Committee hears competing views on licensing and consumer protections for debt resolution providers

Lawmakers heard extensive testimony Wednesday on House Bill 1599, a proposal to expand Washington’s regulatory framework to include commercial debt resolution services providers and to move regulatory authority for these services to the Department of Financial Institutions (DFI).

Committee staff Megan Mulvihill summarized the bill’s provisions, telling the panel that beginning July 1, 2026, both debt adjusters and debt resolution service providers would be required to hold licenses issued by DFI. The bill would revise the definition of "debt adjusting" so it no longer includes debt settlement, add record-keeping and contract disclosure requirements, prohibit misleading advertising, and require that providers not charge a fee until a contract is signed, at least one debt has been renegotiated, and at least one payment has been made between the consumer and a creditor.

Sponsor Representative Christine Reeves told the committee the bill is intended to protect consumers while keeping options available for people dealing with unsecured debt. "By regulating this space, what we're making sure is that we're holding these folks accountable to ensuring that they're providing safe, viable products that get folks to the end goal," Reeves said, noting her personal interest in improving consumer protections for low-income Washingtonians.

Supporters of the bill, including the American Association for Debt Resolution, argued licensing and alignment with the Federal Trade Commission’s telemarketing sales rule would create more options and stronger accountability. Steve Baums of the association said members cannot charge a fee before delivering the benefit of their services under the FTC standard and that the bill would provide oversight similar to those federal protections.

Opponents included legal-aid and consumer-advocacy organizations, who warned the bill would weaken Washington’s longstanding 15% fee cap on debt-adjustment services and could allow predatory for-profit providers to re-enter the market. Julia Kellison of the Northwest Justice Project described repeated client harm she sees in a debt-collection clinic, including seniors whose bank accounts containing Social Security were put at risk by third-party payment arrangements. "It's a predatory nightmare," she said.

Other consumer advocates — including representatives from the National Foundation for Credit Counseling, the Statewide Poverty Action Network and Northwest Consumer Law Center — urged lawmakers to retain the existing protections and fee limits, arguing nonprofit credit counseling, bankruptcy and self-help options are safer alternatives for low-income consumers.

Industry witnesses, including Tom McBride and Steve Baums of the American Association for Debt Resolution, said modern debt resolution firms follow strict federal rules, undergo audits and achieve settlement rates they described as successful for many consumers. Baums told the committee that AADR members resolve a substantial volume of unsecured consumer debt nationally and said member programs typically deliver savings in the range of 30–35 cents on the dollar for enrolled debts.

Public-sign-in totals read into the record showed more opponents than supporters among those who signed in but did not testify in person; the committee closed the hearing without taking a vote. Committee members asked detailed questions about fee structure, consumer protections, record-keeping, and whether nonprofit alternatives could meet consumer needs; no committee action was recorded on the bill during this session.