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Illinois lawmakers pass debt settlement bill
By Sam Craine on May 13th, 2010
Legislators in Illinois recently passed a bill that would further regulate debt settlement companies that do business in the state.
The legislation, which is being sent to Governor Pat Quinn, would prevent debt settlement companies from charging an upfront fee. However, the law would allow these firms to charge a one-time $50 fee for enrollment.
Rather than upfront fees, debt settlement companies will collect fees once they deliver on their promise to take care of a consumer's debt. Some consumers have encountered organizations that may charge fees in the beginning, only to never provide any services.
"They claim they're able to pay off your debt for a fraction of what's owed, but most times, this turns out to be a scam," Attorney General Lisa Madigan said.
When they charge fees for successfully settled debt, they may not amount to more than 15 percent of the total saved by the consumer in the program. Similar legislation has also been introduced at the federal level.
Attorneys general in a number of other states have come out to warn consumers about debt settlement companies that charge upfront fees for services. By asking for these fees but not settling the debts, these companies can leave consumers further in the hole.
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