California Looks at Debt Settlement

The State of California is looking to create laws to oversee debt settlement providers and their operations in the Golden State.

The efforts have attracted the guidance of the major industry organization United States Organization of Bankruptcy Alternatives, who generally support and help shape sensible consumer protection laws for the industry.

The Debt Settlement Service Act would set an upper limit for fees, require a good-faith estimate of the amount of time needed to complete the program, permit lawsuits for failure to comply, and set up a licensing procedure for settlement companies.

“As we grapple with an unprecedented downturn in our economy, many Californians depend on these companies to help alleviate their dire financial situation,” said Assemblymember Ted Lieu, a proponent of the bill, in a written statement. “Oversight is imperative to ensure that the public is not being led into further financial trouble.”

The bill has not yet been passed into law and is still winding through the legislative process.

USOBA has helped develop laws in several states, most recently in Montana, which passed a set of debt settlement rules earlier in 2009.