This is a status report provided by the New Jersey State Bar Association on recently passed and pending legislation, regulations, gubernatorial nominations and/or appointments of interest to lawyers, as well as the involvement of the NJSBA as amicus in appellate court matters. To learn more, visit njsba.com.
The New Jersey State Bar Association testified in opposition to S1310 (Pou), which would permit for-profit debt adjusters to operate in New Jersey. Currently, nonprofit debt adjusters are licensed to do so in New Jersey with strict guidelines regarding fees, audits and bonding. Yongmoon Kim, chair of NJSBA’s Consumer Protection Law Committee, testified before the Senate Commerce Committee to warn of the predatory behaviors of such companies that are being sued in other parts of the country.
“The Consumer Financial Protection Bureau just recently issued a notice on the risks associated with debt settlement companies,” the NJSBA said in its written remarks to the committee. Those risks, outlined in an Aug. 24, 2022, statement, cautioned people to consider all available options including working with a nonprofit credit counselor before engaging the services of a debt settlement company.
“The CFPB issues the same warnings to avoid the very concerns the NJSBA has pointed out here including high fees, the potential inability of the debt settlement company to resolve all of the debts leaving the consumer with ever more debt due to late fees and penalties, and exposure to collection actions if settlement does not occur,” the NJSBA said.
The bill was pocket-vetoed in the last session by Gov. Phil Murphy. It was reintroduced this session. It was amended to include mandatory disclosures of certain information before entering into an agreement with the consumer. While the amendment was noted as an improvement to the bill, it did not go far enough, according to those testifying in opposition to the bill.
Legal Services of New Jersey’s Dave McMillan testified that people he represented often found themselves without recourse because they were unable to make the payments, inclusive of fees and other charges, to these debt settlement companies. Also testifying in opposition were Beverly Brown Ruggia from New Jersey Citizen Action and Renee Steinhagen from New Jersey Appleseed.
The NJSBA urged caution before proceeding, pointing out that there were many more safeguards put into place in a version of this legislation drafted by the New Jersey Law Revision Commission in 2012.
Sen. Joseph Cryan peppered the advocates of the bill with questions regarding the settlement process, asking what would happen to the fees and interest mounting as settlement occurs. Proponents of the bill pointed out that they negotiate at the time they are engaged, which saves the consumer further fees and interest. Later opposition testimony pointed out that while that may be true, the fees and interest accrual is often accounted for in the taxable portion of the discharged debt. Cryan, who voted yes to the bill in the last session, voted no.
Sen. Jon Bramnick abstained on the bill, urging further consideration of amendments to provide consumer protection safeguards. The bill remains pending in the Senate and has no Assembly counterpart.