HB 1599
In CommitteeHouse
Consumer debt adjusters
Concerning consumer debt adjusters and debt resolution services providers.
This status may be delayed. See Action History below for the latest updates.
How does a bill become law?
- Introduced: The bill is filed and assigned a number.
- Committee: A subject-matter committee holds hearings, takes public testimony, and decides whether to advance the bill.
- Floor Vote: The full chamber (House or Senate) debates and votes on the bill.
- Opposite Chamber: The bill repeats the committee and floor vote process in the other chamber.
- Governor: The Governor reviews the bill and decides whether to sign or veto it.
- Signed: The bill has been signed into law.
AI Analysis
This bill creates a new licensing and regulatory framework for debt adjusters and debt resolution services providers in Washington, requiring them to be licensed by the Department of Financial Institutions and follow strict rules on fees, contracts, advertising, and consumer protections. It separates debt adjusters (who manage payments to creditors) from debt resolution providers (who negotiate settlements), and sets new standards for how consumer funds are held and how services are marketed and delivered.
- Creates a new licensing requirement for all debt adjusters and debt resolution services providers operating in Washington, effective July 1, 2026—only licensed entities may offer these services.
- Establishes strict rules for contracts, including required disclosures (e.g., fees, timeline, credit impact, tax implications) and a 3-day cancellation right for consumers.
- Limits fees for debt adjusters to 15% of total debt listed in the contract, with a $25 initial charge cap; for debt resolution providers, fees may only be charged after a debt is successfully renegotiated and must be tied to savings or proportional debt reduction.
- Requires debt resolution providers to use independent, FDIC-insured dedicated accounts for consumer funds, with clear rules on access, ownership, and termination.
- Prohibits deceptive marketing, requires annual reporting to the Department of Financial Institutions, and expands the department’s authority to investigate, license, and enforce compliance—including civil penalties up to $1,000 for violating injunctions.
- Exempts certain groups (e.g., attorneys, banks, nonprofit credit counselors charging ≤$15/month) from licensing, and specifies detailed recordkeeping and transparency requirements (e.g., monthly statements, contract copies, advertising rules).
Who is affected
- Consumers seeking debt relief — Individuals who use debt adjusters or debt resolution services to manage or reduce unsecured debt (e.g., credit card debt, medical bills). They will face new licensing requirements, stronger contract protections, clearer fee disclosures, and new rules around termination and account access.
- Debt adjusters and debt resolution services providers — Companies or individuals that offer debt adjustment or debt resolution services in Washington. They must now obtain a state license, follow new fee and contract rules, maintain dedicated accounts, and comply with reporting and recordkeeping requirements.
- Creditors and lenders — Creditors (e.g., banks, credit card companies, medical providers) who may receive fewer direct payments from consumers but could benefit from more structured resolution plans. They are not required to participate in debt resolution but may be contacted by licensees on consumers’ behalf.
- Dedicated account service providers — Dedicated account service providers and third-party administrators who hold consumer funds in trust accounts for debt resolution programs. They must operate independently of debt resolution providers and follow specific rules about fund handling and transparency.
- State regulatory agencies — The Department of Financial Institutions, which gains expanded authority to license, regulate, and enforce compliance with the new rules—including investigations, audits, and penalties.
Pro/Con Analysis
Stronger case for benefits
Potential Benefits (5)
Licensing and strict fee caps (15% for debt adjusters, post-success only for debt resolution) significantly reduce the risk of predatory practices, fraud, and deceptive marketing—hurting vulnerable consumers who are most likely to be targeted by unregulated debt relief schemes.
Public SafetyPeopleRef: Sec. 13 (NEW): Licensing requirement effective July 1, 2026; Sec. 15(1)(vii): Exempts nonprofits charging ≤$15/monthMandatory disclosures about credit damage and tax consequences (e.g., canceled debt being taxable income) empower consumers to make informed decisions, reducing the risk of unexpected financial harm—especially for low-income consumers who may not understand the tax implications of debt settlement.
FinancialPeopleRef: Sec. 10(2)(f)–(g): Contract disclosures on credit impact and tax implications; Sec. 23(2)(c): Fee structure tied to actual savings or proportional reductionThe requirement for independent, FDIC-insured dedicated accounts with consumer ownership and clear termination rights prevents provider misuse of funds—a major historical flaw in the debt settlement industry—and protects consumers’ principal from being commingled or misappropriated.
FinancialPeopleRef: Sec. 20(1)(ii)–(iii): Dedicated accounts must be FDIC-insured, owned by the consumer, and administered by independent third parties; Sec. 21: Consumer right to terminate and receive funds within 5 daysStrict prohibitions on deceptive marketing—including fake reviews, misleading success rates, and false promises of avoiding litigation or credit damage—reduce consumer exploitation, especially among vulnerable populations (e.g., seniors, low-income, less-educated) who are most susceptible to false claims.
Public SafetyPeopleRef: Sec. 10(2)(h): Prohibition on misleading advertising; Sec. 26: Ban on fake reviews, deceptive rankings, and misleading success claimsMandated transparency about the licensee’s role (as consumer advocate, not creditor agent) and the absence of hidden creditor compensation reduces conflicts of interest and helps consumers understand who is truly representing them—strengthening informed consent and trust in the service.
Rights & LibertiesPeopleRef: Sec. 10(2)(l): Contract must state that licensee does not make payments to creditors; Sec. 10(2)(k): Contract must state licensee is consumer’s advocate and receives no compensation from creditors
Potential Concerns (5)
Licensing requirement excludes unlicensed providers, reducing competition and potentially limiting consumer access to services—especially in underserved areas—while creating barriers to entry for small, independent operators who cannot afford the $50,000 surety bond, fingerprinting costs, and legal compliance overhead.
Business & EmploymentPeopleRef: Sec. 13 (NEW), effective July 1, 2026The $50,000 surety bond and mandatory fingerprinting create upfront costs that disproportionately burden small or new debt resolution firms, potentially consolidating the market toward larger, well-capitalized firms and reducing service diversity—especially for low-income consumers who rely on smaller local providers.
Business & EmploymentPeopleRef: Sec. 14(3): $50,000 surety bond requirement; Sec. 16(4): fingerprinting and criminal background checks for executive officersWhile fees are post-success only, the lack of a cap on percentage-based fees (e.g., 50% of savings) could still extract high costs from consumers who achieve only modest debt reductions—especially those with high-interest debt where savings are limited—potentially leaving them worse off financially despite regulatory safeguards.
FinancialLean peopleRef: Sec. 23(2)(c)(ii): Fee structure tied to 'percentage of amount saved' or proportional reduction, with no cap on total feesThe CPA exemption creates an uneven playing field, as CPAs—typically higher-income professionals with greater resources and brand recognition—can offer debt resolution without licensing constraints, potentially crowding out smaller, non-CPA providers and reducing consumer choice.
Business & EmploymentLean peopleRef: Sec. 15(1)(b)(vii): Exempts certified public accountants (CPAs) providing debt resolution within an accountant-client relationshipMandating disclosure of employee names and fictitious names in business records increases administrative burden and may chill use of pseudonyms by frontline workers (e.g., to protect safety or privacy), though the impact is likely minimal given the narrow scope.
Rights & LibertiesRef: Sec. 27(4)(c): Recordkeeping requirement for employee names and fictitious names
Who Is Most Affected
Low- and moderate-income consumers seeking debt relief benefit significantly: reduced fraud risk, clearer disclosures, and protected funds lower the chance of being exploited or losing money to unscrupulous providers. However, some may face reduced access if smaller providers exit the market due to compliance costs.
Larger, well-capitalized debt resolution firms benefit from reduced competition and clearer regulatory standards, while small operators may struggle with $50K bonds, fingerprinting, and recordkeeping costs—potentially consolidating the industry and raising barriers to entry.
Creditors may see more structured, verified payment plans from licensed providers, but also fewer informal settlements. The requirement that debt resolution providers only charge after success may reduce the volume of settlements, though quality may improve.
Dedicated account service providers gain a clear regulatory role and must meet independence and FDIC-insurance standards—increasing their credibility but also compliance burden. They benefit from being legally separated from providers, reducing liability risk.
The Department of Financial Institutions gains expanded authority and fee-based funding, improving its ability to police the sector. However, implementation costs (licensing, investigations, enforcement) may strain resources unless fees fully offset expenses.