Household debt has reached record levels across the United States, and Ohio families are feeling the financial strain.
According to recent Federal Reserve reports, young Ohioans now carry above-average debt loads driven by credit cards, medical bills and personal loans. Add in rising property taxes, higher energy costs, and persistent inflation, and it is no wonder many households are struggling to manage debt responsibly.
For those trying to stay financially afloat, the choices can seem bleak. Traditional credit counseling or bankruptcy are the usual options – but neither are always right for everyone.
Unfortunately, Ohio law has limited a viable third option by making it harder than necessary for debt-settlement companies to work with borrowers and negotiate with creditors to reduce balances and help avoid the stigma of bankruptcy.
Ohio’s outdated debt-settlement statutes restrict consumer choice and should be amended to align with federal consumer protections and give households access to more financial tools. And now is the time for the General Assembly to make those changes.
The Federal Trade Commission in Washington already regulates debt-settlement companies at the national level with stringent requirements. Federal rules prohibit firms from collecting upfront fees until a settlement is reached; they require firms to make detailed disclosures to clients; and they bar deceptive or misleading advertising.
These commonsense rules protect consumers and hold debt-settlement companies accountable. Ohio law should align with these federal standards – not impose additional regulations that remove consumer choices.
Legislation pending in the General Assembly moves in the right direction.
Companion bills in the Ohio House of Representatives and Ohio Senate would establish clear, transparent rules for how debt-settlement providers may operate under the supervision of the state Department of Commerce’s Division of Financial Institutions. And the bills tie provider fees to actual debt resolution outcomes, ensuring families pay only when results are delivered.
The draft legislation also includes new licensing and bonding requirements, which may go further than necessary but still likely improve on the status quo. New licensing regimes always risk raising costs, adding administrative burdens, and discouraging smaller, innovative firms from entering markets. Such costs will inevitably be passed on to the very consumers the law hopes to help, so legislators should revisit the licensing provisions after the new system is in place and assess whether the additional bureaucracy is really essential for protecting consumers.
Too many Ohio families are one unexpected expense away from financial crisis. They should have as many reasonable, responsible options as possible available to them for averting and managing such crises. And right now, Ohio law takes some of those options off the table. It shouldn’t.
Debt-settlement services may not be the right choice for every household, but neither is bankruptcy. The General Assembly should take this opportunity to modernize Ohio’s over-protective debt-settlement laws and give consumers more debt-management options that may help them regain their financial footing.
Greg R. Lawson is a research fellow at The Buckeye Institute.
