Texas regulates debt relief providers, including credit counselors, to keep its citizens safe from predatory practices.
Debt relief regulations in Texas
The Texas Office of Consumer Credit Commissioner (OCCC) regulates debt relief throughout the state. Specific regulations fall under Finance Code Chapter 394 Debtor Assistance.
All debt relief companies, including credit counselors, must register with the OCCC. Every debt relief provider must maintain a telephone system that operates during business hours. Additionally, providers may only settle unsecured debt.
Debt management agreement
Debt relief services must provide a services agreement that states how your credit may be impacted by the program and ensures you'll have the ability to make monthly payments. It must also provide individualized counseling and education that addresses financial management, debt, credit and budgeting. The counseling you receive should be based on an analysis of your situation and include a management plan that gives you specific steps to take to reduce your debt.
If your provider will negotiate on your behalf, it must provide a list of creditors it believes will and will not participate in negotiations.
As part of debt settlement, your provider must give you a disbursement report that covers the following details:
- Amount of money received from you since the last report
- Amount and date of each disbursement made on your behalf to each creditor since the last report
- Any amount deducted from the funds received by you
- Any amount held in reserve
You should receive a quarterly report. If you request a copy of your report before the quarterly one is due, your provider must send it within 10 business days.
The fees a debt relief company are able to charge depend on the service it offers.
$11 per account or $57, whichever is less
$11 per account or $57, whichever is less
Fees are set by the state commissioner on July 1 of every year. In general, they cannot exceed 17% of the enrolled debt or 30% of the settlement amount.
If you enrolled in debt settlement, your provider can only charge a fee as debts are settled — and you won't be charged a fee until at least one payment has been made toward your settlement.
Either you or your provider may cancel your agreement without penalty. You must give at least 10 days' notice to cancel your debt management services agreement. From here, your provider has an additional 10 days to cancel. Until then, your provider must continue to make disbursements to your creditors — unless both you and your provider agree in writing to stop before then.
If you choose to cancel before 90 days, your provider must issue a refund for the money you paid that hasn't been disbursed to a creditor. You should also receive a refund for 65% of the account setup fees.
If you're struggling with debt, you have multiple options to help manage your finances in Texas.
- Credit counseling. Credit counselors can help you develop a budget and access resources to improve your finances. The Department of Justice maintains a list of federally approved credit counseling agencies in Texas so you can find a legit nonprofit credit counselor.
- DIY negotiations. You can negotiate with your creditors on your own. Many creditors are willing to settle or develop an alternate payment plan to fit your budget.
- Debt settlement. Debt settlement and debt management are treated separately in Texas, but both are expensive services. These negotiate with your creditors on your behalf for a fee and often specialize in helping consumers with large amounts of debt.
- Debt consolidation. Debt consolidation loans are only an option for borrowers with good to excellent credit. If you aren't behind on your payments, debt consolidation can combine your payments into one — and you may even be able to score a lower interest rate.
How to find a legit debt relief company
Texas requires all debt relief providers to be registered. To confirm your provider is legit, see if it's regulated by industry organizations like the American Fair Credit Council (AFCC) or the International Association of Professional Debt Arbitrators (IAPDA). The Federal Trade Commission (FTC) has a list of companies and individuals banned from debt relief, and the Justice Department has a list of credit counseling agencies approved to work in Texas.
The Attorney General of Texas also outlines ways to spot a debt relief scam to help keep Texans safe. If a provider reaches out to you or asks for an upfront fee, look elsewhere. These are two common signs of a scam.
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Texas debt statistics
In a report published by the Federal Reserve, Texas had an average debt-to-income (DTI) ratio of 1.09 to 1.24 — higher than the ideal DTI, which should be below 1. It also leads the US in retail credit card debt in 2019, according to data from Experian, and had one of the largest increases to consumer debt.
- Mortgages: $176,736
- Credit cards: $6,753
- Store credit cards: $1,446
- Student loans: $32,441
Personal loans and car loans weren't included in Experian's report. However, Midland, Texas did have the highest auto loan balance in the country at $33,847.
Texas has regulations around debt relief that are on the heavier side — which are designed to keep consumers out of more trouble than they might otherwise get in. Before you enroll in a program, learn more about debt relief so you can pick the best route to financial security.
Frequently asked questions
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