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Since Kansas residents have been the victims of several large debt settlement scams, Kansas Attorney General Derek Schmidt cautions residents to research carefully before selecting a debt settlement firm. “Debt settlement or consolidation firms can sound like great opportunities to reduce your payments and help get out from under a mountain of debt, Schmidt says, "Unfortunately, many of these firms charge excessive fees and then do little to help you with your debt. Some companies have been known to charge fees up to 15 to 20 percent of the debt.”
Debt settlement agencies must follow the regulations set forth in the Chapter 50 Unfair Trade And Consumer Protection Article 11: Credit Services Organizations. The state law defines credit service organizations as “a person who engages in, or holds out to the public as willing to engage in, the business of debt management services for a fee, compensation or gain, or in the expectation of a fee, compensation or gain.” All credit services must be registered with the Kansas Office of State Bank Commissioner, and consumers interested in debt settlement services should select an agency from the approved list.
Questions you should ask
While there are many agencies that offer debt settlement services in Kansas, it is important to find the right one. The National Foundation for Credit Counseling recommends asking specific questions before signing a contract. For example, be sure to ask the company if they will recommend that you stop paying your creditors, if the settlement will be reported as “Paid by Settlement” on your credit report, and what taxes on the forgiven debt you will be responsible for.
You should also ask detailed questions about the fees, including if the fees are due in advance, on a monthly basis or after the settlement. Kansas law says credit services organization cannot charge more than $50 for the initial visit. For ongoing fees, an agency can only charge $20 per month or $5 per creditor, whichever is less.
“During difficult economic times, my office receives many calls from Kansans looking for help managing their debt. Unfortunately, scammers or others who break the law sometimes try to take advantage of consumers who are in difficult financial situations,” says Kansas Attorney General Derek Schmidt. To protect consumers, Kansas has a state statute (Chapter 50 Unfair Trade And Consumer Protection Article 11: Credit Services Organizations) that outlines acceptable business practices for credit counseling agencies.
By understanding the credit counseling process and state laws in Kansas, and the regulations designed to protect consumers, you can find a reputable agency to help you get your finances back on track.
Steps For Successful Credit Counseling
Contact An Agency
The Kansas Office of State Bank Commissioner maintains a list of licensed credit services agencies allowed to conduct business in the state. Since Kansas requires all credit organizations to register and have a surety bond, you should only do business with approved agencies.
Ask About Fees For Credit Counseling
Kansas state law mandates that the fee for the initial visit must be $50 or less, but that the consumer is responsible for the fees for the credit report. The monthly fees must be $5 or less per creditor and total no more than $20 per month. If you do not enter a debt management plan, the agency is allowed to charge you $50 per counseling or educational program. The Attorney General says that licensed firms charging excessive fees have been a particular problem in Kansas with some companies charging fees of 15% to 20% of the debt. If a company charges you more than the allowable fees, report the organization to the Kansas Attorney General, and the agency will be required to return the fees to you.
Meet With Your Counselor
Your counselor may provide advice or recommend a financial management course. Another option is a debt management plan, which involves the agency negotiating with your lenders. You would then make a monthly payment to the agency, which pays your creditors directly.
Follow The Counselor’s Advice
The advice you receive is valuable. Follow that advice, set a budget and make changes. Keep documentation of all credit counseling services and paperwork in case you need the information in the future.