Debt management companies help debtors by creating plans to reduce debts over a fixed period to manage overwhelming debt. These companies also negotiate with creditors to establish reduced rates for their clients. They are paid fees by the debtor in return for their services.
Through licensure, the state aims to protect consumers from being taken advantage of by fraudulent companies. Due to the vulnerable position of debtors and the ability of a debt management company to manipulate the debtor, many states have opted for license requirements.
Before a debt management company begins working in a new state, it must first be fully licensed in that state. The company will likely need to be foreign qualified by registering the business entity with the Secretary of State. The debt management licensure process can include a lengthy application, background check, proof of accreditation, fingerprints, bonds, and exams.
The company will likely have to provide proof that they are licensed in their home state as a debt management company or that their home state does not require a license. The process can take up to 3-4 months. Every application is different and all regulatory agencies reserve the right to request further information from the applicant.
Businesses functioning without the proper license are generally penalized based on the size of the operation and the gravity of the offense.
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What type of licensing is required for debt management companies?
Before a debt management company begins working in a new state, it must first be fully licensed in that state. The company will likely need to be foreign qualified by registering the business entity with the Secretary of State.
The debt management licensure process can include a lengthy application, background check, proof of accreditation, fingerprints, surety bonds and exams. The company will likely have to provide proof that they are licensed in their home state as a debt management company or that their home state does not require a license. Every application is different and all regulatory agencies reserve the right to request further information from the applicant.
The debt management licensing process is often a hurdle for a company’s growth into new states. Please contact CT Corporation to consult a licensing specialist.