Massachusetts State Legislator introduces an Act relative to the licensing and supervision of debt management services in the Commonwealth.

On January 18, 2023, Massachusetts Representative Daniel Cahill (D) introduced Bill HD.1676 (“Bill”), which seeks to establish an Act relative to the licensing and supervision of debt management services in the Commonwealth (“Act”). HD.1676 has been filed in the Massachusetts House Docket, where it will be referred to the appropriate Standing House or Joint Committee. The Committee will study and review the Bill and determine whether it should be “reported” (“sent”) to a branch floor for further consideration. 

The proposed Bill states that “[n]o person shall engage in or advertise for debt management services” in the Commonwealth without a license. Based on the broad language of the Commonwealth’s proposed definition of “debt management services,” companies engaging in or advertising debt settlement services (i.e., both backend and frontend debt settlement companies (“DSCs”)) would meet this definition and would be required to be licensed before doing business in the Commonwealth, as well. Furthermore, licensees would be required to file a surety bond with the Commonwealth (in an amount to be determined) and follow a series of other guidelines established by the Act. The Bill would also prohibit DSCs from exercising a power of attorney to settle debts on behalf of the consumer and impose fee caps. DSCs would only be allowed to charge contingency fees on a single debt that is either proportional to the consumer’s total debt or a percentage of the amount saved by the consumer (this percentage cannot change from one debt to another). Both attorneys and payment processors would be exempt from the licensing requirement. 

We will continue to monitor HD.1676 and update you on its trajectory through the Massachusetts Legislature. If you would like to read the entire text of the proposed legislation, please click on the following link: