The state Senate Commerce Committee heard extensive testimony on A1739 (McKeon)/S2989 (Pou), which makes certain for-profit debt adjusters eligible for licensing to conduct business in New Jersey. The measure was voted out of committee last week. The New Jersey State Bar Association opposes this legislation “because it would open up the abuses that are widespread in the states that permit for-profit debt adjustment.”
Testifying alongside David McMillin, an attorney with Legal Services of New Jersey, NJSBA member Ronald LeVine, past chair of the Consumer Protection Committee, warned the committee that the field of for-profit debt adjusters is riddled with criticisms including failures to warn consumers about the implications of charge offs, the adverse effects of long-term debt resolutions that often fail, and failures to inform consumers of other, more viable options, such as bankruptcy.

“The unfortunate bottom line is that the promise of debt settlement operators is almost never realized, despite the high fees they charged,” said the NJSBA in a statement. “The Better Business Bureau has determined that for profit debt settlement is an inherently problematic type of business and the United States General Accountability Office completed an investigation finding that ‘debt settlement companies engaged in fraudulent, deceptive, and abuse practices pose a risk to consumers already in difficult financial situations.’”
Sponsors defended the bill as offering a tool for consumers attempting to resolve debts without declaring bankruptcy. By regulating the industry, consumers will be further protected because rules will be in place to stop the bad behavior, said Sen. Nellie Pou.
Sen. Robert Singer pointed out that the legislation “will remove existing regulations to bring New Jersey in line with the rest of the country and, at the same time, provide a layer of protection for consumers by serving as a deterrent against adjusters who set out to deceive customers.”
LSNJ’s McMillin, whose agency provides free legal representation to low-income residents, testified on his personal experience with these companies. He pointed to non-profit credit counseling agencies as an option short of bankruptcy where people can go to not only be educated on how to resolve the debt, but also to learn about other options such as bankruptcy
Sens. Joseph Cryan and Gordon Johnson urged further review of the bill to include more protections for consumers before voting the bill out of committee. Sen. Jon Bramnick abstained.
The bill was heard “for discussion only” last month and remains pending in the Assembly Consumer Affairs Committee. It has not yet been posted for a vote in either house.