Court Opinion

ID: 4714604
Source: CourtListenerOpinion
Date Created: 2021-08-12 00:41:21.02827+00
Date Added: 2024-06-11T08:07:22.956059
License: Public Domain

Chambers, J.
¶23 (concurring) — I fully concur with Justice Fairhurst’s measured, well reasoned majority opinion. I write separately, however, to stress that the same evils our legislature sought to avoid in decades past by regulating the debt adjustment industry still lurk.
¶24 As our legislature knew long ago, debt adjusting “is noted for its historic abuse and questionable practice and is outlawed or regulated in most States.” Wash. Legis. Budget Comm., Performance Audit: Debt Adjusting, Licensing and Regulatory Activities, Report No. 77-13, at 3 (Jan. 20, 1978) (on file with Wash. State Archives, H.B. 86, 46th Leg., Reg. Sess. (Wash. 1979)). Abuse of debtors has been so troubling historically that when the original 1967 legislation was set to sunset, then Attorney General Slade Gorton’s consumer protection and antitrust division counseled the legislature that
[i]t is our considered opinion that debt adjusting for profit in this state should not be regulated but rather should be prohibited. While it is highly unusual for this office to recommend such a step in view of our strong support for competition and free enterprise with a minimum of regulation, our experience in this area indicates that this field, even with regulation, is open to abuse.
Wash. Legis. Budget Comm., Sunset Audit Program and Fiscal Review” of Debt Adjusting, Licensing and Regulatory Activities app. 1 (Preliminary Report Sept. 17, 1977) (on file with Wash. State Archives, Substitute H.B. 564, 45th Leg., 1st Ex. Sess. (Wash. 1977)). The same sunset audit noted that “[a]n estimated 50 percent of clients signing up for a program never complete it.” Id. at 18.
¶25 Time has seemed to only make these numbers worse. According to the debt settlement industry’s own *502statistics, the dropout rate is almost 66 percent. Of that 66 percent, 65 percent leave the programs with no settlements. Telemarketing Sales Rule, 75 Fed. Reg. 48,458, 48,472-73 (Aug. 10, 2010). As the Federal Trade Commission (FTC) recently observed:
[D]ebt settlement is a high-risk financial product that requires consumers simultaneously to pay significant fees, save hundreds or thousands of dollars for potential settlements, and meet other obligations such as mortgage payments. Failure leads to grave consequences — increased debt, impaired credit ratings, and lawsuits that result in judgments and wage garnishments.
Id. at 48,484. “Consumers drop out of debt relief programs for many reasons, but the record shows that providers’ practice of charging substantial advance fees is a significant cause.” Id. at 48,485. Because of this, and because of the “deceptive and abusive practices of debt relief service providers,” the FTC has banned advanced fees for debt settlement companies, reducing the incentive and opportunity for debtor abuse. Id. at 48,465; 16 C.F.R. § 310.4. Those who enter a debt adjustment program but eventually drop out are generally much worse off than if they had not participated in the program at all. Not only have they paid substantial fees to a debt adjuster, but their debt problems continue to grow and spiral out of control.
¶26 This case illustrates the creativity of businesses attempting to circumvent regulation. As cats are drawn to cream, many for-profit debt adjusters will be attracted to the most unsophisticated of consumers. Despite the recent federal rule, I fear that until the Washington Legislature prohibits debt adjusting for profit, consumers in Washington will continue to suffer. In my view, the chronic and systemic abuses in the Washington debt adjusting industry deserve the attention of the Washington State Legislature.
¶27 With these observations, I concur.