Bill
A 4598
NJ allows for-profit debt adjusters to operate under a state license, without handling consumer funds, aligned with the FTC Telemarketing Rule, with annual reporting and oversight.
Status and procedural history
- Introduced: June 17, 2024.
- Referred initially to Assembly Regulated Professions Committee; also referred to the Assembly Children and Families Committee (Feb. 4, 2025).
- Reported favorably with committee amendments by the Assembly Regulated Professions Committee (2nd reading) on April 10, 2025.
- Companion bill: S1310 (2R).
- Effective date (as amended): 180 days after enactment.
Purpose
- To permit certain for‑profit entities to operate as licensed “debt adjusters” in New Jersey under a new statutory category (“for‑profit debt adjuster”) while preserving licensing and oversight by the Department of Banking and Insurance and aligning some activities with applicable federal rules (the FTC’s Telemarketing Sales Rule).
Key provisions and changes
- New definition: creates the term “for‑profit debt adjuster” — a person/entity that engages in debt‑adjustment activities but (1) does not receive or hold, actually or constructively, consumer funds, and (2) is subject to 16 C.F.R. 310.4 (or any successor federal law/regulation) (the FTC Telemarketing Sales Rule).
- Authorization: allows a for‑profit debt adjuster, in addition to existing nonprofit social service and nonprofit consumer credit counseling agencies, to act as a licensed debt adjuster (license required from the Commissioner of Banking).
- Scope of applicability: the debt adjuster statute’s protections and requirements generally apply to for‑profit debt adjusters, but only to the extent they do not conflict with the federal Telemarketing Sales Rule.
- Consumer funds / bonding: for‑profit debt adjusters are prohibited from receiving or holding consumer funds and are not subject to the bonding requirements that apply to nonprofit licensees.
- Audits and reporting:
- Licensees must file annual reports with the commissioner. Committee amendments require the annual report to include: total number of active consumers in the State; total number of enrolled consumers in the State; total fees collected in the State; and total amount of debt settled in the State.
- Failure to file the annual report will result in penalties available under current law (up to $100 per day and potential suspension/revocation).
- Annual financial audits remain required; however, for‑profit debt adjusters are not required to include a certification that salaries and expenses are reasonable compared to comparable organizations.
- Fees: the Commissioner is authorized to set maximum fees that may be charged by for‑profit debt adjusters. (Existing law for nonprofits caps debt‑adjustment fees at 1% of gross monthly income, not to exceed $15/month, unless otherwise provided.)
- Consumer disclosures: for‑profit debt adjusters that enter into agreements with debtors must disclose certain information to the debtor (the bill requires disclosure but committee report text summarizes rather than listing full disclosure content).
- Clarification: updates language clarifying that persons engaged in the practice of law are not deemed debt adjusters.
Who is affected
- For‑profit companies that wish to provide debt‑adjustment services but will not handle consumer funds (new market entrants subject to licensing and FTC rule).
- Existing nonprofit social service agencies and nonprofit consumer credit counseling agencies (continued regulation; some parity in reporting but notable differences such as bonding).
- Consumers/debtors seeking debt adjustment or credit counseling services in New Jersey.
- Department of Banking and Insurance (licensing, oversight, fee regulation, enforcement).
- Federal agencies (FTC) by operation of the Telemarketing Sales Rule preemption/coordination provisions.
Potential impacts and considerations
- Opens the market to for‑profit providers that comply with the FTC rule and do not handle client funds — could increase available services and business models (e.g., firms that arrange creditor negotiations but do not hold payments).
- Reduces certain financial safeguards for for‑profit entities compared with nonprofits (no bonding requirement; no salary/expense reasonableness certification), while retaining licensing, reporting and audit obligations.
- Strengthens data collection about market activity by requiring granular annual reporting fields.
- Aligns state regulation with applicable federal telemarketing rules but preserves state authority (e.g., to set fee caps), except where federal rules conflict.
Compiled from official sources — confirm details with the bill’s official record.
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