Debt settlement services include any service or program that negotiates, settles, reduces, or in any way alters the terms (e.g., payment terms, balance reduction, interest rate, fees) of a debt between a consumer and one or more unsecured creditors or debt collectors. Debt settlement services are different from debt management services under Maryland law. Debt management services take payments over a long period of time and distribute the payments among the person's creditors. Debt settlement services negotiate to settle a consumer's debt.
Read the Law: Md. Code, Financial Institutions § 12-1001; § 12–901
In Maryland, companies that offer debt settlement services must register with the Commissioner of Financial Regulation through the National Multistate Licensing System (NMLS), including payment of registration fees.
Read the Law: Md. Code, Financial Institutions § 12–1004; § 12-1006
A debt settlement services agreement is a written contract, plan, or agreement between a debt settlement services provider and the consumer for the performance of debt settlement services. There are very specific requirements for what must be included in a debt settlement services agreement. For example, for debt settlement services agreements for student education loan debt relief, there are required statements, including a specific disclosure that the company is not affiliated with the U.S. Department of Education and is not a lender.
Read the Law: Md. Code, Financial Institutions § 12-1001; § 12-1012
A consumer may withdraw from a debt settlement services agreement at any time, without being charged a penalty. However, the debt settlement service may collect fees that were earned in compliance with Maryland law.
Read the Law: Md. Code, Financial Institutions § 12–1010
A debt settlement service cannot charge a consumer a fee for consultation or for obtaining the consumer's credit report. The debt settlement service also cannot require a voluntary contribution from the consumer for any provided service.
A debt settlement service can only charge the consumer a services fee after:
- a debt settlement services agreement has been executed by the consumer and the debt settlement service;
- the debt settlement service has renegotiated, settled, reduced, or otherwise altered the terms of at least 1 individual debt specified in the debt settlement services agreement; and
- the consumer has made at least 1 payment in accordance with the debt settlement services agreement.
Read the Law: Md. Code, Financial Institutions § 12–1010
If the debt settlement service establishes a bank account for holding its customer’s money, it must file a $50,000 surety bond with the Commissioner of Financial Institutions.
Read the Law: Md. Code, Financial Institutions § 12–1014
If a debt settlement service engages in the business of student education loan debt relief, the service cannot advise (expressly or by implication) that the consumer stop making payment to or stop communicating with the student loan service.
Read the Law: Md. Code, Financial Institutions § 12–1012.1
A violation of this law is an unfair or deceptive trade practice under Maryland law. Anyone who violates the law is subject to fees and penalties associated with the violation.
Read the Law: Md. Code, Financial Institutions § 12–1016