Laws Concerning Debt Consolidation in New York

Debt consolidation is marketed as an option for people who need financial relief. In a nutshell, debt consolidation works by compacting many bills into a single bill which should require a person to spend less per month than he previously had. He may also get better interest rates. This is usually accomplished by having a debt consolidator contact a person's creditors, negotiate new terms, and then accept a single monthly payment from the debtor which is then divided up and applied to individual debts.

For many people, this seems like an ideal solution. The consumer acceptance of debt consolidation has led to a rapidly expanding industry. However, if you live in New York and you have received an offer for such services or you are otherwise considering it, there are some laws that you should familiarize yourself with first.

Debt Consolidation: New York Laws

Restrictions imposed by the State of New York suggest an understanding that many people who seek debt consolidation services are in serious financial trouble. These individuals are often desperate and there is a high potential that they may be exploited without government regulations.

To protect these individuals, there are restrictions on the businesses that can offer debt consolidation services. According to state law a company must be licensed for this purpose. In order to be legally licensed, the organization must have non-profit status unless you are dealing with a lawyer. Any company, therefore, that does not meet these requirements but which accepts or is willing to accept monthly payments from you to in turn make payments to your creditors is acting illegally.

The Better Business Bureau (BBB) notes that in New York, many debt consolidators also provide credit repair services. This normally involves getting items removed from a person's credit report that should not be there. It is illegal for a business to charge you a consultation or any other type of up-front fee for this sort of service. The company is also violating the law if it misrepresents the items that can be removed from your credit report.

Legal Assistance

Debt and the manner in which it is handled can have serious long term effects. If you are in need of debt relief and you are considering a consolidation service, it may be better to speak with a New York attorney first. A legal professional can help determine the legality of the services that you are considering and he may be able to advise you of other options that are more suitable for your situation.