There are two types of debt consolidation programs available to consumers in Colorado. The first is consumer credit counseling. This service is appropriate for consumers with credit card debt or unsecured personal loans, and it can help to lower your interest rates, as well as the time it takes to achieve debt freedom.

The second form of debt consolidation is known as debt settlement or negotiation. This involves negotiating with creditors to reduce your debt. It is the fastest way to get out of debt other than bankruptcy.

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Debt Consolidation in Colorado

Colorado is one of the first states to adopt legislation that distinguishes between consumer credit counseling services and debt settlement. The law, which went into effect in January of 2008, is known as the Uniform Debt Management Services Act (UDMSA). Much of its focus is on ensuring that debt management firms are not putting consumers into a bigger bind financially because of high fees and a lack of safeguards such as insurance or surety bonds in the event that there is employee dishonesty or identity theft. It is important that any consumer who seeks out the help of credit card debt consolidation company, only seek out reputable programs that are in full compliance with the law.

Fees

For credit counselors, the following limits were imposed on fees:

 50 for setting up an account, obtaining a credit report, and counseling a potential client a cap for monthly service fees is capped at $10 per account but not to exceed $50 total

Debt negotiators are bound by the following fee limits:

  A total of18% of the debt amount that is enrolled in the program set up or retainer fees are capped at 4% of the total debt amount enrolled in the program; fees cannot be collected in a period of less than half the estimated program length (in other words, if your estimated program length is 36 months, fees cannot be collected over a period of less than 18 months), unless the individual chooses to do so or the company obtains settlement offers from more than 50% of the creditors enrolled in the program no debtor who completes his or her obligations under the program may be charged fees such that those fees, when added to the aggregate of settlement offers obtained by the company, exceeds the principal amount of debt (Note: principal amount of debt is defined in the law as the debt amount at the time of an agreement)

Miscellaneous

The fees alone do not comprise the entirety of the law regulating the debt consolidation industry. Some other points of interest for credit counseling:

  Credit counselors cannot set up a plan that would result in a negative amortization of any one of the client’s debt (this means the client’s payment would cover less than the finance charges, so the debt would actually increase)

Some points of interest for debt settlement:

  Companies cannot take power of attorney to accept settlement offers of more than 50% of the balance owed at the time of settlement offer a bonus, reward, premium or other compensation to an individual for signing up

For more information, feel free to follow this link: (warning---PDF) UDMSA Colorado Other Resources

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