March 11, 2019
This is a status report provided by the New Jersey State Bar Association on recently passed and pending legislation, regulations, gubernatorial nominations and/or appointments of interest to lawyers, as well as the involvement of the NJSBA as amicus in appellate court matters.
Legalization of for-profit debt adjusters gets nod from Senate Commerce Committee
A bill that would permit for-profit debt adjusters to operate legally in New Jersey received a unanimous vote, moving it out of the Senate Commerce Committee. The New Jersey State Bar Association opposes S-3499 (Pou) because the association believes there is the potential that for-profit debt adjusters may prey on vulnerable New Jersey citizens. Ronald I. Levine testified on behalf of the NJSBA before the committee last week, raising concerns about the bill and promising to work with the sponsor on potential amendments.
Levine, a member of the NJSBA’s Consumer Protection Law Group, was joined by David McMillin of Legal Services of New Jersey, who also opposed the bill. Both testified about the efficacy of existing nonprofit debt servicers that provide protections for consumers by regulating not just the practice of debt settlement, but also attorneys who advise clients on debt settlement as an ancillary service. Both argued that debt adjusters, which already operate illegally in New Jersey, are not necessary because of the availability of other resources, including nonprofits and bankruptcy attorneys, who are well-versed in the federal laws related to debt.
“Reputable nonprofit agencies, and attorneys providing ancillary services for clients, already provide all of the crucial services in this arena to New Jersey consumers, legally and effectively,” said the NJSBA. “New Jersey has long had an accessible and effective network of nonprofit credit counseling agencies that offer debt management in accordance with the existing New Jersey Debt Adjusters Act.”
In addition to protections governing nonprofit social service or credit counseling agencies or attorneys offering debt adjustment services in New Jersey, the act further limits the fees for debt adjustment services and requires credit counseling to post a bond and have its financial records audited annually with mandatory reporting. Also, acting as a debt adjuster without a license is a criminal violation and gives rise to private remedies under the Consumer Fraud Act.
The Fair Credit Council, which represents for-profit debt settlement providers, testified in favor of the bill, arguing that the federal laws in place protect consumers from practices such as advanced fee collection and counseling. However, the NJSBA argued that such protections fall shy of protecting consumers because of the lack of information regarding tax consequences and other avenues of debt settlement.
In 2012, the Law Revision Commission issued a report recommending adoption of the Uniform Debt-Management Services Act with New Jersey-specific amendments to “maximize the protections for New Jersey residents.” This includes the incorporation of language from the Federal Trade Commission Telemarketing Sales Rule, eliminating certain automatic exemptions from the law, prerequisites for entering into an agreement, mandatory agreement language, marketing and advertisement requirements, and remedies in the event of a violation of the act.
The association continues to monitor the bill’s progress and to work with the sponsor to create a consumer-friendly bill that protects vulnerable consumers.