Uniform Debt Management Services Act – The Bible of a Debt Manager

Any debtor resorting to the help of debt management has to be sure that the company that he/she is considering meets the requirements set by the Uniform Debt Management Services Act (UDMSA). This will help to make sure that the company will really HELP the debtor to handle his debt instead of making his/her hard financial situation even worse. This article lists the basic principles of the UDMSA. If you notice that your debt management services provider fails to follow any of these, we strongly suggest you avoid signing in with it.Brief history of debt management industry.It was in the 1950′s when US consumers with bad credit problems were first offered to resort to the help of professional debt managers. Basically, there have been two major types of services available – credit counseling combined with working out the financial programs that would give a delinquent debtor the chance to pay his/her outstanding debt off over an extended period of time without having to file for bankruptcy, and debt consolidation and management services aimed at talking the creditors into settling a person’s outstanding debt on a percentage of it – also avoiding the bankruptcy of the debtor.It can’t be said that the providers of debt management plans have always been accepted well by the financial society… There has been a wave of harsh criticism against them stating that their services were aimed at steering the debtors away from filing for bankruptcy it attempt to create profit for the creditors since in most cases it would have been much easier and advantageous for the debtors to file. For some reason, non-profit credit counseling organizations were always preferred to for-profit debt management agencies – even though the charitable status of CCC’s often proved to be nothing but a fake covering the hidden funding from the creditors themselves.A giant leap towards improving the quality of debt management services was made in 2005 with the passing of the federal bankruptcy reform. From that moment and on, every person filing for Chapter 7 bankruptcy was obliged to pass a consumer debt counseling or debt management session. In addition to that, the reform featured a number of strict regulations concerning the activity of debt management agencies. These regulations are now obligatory in every state due to the federal character of the reform, which apparently makes the debt managers and counselors all over the USA much more responsible, thus ensuring better protection for the customers. The legal document listing these regulations is called the Uniform Debt Management Services Act (UDMSA). It is subdivided into three major parts: Registration regulations, Service-Debtor Agreement regulations and Enforcement statements. Let’s take a closer look at each of these sections:Registration.Any debt management agency must be registered as a consumer debt management service in the state where it is planning to operate before entering into any agreements with debtors in this state. During the process of registration, the principals of the service must provide the following information about their enterprise:– the financial condition of the service;– the identity of principals;– the list of location where the enterprise will be offering its services;– form for agreements with future clients;– the business history of the enterprise in other jurisdictions.There are also a number of other requirements applicable to every debt management agency. The list of these requirements includes:– a sufficient insurance policy aimed against fraud, theft, dishonesty, etc and an insurance fund in an amount of at least $250,000;– proven possession of a security bond of at least $50,000. The beneficiary of this bond must be a state administrator.Neither of the requirements listed above applies to a debt management service already registered in any other state. It will be enough for the principals of such services to provide the proof of registration in another state in order to get registered in the given one.A debt management service that gets registered successfully receives a certificate allowing it to do business in a given state. This certificate should be renewed each year, so always make sure that your debt management agency’s certificate has not expired yet.Service-Debtor Agreements.This section of the UDMSA concerns the fees charged and the services provided by a debt management agency. Always remember that the debt manager dealing with your debt account should be a certified professional. The amount of fees that may be charged and the contents of Service-Debtor Agreements are determined by statute. The debtor also has the right to rescind the agreement with a debt management provider within 30 days since its signing absolutely penalty-free. However, the debt management provider may charge the debtor with some fee in case of full cancellation of the agreement (which can also be made within 30 days since the signing of the agreement only). The creditor has the right to annul the agreement in case the debtor is late with his payments for at least 60 days.Always make sure that the debt management agency that you are working with keeps the payments intended for your debtors in a trust account, separately from any other funds of the company.Enforcement.The UDMSA strictly prohibits the debt management agencies from doing any of the following:– misappropriate any of the debtors’ funds kept in the trust accounts;– settle the debts for more than 50% of the outstanding value without getting the debtor’s consent first;– use gifts or premiums to persuade either side into a specific settlement agreement;– settle any debts without the certification from the creditor.Never hesitate to complain if you catch your debt management performing any of the activities listed above.The Uniform Act allows two levels of enforcement: administrator and individual. Among the means of administrator enforcement are the following: investigative powers, the power to charge a civil penalty of up to $10,000 and the power to start civil lawsuits. On the other hand, the means of individual enforcement include: the power to bring a civil action for compensatory and punitive damages and the power to charge attorney’s fees.It should be noted that banks are not subject to the regulation of the UDMSA due to their status of regulated entities under other law.Always make sure that the management company that you sign in with follows all of the rules and regulations stated above. The breach of these rules is illegal and may be punished by law.