Washington
On January 24, 2025, Washington Representatives Reeves (D), Corry (R), and Walen (D) introduced House Bill (HB) 1599, which seeks to amend the state’s existing debt adjusting act. Currently, the Washington law does not require debt adjusters, which include debt settlement providers, to be licensed, although there is a fee cap of fifteen percent (15%) of a consumer’s total enrolled debt. If passed, the amended Act would distinguish “debt adjusting services” from “debt resolution services” and would create a licensing requirement for providers of both services, as well as additional requirements and prohibitions. Debt settlement would be removed from the definition of “debt adjusting” and included within the definition of “debt resolution services,” which is defined as “any program or service represented, directly or by implication, to renegotiate, settle, or in any way alter the terms of payment or other terms of the debt between a consumer and one or more unsecured creditors” (emphasis added). Debt resolution services would not be subject to the fifteen percent (15%) fee cap, with separate fee requirements.
Attorneys licensed to practice law in the state who provide debt resolution services within an attorney-client relationship would be exempt from the requirements of the proposed bill. Notably, the bill also carves out an explicit exemption for “[p]ersons who market on behalf of licensees and do not otherwise provide debt adjusting or debt resolution services.”
New York
On January 24, 2025, New York Senator Kavanagh (D) introduced Senate Bill (SB) 3224, which seeks to clarify certain provisions relating to the prohibition on budget planning and allow the New York Attorney General to enjoin or restrain commission or continuance of violations. If passed, the bill would amend the current budget planning law to qualify “debt relief and debt settlement…as budget planning,” meaning debt settlement providers would be subject to the licensing requirements for budget planners in the state, as well as additional requirements and prohibitions. Attorneys admitted to practice law in the state would continue to be exempt; however, the bill would amend the exemption so that it does not apply to those attorneys whose “principal purpose of…business is budget planning.” Per the proposed bill, as well as being subject to the licensing and other requirements of budget planners, “[a]ny attorney licensed to practice law in this state who is engaged in budget planning as a principal purpose of their practice shall (a) negotiate directly with creditors on behalf of the client; (b) ensure that all moneys received from the client are deposited in the attorney's account maintained for client funds; (c) pay creditors from such account; and (d) offer budget planning services through the same legal entity that the attorney uses to practice law.”
We will continue to monitor the status of the Washington and New York bills and provide updates on their trajectory through each state’s legislature. If you would like to read the entire text of the proposed pieces of legislation, please click on the following links, respectively: https://app.leg.wa.gov/billsummary?BillNumber=1599&Year=2025 (WA) and https://legiscan.com/NY/text/S03224/2025 (NY).
