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Debt Settlement

Debt settlement is when a third party works with your creditors to reach an appropriate settlement amount that reduces the amount you pay and fulfills your financial obligation. “In Oregon, debt management service providers perform related services including debt settlement, some loan modification activities, credit repair, debt proration and other financial education programs,” according to the Oregon Department of Justice

Oregon Regulations

All debt management service providers in Oregon are regulated and the state provides strict guidelines for business practices. All debt Management Service Providers must register with the Division of Finance and Corporate Securities and consumers can search the database of licensed debt management providers to find the best match for their situation. Consumers are encouraged to report providers who do not follow the law to the Oregon Attorney General by calling 1-877-877-9392.

State law also provides fee schedule that all providers must follow. Debt service providers are required to charge no more than $50 for the initial visit. If the debt provider company pays the consumer's creditors directly each month, then the monthly fee can be up to 15 percent of the amount not to exceed $65 per month. However, if the provider holds the consumer's monthly payments for a future payoff, then the amount is calculated as 15 percent of the total debt at the time the contract is signed. Additionally, consumers can cancel any contract within three days of signing or at any time within 10 days written notice to the provider.

The Oregon Division of Finance and Corporate Securities strongly recommends that residents do not stop paying creditors at any time. “Ignoring your creditors can lead to serious damage to your credit or, in worse cases, bankruptcy. Debt management companies in Oregon should not advise you to stop communication with your creditors. In addition, they must perform a budget analysis that shows debt management services will be feasible and advantageous to you.”

Questions You Should Ask

While there are many agencies that offer debt settlement services in Oregon, it is important to find the right fit for you. The National Foundation for Credit Counseling recommends asking a lot of questions before signing a contract, including if the agency recommends that you stop paying your creditors, if it will be reported as “Paid by Settlement” on your credit report and what taxes on the forgiven debt you will be responsible for. Based on the Oregon state law, residents should also clarify if the provider will pay the creditors each month or put money in a bank account, since this affects the payment calculation.

Credit Counseling

“If you are struggling to get control of your finances or would just like to ask for advice, contact a licensed credit counselor but choose your credit counselor carefully," according to the Oregon Department of Justice. "There are many reputable credit counseling services out there, but there are also bad actors who take advantage of their clients by charging excessive fees and leading them further into debt.” 

Credit Counseling in Oregon

Finding a Credit Counselor

The Oregon Department of Justice recommends residents use an agency on the list maintained by the United States Department of Justice. Before selecting a credit counselor, check on the agency's complaint history with the Oregon Department of Justice.

Contact the organization and discuss their fee structure for credit counseling. “Any set-up fee or monthly fee should be reasonable, usually defined as $50 or less, with monthly fees in the $25 range. The agency should be willing to waive all fees in cases of true hardship,” according to the National Federation Credit Counseling. According to Oregon law, credit counseling agencies cannot charge more than $50 for the initial visit. The bill also states that additional fees can be charged by credit counselors for expenses in addition to the monthly fee and education courses. Additionally, the agency must charge the consumer the fee within 120 days of the contract signing.

Talk honestly with Them

Meet with your credit counselor and provide information about your financial situation. It is important that you accurately disclose you financial situation. Your counselor may provide advice or recommend a financial management course. Another option is a Debt Management Plan. That's where the agency negotiates with your lenders and pays your them directly.

If the credit counseling agency does not follow the laws of Oregon or engages in unethical business practices, call the Oregon Attorney General Consumer hotline at 1-877-877-9392.

Use the knowledge credit counselors provide

Follow the advice of your credit counselor and work to make lasting changes in your financial situation. Keep documentation of all credit counseling services and paperwork in case you need the information in the future.