Stat. § 2592; N.H. Rev. Stat. § 399-D:15.V; Mich. Comp. L. § 451.428(1); Minn. Stat. § 332B.09, subdiv. 2(1); Wash. Rev. Code § 18.28.080(1); 6 Del. Code § 2423A(d)(2)(C); Iowa Code § 533A.9.4.b(1); Idaho Code § 26-2229(3); Mont. Code § 30-14-2103; Va. Code § 6.2-2041.

10

Conn. Gen. Stat. § 36a-671b(b) & State of Connecticut Department of Banking, Debt Negotiation Schedule of Maximum Fees, available at https://portal.ct.gov/DOB/Consumer-Credit-Licensing-Info/Consumer-Credit-Licensing-Information/Debt-Negotiation-Schedule-of-Maximum-Fees; 225 Ill. Comp. Stat. § 429/125; 32 Me. Rev. Stat. § 6174-A.2.B; Iowa Code § 533A.9.4.b(2); Minn. Stat. § 332B.09, subdiv. 2(2); N.D. Cent. Code § 13-11-21; R.I. Gen. Laws § 19-14.8-23(d)(2); Va. Code § 6.2-2041.

11

Ore. Rev. Stat. § 697.692(1)(d, e).