Illinois HB4781 Eliminates Consumer Debt Relief Choices

HB4781 Eliminates Consumer Debt Relief Choices, Forces More Illinois Consumers Into Bankruptcy

Debt Settlement Industry Exec Calls Legislation ‘Gift to Credit Card-Issuing Banks’

The Illinois State Legislature recently passed HB4781, a bill that would place such stringent restrictions on debt settlement companies that it would effectively make debt settlement obsolete in the state. The bill has been praised as a consumer protection action, but if signed into law, it would harm consumers by eliminating a viable option for many consumers who struggle with unmanageable debt.

Most public information about this legislation has not included the perspective of debt settlement firms. “Like any industry, the debt settlement industry has a few bad apples, but many debt settlement firms are working diligently to operate transparently, under solid ethical standards,” said Andrew Housser, co-founder and CEO of Freedom Debt Relief, LLC (FDR).

Housser’s company is one of the nation’s largest debt settlement firms, having settled nearly 1,800 individual creditor accounts for Illinois consumers in 2009. Those accounts had a face value of $9.4 million, with a settled amount of $3.9 million, meaning that FDR saved its clients $5.5 million last year alone in Illinois. Nationwide, FDR settled more than 56,000 accounts in 2009, with face values of almost $300 million.

“We welcome a conversation with regulators, legislators and particularly consumers about enacting strong, consumer-centric regulation in Illinois, as well as the rest of the country,” continued Housser. “But our industry performs a real service for consumers. Putting it out of business by creating an unreasonable climate is not good for those consumers, not good for the businesses that serve those consumers — including the mortgage and credit card industries that rely upon consumer payments — and not good for the beleaguered economies of many states, including Illinois.”

Housser is available to discuss the following points pertinent to this legislation:

  1. Fee structure outlined for debt settlement companies: The fee structure provided for in the bill is so restrictive that debt settlement companies operating under the statute would be unable to cover even a fraction of their costs. “The fee structure effectively produces an outright ban on debt settlement services in Illinois,” said Housser.
  1. Impact of bill on credit counseling agencies: While severely limiting the fees charged by debt settlement companies, HB4781 actually increases the fees that credit counseling firms can charge. These firms — which do not reduce consumers’ debt obligations, but rather establish plans to repay obligations in full — typically collect fees that, according to Housser, are up to six times higher than the fees that debt settlement companies can charge under the bill.
  1. Removal of a consumer option: If all debt settlement firms terminate services in Illinois, options will be drastically limited for people who have accumulated extensive unsecured debt. Many of them will be forced into bankruptcy as the only other viable option. In Illinois, the number of people filing bankruptcy already jumped from 40,000 in 2007 to more than 72,000 in 2009.(1)
  1. Penalization of ethical companies: Leading debt settlement firms have transparent business practices that are clearly presented on their Web sites, in their literature and by their employees. They operate across many states, and they are in favor of rules or regulations that will discourage unethical or illegal practices. “This bill paints all companies with the same brush and throws the baby out with the bathwater,” said Housser.
  1. Gift to credit card companies: According to Housser, the Illinois bill effectively shifts negotiating leverage away from the consumer and to creditors, making credit card companies and collection agencies the real benefactors. “The bill is effectively one giant gift to the credit card banks,” he concluded.
  1. Debt settlement industry size, operations, statistics: As co-founder and CEO of FDR, and a member of the board of The Association of Settlement Companies (TASC), Housser is an expert on the industry and can discuss anything pertaining to debt settlement company operations.

“While we support strong, consumer-centric regulation in our industry, the Illinois legislation directly harms the individuals it seeks to protect — consumers — by stripping them of what may be their only realistic option to settle their debt outside of bankruptcy,” explained Housser. “Some consumers may not even qualify for bankruptcy due to changes in the 2005 bankruptcy law. They will be left at the mercy of the credit card companies and collection agencies. In our current economic climate, taking away consumer options is just not right.”

About Freedom Debt Relief (
Freedom Debt Relief provides consumer debt settlement services. Working for the consumer to negotiate with creditors and lower principal balances due, the company has served more than 80,000 clients since 2002. The company is a member of The Association of Settlement Companies and the International Association of Professional Debt Arbitrators. FDR holds the Goldline Research Preferred Provider certification for excellence among debt settlement companies.

Freedom Debt Relief is a wholly owned subsidiary of Freedom Financial Network, LLC (FFN). Based in San Mateo, Calif., FFN also operates offices in Sacramento and Tempe, Ariz. The company, with 600 employees, was voted one of the best places to work in both the San Francisco Bay area and the Phoenix area in 2008 and 2009.

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