Debt Management: Consumers

Program Information

The Debt-Management Services Act (DMSA) regulates companies that offer and provide debt management services to Colorado residents. It also provides consumer protections. Under Colorado law, Debt Management Services Providers (Providers) include non-profit and for-profit Credit Counseling and Debt Settlement companies. Providers typically work with unsecured debt such as credit card debt. The law also applies to law firms and attorneys unless the attorney is licensed to practice law in Colorado and is providing legal services in an attorney-client relationship.

Debt-Management Registration Required

Providers must be registered with the Colorado Attorney General’s Office before entering into agreements with Colorado residents. Review the information (below) about debt-management services and requirements debt-management providers have regarding disclosure and fees under the DMSA. If a debt-management provider has violated your rights under the DMSA, you are entitled to sue the company and may be entitled to recover damages.

To search for a debt-management provider or download a license report, visit the Consumer Credit Unit License Holders Report website (opens in new tab).
Debt-management companies that became inactive prior to October 31, 2020 can be found on this Nonactive Debt-Management and Disciplinary History Report (PDF).

Credit Counseling

Credit Counseling providers, also known as Debt Management providers, work with consumers’ creditors to establish a debt management plan that may include interest rate reductions, lower fees, re-aging of delinquent accounts, and lower monthly payments. Plans typically provide for full repayment of the principal amount of debt enrolled in the plan. Consumers make monthly payments to Credit Counseling providers. This money is held in the provider’s trust account. Funds are then disbursed monthly to creditors on behalf of the consumer.

Debt Settlement

Debt Settlement providers, also known as Debt Arbitrators or Debt Negotiators, negotiate with consumers’ creditors to settle debts for less than the full balance owed. Debt settlement providers do not make regular payments to creditors. Instead, consumers make monthly deposits into savings or special purpose accounts, which may be a savings account at the consumer’s bank, a trust account owned by the provider, or a special purpose account managed by a third party.

Negotiations with creditors usually do not begin until consumers have accumulated at least 50 percent of the amount of debt to be settled. The savings process may take months or years, depending on the plan, and creditors may attempt to collect the debt during that time.

Important Information to Consider about Debt-Management Services:

Please take the below tips into consideration:

You may be able to negotiate a favorable settlement yourself, without paying fees to debt settlement providers, by contacting your creditors directly.
Creditors are not required to participate in or cooperate with a debt management or settlement plan.
Plans may negatively affect your credit score and ability to obtain credit.
Providers cannot stop collection activity, including collection calls, wage garnishment, judgments, and litigation.

Providers must disclose in writing the following information:

All fees, including those charged by third parties, conditions of payments, and a full and detailed description of the services to be performed;
That plans are not right for everyone and may hurt your credit score or ability to obtain credit;
That nonpayment of debt may lead creditors to increase finance charges, take collection activity, or sue you;
That settlement of a debt may result in taxable income reportable to the IRS;
If true, that the provider receives compensation from creditors; and
Your right to cancel within three days of signing the agreement for a full refund, and your right to cancel later without a penalty.

Providers must supply the following information:

Free education about the management of personal finance;
A financial analysis and budget;
A copy of the agreement; and
Monthly accounting statements.

Allowable Fees:

Credit Counseling providers may charge an enrollment fee of $50.00 and a monthly fee of $10.00 times the number of debts remaining in the plan at the time the fee is assessed, but not more than $50.00 in any month. Donations or voluntary contributions are “fees” subject to these limitations.

Debt Settlement providers set fees either as a percentage of the amount of debt enrolled or the amount saved by the consumer. Providers may only collect their fee once a settlement agreement has been approved by the consumer and the first payment has been made to the creditor.

Providers may not:

Charge fees for cancelling an agreement or for financial education;
Provide membership in a club or advocacy program or coupons for goods or services;
Guarantee or promise any particular result;
Represent they can settle debts for a certain amount or range;
Represent they can stop collection calls or other collection activity; and
Offer a gift, bonus, reward, or other compensation for signing an agreement.

If you wish to file a complaint, please use the button in the upper, right-hand side of this webpage or the File a Complaint button at the top of the COAG website.