A new bill in the Ohio Senate would allow for debt settlement companies to operate in Ohio.
Debt settlement is a billion-dollar industry in which for-profit operators charge a fee to negotiate with creditors on a debtor’s behalf.
Sponsoring Sen. Bob Hackett (R-London) said consumers deserve this option, which he says isn’t available now because bankruptcy lawyers have shut them out of the state.
"Truthfully, the bar has a lot of attorneys who make money on bankruptcy filings – everybody knows that. And we’ve been told that’s what drives their opposition to this bill," Hackett said. "But Ohio should not seek to drive its citizens into bankruptcy simply because it benefits a particular business model. In the end, this bill doesn’t mandate the use of debt settlement services – it simply allows Ohioans to consider them as an option."
Hackett was joined at the announcement of his bill by former Attorney General Betty Montgomery and the CEO of the American Fair Credit Council, Denise Dunckle. The American Fair Credit Council is the national debt settlement companies' association and Montgomery lobbies for them in Ohio.
Hackett said a similar bill passed a Senate committee in the last session. But he thinks this time the bill has a better shot, because of an Ohio Supreme Court ruling last year in the case of a non-attorney who set up a debt settlement business. The court ruled 5-2 that there's nothing in state law saying a nonlawyer negotiating to settle a debt for someone else is engaging in the unauthorized practice of law.
Ohio State Bar Association CEO Mary Amos Augsburger said in a statement:
"The Ohio State Bar Association is proud of its work to litigate, on behalf of Ohio consumers, numerous cases against the kinds of out-of-state debt companies now looking for the General Assembly’s blessing to operate more widely in Ohio. The terms and obligations of these debt settlement agreements are often legal in nature and as such, we continue to believe Ohio consumers are best protected by lawyers who can properly advise them and are ethically required to act in their best interests."
And consumer advocates say debtors can often negotiate with their creditors themselves for free.
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