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Education

Research fully before Upon registering with the department, Debt Co. was

required to apply for a license. During the application
doing business in process, it had to submit extensive information about its
business operations, as well as ensure its contract with
Illinois consumers conformed with requirements under
a new state the Illinois Debt Settlement Consumer Protection Act (Debt
Settlement Act). Debt Co. also had to submit all information
related to Illinois residents who had signed up for its debt
settlement services.

Although Debt Co. was trying to do everything according
to Illinois laws, the fact that it had already begun doing
business in Illinois meant it was in violation of the Debt
Settlement Act, which prohibits unlicensed debt settlement
services. The department notified Debt Co. that it was in
violation of the Debt Settlement Act and requested Debt
Co. withdraw its application.

The department advised Debt Co. that the Debt Settlement
Act statute, as written, meant it could not grant a license
to Debt Co. To grant a license, the department must find
that the applicant, or any officers, directors, partners,
By David Haber or managers, had not violated any provision of the Debt
Global Legal Law Firm Settlement Act. Debt Co. was required to refund all
referral fees and any other fees not allowed under the Debt
elling almost anything in a state might require a Settlement Act. Debt Co. was also levied a fine even though
license, even in the payments space. Some busi- it had tried in earnest to get licensed properly.
nesses must register in every state, which can Unintended consequences
S include registering with the Secretary of State
and other state agencies that regulate the market that they The result is that unlicensed debt settlement providers
operate in. Thus, when underwriting an account, you may may choose not to reveal that they do business with
need to confirm that the business has all necessary licen- Illinois consumers. Instead of protecting consumers, the
sure. A mere checkbox affirming that it does, might not be Debt Settlement Act does the opposite because it forces
accurate. unlicensed debt settlement providers, whether scrupulous
or not, into hiding. This example illustrates that regulations
Many businesses begin business operations in a state that intend to benefit consumers can often do the opposite.
and look into what licensure is required afterward. This
common practice, however, can be fatal to a business’s Companies should thoroughly investigate licensing
ability to operate within a state. The fine line between requirements in each state before doing business there.
being compliant and operating until state authorities begin And it often makes sense to retain experienced licensing
an investigation must be considered when underwriting an attorneys for this purpose. Although it may not make
account or beginning a new business venture. financial sense to invest heavily in the licensing process
before knowing a viable market for your company’s services
The phrase "no good deed goes unpunished" has proven exists in a particular state, it is better than being denied a
to be true with respect to state licensing. Usually, when license if you are already doing business there.
companies find out they do not have the correct license,
they pay a nominal fine and are allowed to obtain the Similarly, when underwriting an account, a deeper dive
required license. It's similar to a fix-it ticket. In some states, may reveal latent defects with compliance. These issues
however, the laws governing certain industries prevent should be examined, sometimes down to the municipality
companies from obtaining the license required to operate level.
if they have already begun business within the state.
Sincere efforts gone wrong David Haber is an Associate with Global Legal Law Firm. Global Legal Law
Firm tracks all the legal developments in the electronic payments space
For example, in April 2017, a debt settlement provider, and helps clients develop strategies for various laws and prevailing inter-
referred to as "Debt Co." obtained a license to do business pretations across the United States. Global helps clients with compliance
in Illinois from the secretary of state. The form letter advice, drafting and negotiating business contractual terms and condi-
provided along with the approval stated that Debt Co. tions, defending state and federal regulatory actions, and civil litigation
needed to register with the Illinois Department of Financial matters involving electronic payment transactions and electronic pay-
and Professional Regulation. ment companies. Contact Global at info@attorneygl.com.

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