Controversial Maryland Surety Bond Requirement

Debt Settlement Service Provider Bond law may not protect consumers as intended

Effective October 1, 2011, a new law requires debt settlement service providers to have a $50,000 surety bond from a state approved surety. Unfortunately, neither the surety bond requirement nor the law itself provide adequate consumer protection. The Maryland Senate Finance Committee, on pressure for the service provider industry, modified the fee cap that can be charged consumers from 30% to 25% of the debt enrolled with a company, but the cap actually results in higher fees for consumers, higher than the limits even proposed by the industry itself.

The law, Maryland Senate Bill 741 (PDF) actually rewards debt settlement firms for convincing consumers to enroll their debts, regardless of the success or failure of the debt settlement. In other words, companies can now accumulate fees without having to pay any of the consumers bills, which is exactly what they are doing (as shown in the video).

Read more at the Maryland Consumers blog.

Consumer interviews are available on video.