Bill Text: NJ SCR103 | 2020-2021 | Regular Session | Amended

Bill Title: Urges efforts at state and federal levels to protect minority communities through better regulation of debt settlement companies.*

Spectrum: Slight Partisan Bill (Democrat 2-1)

Status: (Engrossed) 2021-01-13 - Reported out of Assembly Comm. with Amendments, 2nd Reading [SCR103 Detail]

Download: New_Jersey-2020-SCR103-Amended.html

[First Reprint]








Sponsored by:


District 28 (Essex)


Co-Sponsored by:

Senators Addiego and Cruz-Perez






     Urges efforts at state and federal levels to protect minority communities through better regulation of debt settlement companies.



     As reported by the Assembly Consumer Affairs Committee on January 13, 2021, with amendments.


A Concurrent Resolution urging efforts at the state and federal levels to protect minority communities 1[from certain practices] through better regulation1 of debt settlement companies.


Whereas, The General Assembly recognizes that debt settlement companies, which 1[claim to]1 settle, renegotiate, or in some way change the terms of a person's debt to a creditor, 1[cause] can offer1 significant 1[problems for borrowers, often increasing debt while complicating the process of becoming] benefits to consumers wishing to become1 debt free; and

Whereas, Debt settlement companies 1[suggest that they are "negotiating] negotiate1 with creditors to settle 1delinquent1 debt for less than what is 1[owed" and can require that consumers stop making payment, ] owed, a process that1 usually 1[for] takes1 two to three years 1[, while they negotiate a settlement]1; and

Whereas, Stopping payments causes accounts to default, resulting in additional late payments, late fees, and other penalties that will be added to the amount already owed; and

Whereas, 1[Debt settlement] Stopping payments1 will have a negative impact on consumers' credit scores and make it more difficult to access affordable credit, since 1[debt settlement remains] delinquencies remain1 on a credit report for 1[seven] several1 years and not paying the full amount owed or missing payments 1[while negotiating a settlement lowers] can result in lower1 credit scores; and

Whereas, A fee is normally charged by debt settlement companies to negotiate on a consumer's behalf and can be as much as 1[20] 181 to 25 percent of the 1[final settlement] original amount1 owed, which means a consumer with a $5,000 settlement 1of a $10,000 debt1 may have an additional 1[$1,000 to $1,250] $1,800 to $2,5001 in fees to pay; and

Whereas, Lenders are under no obligation to accept settlement offers and in fact, some lenders refuse to work with debt settlement companies; and

Whereas, There can be negative tax consequences from using a debt settlement company, as whatever amount of debt is forgiven may be considered as income and require that the consumer list this amount as income on their tax returns; and

Whereas, 1[These companies often disproportionately operate in] It is important to protect1 minority communities, where individuals and families often have fewer resources to draw on when they come under financial pressure; now, therefore,


     Be It Resolved by the Sente of the State of New Jersey (the General Assembly concurring):

     1.    The Legislature supports efforts at the state and federal levels that ensure debt settlement companies are subject to basic consumer protections, including licensing, regular examination, and prominent mandatory disclosure.


     2.    The Legislature recognizes that these services do not release a consumer from existing debt, and that ceasing to make payments without the consent of the creditor may damage the consumer's credit score and may subject the borrower to collections activities, additional fees, and interest.


     3.    The Legislature urges states, including New Jersey, to consider legislation restricting 1[debt settlement companies'] the making of1 unsafe or unsustainable loans directly or indirectly to consumers.


     4.    The Legislature encourages the federal government to conduct a comprehensive review of its oversight of debt 1[servicing] settlement1 companies, to include a review of federal bankruptcy rules; how debt settlement companies act as credit counseling services; the status of these companies as money servicing businesses; and a review of the enforcement of current laws and regulations by the Consumer Financial Protection Bureau and Federal Trade Commission.


     5.    Copies of this resolution, as filed with the Secretary of State, shall be transmitted by the Clerk of the General Assembly or the Secretary of the Senate to the President of the United States, the Vice President of the United States, members of the United States House of Representatives and United States Senate, the United States Secretary of the Treasury, and to other federal and State government officials as appropriate.