Minnesota Legislature
Loophole in 2009 debt settlement law looks to be closed
A 2009 law set rules for organizations that provide debt settlement services, specifically credit card and medical debts. But services used to settle back tax debt were not addressed, and there has been an uptick in complaints from people who have been scammed by these providers.
HF2641/SF2869* would expand regulation on debt settlement services on settling delinquent federal and state taxes.
Sponsored by Rep. Dennis Smith (R-Maple Grove) and Sen. Kevin Dahle (DFL-Northfield), the bill was passed 130-0 by the House Thursday; it was passed 61-0 by the Senate April 25. It now moves to the governor.
“This bill says that if you do tax debt settlement — which is the same thing as settling a credit card debt or a medical debt — you should operate under the same rules,” Ron Elwood, supervising attorney at the Legal Services Advocacy Project, told the House Commerce and Regulatory Reform Committee earlier this session.
The bill would:
- clarify that the federal government is not a debt services provider;
- provide that any legal action taken by a creditor or a debtor has to take place in Minnesota; and
- add to the definition of creditor to include a government entity and add to the definition settlement services to include settling a tax debt.
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