What is a Debt Manager?

The individual who engages in the business of debt management.

How does an individual become registered as a Debt Manager in Michigan?

An individual desiring to engage in debt management in Michigan must fill out a debt management application, pass the required competency exam, and obtain the approval of the Office of Financial and Insurance Regulation. Application forms can be found at http://www.michigan.gov/documents/FIS_0506_ALL_105813_7.pdf.

Can I file a complaint against a Debt Manager? How?

You can file a complaint against a debt manager by contacting the Office of Financial and Insurance Regulation at (877) 999-6442 or by sending a letter to the Office of Financial and Insurance Regulation at 611 West Ottawa, Lansing, Michigan 48933-1070, or filing a complaint form, downloaded from http://www.michigan.gov/documents/FIS_0590_debt_complaint_5_04_91672_7.pdf.

How many clients must a person counsel before being required to be registered?

A person must be licensed prior to engaging in any business of debt management.

My creditors are beginning to call my house and my job demanding money. Whom can I call for help?

You could contact a firm licensed under the Michigan Debt Management Act which would prepare a Budget Analysis Form to determine your income, obligations and what you can reasonably pay your creditors. They would contact your creditors to attempt to reduce the interest rate and your payments.

Do all debt management firms charge a fee for their services?

No, however, the Michigan Debt Management Act allows a licensed firm to charge a fee of up to 15% of the amount of the debt to be liquidated during the express term of the contract.

Is the 15% fee the licensee is allowed to charge based on the total debt to be liquidated at the time I enter the contract or can the licensee charge the fee based on the contracted monthly payment amount which may include subsequent interest?

The fee is to be derived from the amount of debt to be liquidated as determined at the beginning of the contract.  The amount of debt to be liquidated is equivalent to the principal debt amount which will be completely discharged during the course of the contract plus approximate interest charges that are relative to that principal (but not including mortgage or land contract interest charges) that accrue during the liquidation.  

Can a mortgage payment be included in a debt management plan?  If so, how is the fee the licensee may collect calculated?

A mortgage payment may be included in a debt management plan as any financial obligation of a debtor, whether delinquent or current.  However, a fee may only be charged and collected if the mortgage is satisfied in full during the contract liquidation period.  The fee shall be calculated on the outstanding principal balance of the mortgage at the time the contract is executed as the Act prohibits the fee from including mortgage or land contract interest charges in the calculation of a licensee’s fees.  An amortization schedule should be utilized to determine the principal amount to be included in the monthly fee calculation.

Are bill payment services (i.e. utilities and rent) allowable under the Act or is a separate license required under the Money Transmission Services Act (Act 250 of 2006) in order to participate in bill payment services?

A debt management licensee which is conducting debt management services may also pay bills for its clients as long as the payment of bills is incidental to the debt management plan and not the primary purpose of the relationship.  A licensee may not charge a fee for the collection and remittance of these bills as the bills are considered recurring debts.  Recurring debts do not have an associated “principal” balance at the time of execution of a contract and, therefore, will not be liquidated in full at the end of the contract.  If a licensee wishes to engage in the practice of charging a fee for bill payment services, a license under the Money Transmission Services Act is required.

Can a licensee participate in a “fair share” program? If so, is prior approval from OFIR required and how are the fees received to be disclosed to the debtors?

Fair share programs are typically utilized by licensees organized under Section 501(c)(3) of the United States Internal Revenue Code and allow the licensee participating in the program to receive remuneration from a creditor for the collection and remittance of a debtor’s funds....  Under the program, the creditor agrees to credit the debtor for a full payment, but only receives a “net payment” from the licensee (Gross - fair share = net).  Not all creditors participate in a fair share program and the amount received is usually a percentage (1-3%) of the gross disbursement to the creditor.

A licensee may participate in a “fair share” program, but only after such program has been approved by OFIR and fully disclosed to the debtor as required by Rule 14(g).  The disclosure is not required to be specific as to the amount received from each creditor participating in the program or to the exact amount the licensee will receive; a range (percentage of monthly payment) of the remuneration along with the list of creditors participating in the fair share program must be disclosed.

A debt management licensee may accept a partial payment; however, if full payment is not received by the licensee within 60 days as required under Section 18(4), the contract must be cancelled with all monies held by the licensee returned to the client, unless a letter of continuation is received as allowed under Section 18(4).

May a licensee accept a payment which is above the amount stated in the contract?

A licensee should not accept a payment in excess of the contracted amount and immediately refund the excess to the debtor unless the debtor has provided specific instructions for the disbursement of these funds or unless funds are accumulated under a plan approved by the Commissioner as allowed by Rule 20(4).  Any excess funds must be distributed at least monthly as required under Section 14(2).

If the product or service is not required as part of the debt management plan and is not “a debt to be liquidated during the term of the contract” it is not considered part of the contract and therefore not to be included in the calculation of fees and charges under Section 18 or to be disclosed in the total amount of the licensee’s charges under Section 14.  However, Rule 25 requires a licensee to obtain approval from OFIR to offer any other products or services.  OFIR requests all additional products or services offered be disclosed separately from the contract and the additional product or service agreement to include the customer’s signature. 

If a debtor wishes to add an additional account to an active debt management contract the licensee must complete a new budget analysis to verify the debtor can reasonably satisfy the additional payment.  If the budget analysis shows the debtor can satisfy the requirement, an addendum to the contract must occur which outlines the new contractual provisions (i.e. creditors which will receive payments under the contract, total amount owed to each creditor, payment amount to each creditor).  Instead of an addendum, a new contract may be entered into by the client.

What is a licensee required to execute if a client wishes to remove a creditor from a contract or directly pay off a creditor?

If an account is removed at the request of the client or an account is directly paid in full, an addendum with a statement to that effect is sufficient.

Not always. Some non-profit debt management firms charge a fee of up to 15%.

Can everyone participate in a debt management program?

No. A licensed debt management firm shall not accept an account unless a written and thorough budget analysis indicates that the debtor can reasonable meet the requirements required by the budget analysis. If they determine that you cannot make reasonable payments to your creditors, they will not accept you as a client.

How much will the debt management firm charge me to prepare a thorough Budget Analysis?

The Michigan Debt Management Act prohibits a licensed firm from charging you for preparing a budget analysis.

What does the debt management firm do with my money during the time they have it before they pay it to my creditors?

The licensed debt management firm is required to hold their client's money in a separate account maintained for the benefit of the licensee's Michigan clients at a financial institution whose deposits are insured by an agency of the United States government.

Does Michigan only license debt management firms that are physically located within the State of Michigan?

No. Any firm conducting debt management activities with Michigan residents must be licensed pursuant to the Michigan Debt Management Act, prior to conducting activities with Michigan residents.

How do I check on a debt management firm to see if it is licensed in Michigan?

The Office of Financial and Insurance Regulation licenses the Debt Management Firms. You may call our office at (877) 999-6442 to be certain the firm is licensed or check on our website at www.michigan.gov/ofir.

I have never heard of debt management. Do these firms advertise under another heading or only as debt managers?

Debt management firm are also called Credit Counselors and often refer to their firm and advertise in the yellow pages of the telephone director as credit counseling firms.

Will this firm pay my creditors by loaning me money?