A man and woman are meeting with a debt management consultant
ComplianceAugust 11, 2022

Debt management, debt settlement, and credit services licensing requirements (smart chart)

Each year, millions of consumers depend on credit service providers, debt management services, and debt settlement to help them manage debt.

State regulators have responded to the growth in this industry by expanding or creating new licensure requirements.

If you are a debt services company or are planning to start a business in this industry, it’s important to know each state’s regulations relating to your activities. Aside from industry-specific state licensure, there may be federal hurdles (instituted at the state level), state tax registrations for which you are liable, and local business licenses which you may need to obtain to operate your business legally.

Read on for an overview of licensing requirements for debt management, debt settlement, and credit services licensing requirements.

Debt management smart chart

Debt Management Services Licensing Smart Chart

Licensing requirements by state


Each of these businesses differs in the services they provide. To help you determine which category your company fits into, here are definitions of each:

  • Credit services organization (CSO): Credit services organizations improve the credit situations for individuals for a fee.
  • Debt management: Debt management companies help people pay off their debts by consolidating debts into a single monthly payment, which is then shared amongst their creditors. There may be some overlap with credit services organizations.
  • Debt settlement: Debt settlement is also called debt reduction, debt negotiation, or debt resolution. Settlements are negotiated with the debtor's unsecured creditors. There may be some overlap with credit services organizations.

Licensing requirements

Before your debt services company can begin to operate in a state, research the licensing requirements specific to that jurisdiction. Although requirements vary by state, generally you will need to provide the licensing authority with the following:

  • Business plan
  • Financial review and credit check
  • Formation documents
  • Certificate of Good Standing
  • Corporate structure chart
  • Fingerprints
  • Background check
  • Surety bond

Every applicant is different, and all regulatory agencies reserve the right to request additional information from the business entity. Furthermore, individual counselors are often required to be licensed as well as the business itself.

If the state in which you operate has no debt services licensing requirement, check that there aren’t other compliance tasks, such as obtaining a surety bond.

Typically, obtaining a debt management services license can take between three to four months.

If you do business in a state but your company is domiciled in another state, you are treated as an out-of-state entity and will likely need to be foreign qualified by registering your business with the Secretary of State. This process may require you to provide proof that you are licensed in your home state as a debt management company or that your home state doesn’t require a license.

Note: The states of Hawaii, North Carolina, and Louisiana allow credit service organizations but prohibit certain “debt adjustment” activities (encompassing debt management and debt adjustment) altogether.

Consequences of non-compliance

If you operate a debt service company without a valid license, you will incur severe consequences. This can range from cease-and-desist orders to large penalties and even jail time. You may also be required to fully reimburse your consumers.

CT can help

Outsourcing business registration and license research, applications, management, and renewals can help take the pressure off of your internal resources. By working with a full-service management provider who specializes in the efficient processing of business licenses, you can free up your staff to focus on high-value business activities, while ensuring you keep up with changing compliance requirements.

For more information on CT Corporation services and how we can streamline your business licensing, please contact us or call us at (844) 701-2064.

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The CT Corporation staff is comprised of experts, offering global, regional, and local expertise on registered agent, incorporation, and legal entity compliance.

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