Debt settlement license
Authorizes a company to negotiate with creditors to accept less than the full balance owed on a consumer's enrolled debts, for a fee tied to the settlements achieved.
Debt management license
Authorizes a company to administer debt management plans: collecting a monthly deposit from the consumer and distributing it to creditors until the balances are repaid in full.
| Feature | Debt settlement license | Debt management license |
|---|---|---|
| What happens to the debt | Settled for less than the balance owed | Repaid in full on a structured plan |
| Typical fee structure | Percentage of enrolled debt or of savings, earned as debts settle | Setup and monthly maintenance fees, capped by statute |
| Federal overlay | TSR advance-fee rule for telemarketed programs; dedicated consumer account rules | TSR debt relief rules where telemarketed; fewer settlement-specific constraints |
| Who holds consumer funds | The consumer, in a dedicated account, often via an independent administrator | The provider, in trust, with distribution and accounting rules |
| State license names | Debt settlement provider, debt adjuster, UDMSA registration | Debt management services, debt pooling, budget planning, UDMSA registration |
| State restrictions | Some states restrict or prohibit for-profit settlement | More broadly permitted; several states favor or require nonprofits |
Best for
Pick Debt settlement license
The debt settlement license path fits companies whose program negotiates reduced payoffs and earns fees as debts settle, operating under the TSR's advance-fee and dedicated-account rules in the states that permit the model.
Best for
Pick Debt management license
The debt management license path fits providers administering full-repayment plans for setup and maintenance fees, including nonprofit counseling agencies whose plan administration brings them under the statutes.
Two models, two license paths
The two activities look adjacent from the outside, both help an overextended consumer deal with unsecured debt, but the mechanics are opposites. A settlement provider tells creditors the full balance is not coming and negotiates a reduced payoff funded from an account the consumer builds up. A debt management provider promises the full balance on a schedule, collects one monthly payment, and distributes it to creditors, often with negotiated concessions on interest or fees. States wrote their statutes around those mechanics, which is why the license paths differ even where one statute covers both.
In states that adopted a version of the Uniform Debt-Management Services Act, settlement and management providers register under the same act, with fee provisions that treat the two models differently. Elsewhere, the activities can sit under separate statutes with separate applications, bonds, and caps, and a company running both models may need two authorizations in one state. Some debt adjuster statutes restrict for-profit operation entirely, and those restrictions more often bite the settlement model. The full state framework is on our debt settlement company licensing page.
Where credit counseling fits
Credit counseling on its own, budgeting advice and education, is often outside licensing. But the moment a counselor administers a repayment plan, it usually becomes debt management in the statute's eyes, and exemptions tend to protect only genuine nonprofits. Regulators read the contract and the money flow, not the label on the website.
Choosing based on your model
The license follows the program you actually run. If your revenue is earned as balances settle for less than face value, you are on the settlement path: dedicated-account rules, the TSR advance-fee rule, settlement-based fee caps, and the shorter list of states that permit the for-profit model. If your revenue is setup and maintenance fees on full-repayment plans, you are on the management path: trust accounting, distribution timing, and statutory fee ceilings. Hybrid programs get analyzed activity by activity. Cornerstone maps the states, files the applications, and places the bonds for both models; talk with our team about your program.
Frequently asked
- Can one company hold both licenses?
- Yes, and hybrid providers often do. In UDMSA states one registration can cover both activities; in states with separate statutes, the company files for each authorization it needs. The contract and fee schedule for each program are reviewed against that program's rules.
- Does credit counseling need its own license?
- Advice alone often does not, but administering a debt management plan usually triggers the debt management statute, and many exemptions apply only to genuine nonprofits. The analysis follows what the organization actually does with the consumer's money.
- Which model faces more state restrictions?
- Debt settlement. Several states restrict or effectively prohibit for-profit debt adjusting, and settlement-based fees draw the strictest caps. Debt management is more broadly permitted, though its trust accounting and fee ceilings are enforced closely.
- Do both models need surety bonds?
- In most licensing states, yes. Bond amounts are set state by state, and some scale with consumer funds under management or enrollment volume. The bond files with the application, so placement belongs on the licensing critical path.
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Browse the full list on the comparison hub.