Bill H.1051 (“Bill”), which seeks to establish an Act relative to the licensing and supervision of debt management services in the Commonwealth (“Act”), continues in the Massachusetts legislative process. The Bill, which was introduced on February 16, 2021, by Representative Daniel Cahill (D), was referred to the Joint House and Senate Committee on Financial Services on March 29, 2021, where it has remained since. The Committee is to study and review the Bill and determine whether it should be “reported” (“sent”) to a branch floor for further consideration.
The proposed Bill states that “[n]o person shall engage in or advertise for debt management services” in the state without a license. This broad language would require both backend and frontend debt settlement companies (“DSCs”) to be licensed before doing business in the state. Furthermore, licensees would be required to file a surety bond with the state (in an amount to be determined) and follow a series of other guidelines established by the Act, such as informing consumers with certain disclosures. DSCs would only be allowed to charge contingency fees on a single debt that are either proportional to the consumer’s total debt or a percentage of the amount saved by the consumer (this percentage cannot change from one debt to another), and consumers may cancel at any time with any unearned fees to be refunded within ten (10) business days of notice (with notice being deemed effective on the day consumer mails said notice). Both attorneys and payment processors would be exempt from the licensing requirement.
We will continue to monitor H.1051 and update you on its trajectory through the Massachusetts Legislature. If you would like to read the entire text of the proposed legislation, please click on the following link: