Business debt settlement companies in Idaho should be licensed debt counselors. Under Idaho’s Collection Agency Act, on its face, anyone in Idaho who enters into a contract to settle “any account, note or other indebtedness” must be licensed.
Do business debt settlement companies in Idaho have to be licensed in Idaho?
On its face, Idaho Code 26-2223(7) prohibits any person from doing business in Idaho without a license from the Department of Finance by “contracting with the debtor to effect the adjustment, compromise, or discharge of any account, note or other indebtedness.” Under Idaho Code 26-2222(9), a person who does that is a debt counselor. Neither of those provisions limits what is meant by “debtor” or “indebtedness” to consumer debt.
In fact, the Idaho Department of Finance’s page on collection agencies lists “debt settlement companies” among the businesses it regulates, and between 2009 and 2011 the department entered into consent orders with multiple debt settlement companies and denied a debt settlement company’s application for a debt counselor license. We could not find a published department position on companies settling only business debts, so if the company you’re talking to says it doesn’t need an Idaho license, call the Department of Finance at 208-332-8002 or email collections@finance.idaho.gov to double-check.
How do you check an Idaho provider's license?
Check your provider’s name in the department’s licensee and financial institution search. The department says these licenses are now applied for through the Nationwide Multistate Licensing System (“NMLS”), so a legitimate business debt settlement provider should have no problem telling you its license number.
Note that while there is an exemption for licensed attorneys in Idaho when the activity is incidental to the practice of law under Idaho Code 26-2239(1), on its face that would not apply to a law firm not licensed in Idaho or one for which debt settlement is not merely “incidental” to its practice.
What is the advantage of using a licensed debt counselor in Idaho?
Among other things, a licensed debt settlement company has to:
- Post a surety bond of at least $15,000, and upon renewal of its license twice the average monthly funds it holds, up to a maximum of $100,000 (Idaho Code 26-2232A);
- Limit its fees to 15% of each amount received if it handles your funds, or 20% of your principal unsecured debt at contracting if not, and not charge you anything else (Idaho Code 26-2229);
- Refund you 50% of the fees it charged you attributable to debt it didn’t settle if you cancel; and
- Deal “openly, fairly, and honestly without deception,” and not collect fees through false claims, or claims without a factual basis, that it can reduce or eliminate your debt (Idaho Code 26-2229A and 26-2226).
Doing this business in Idaho without a license is a felony under Idaho Code 26-2238. (For more on what to expect in fees, see How Much Does Business Debt Settlement Cost?)
Does usury law help an Idaho owner negotiate?
Usury law won’t help you much. While Idaho Code 28-22-104 sets the legal rate of interest at 12%, that only applies if there is no written contract for a different rate of interest. We found no general Idaho cap on a contracted rate for business credit, and the usury law governing your contract is likely that of the state it designates (often, New York). See Can a Merchant Cash Advance Be Usurious? for whether your funder’s contract can be “recharacterized” so that usury law applies.
How fast can a funder collect in Idaho after suing elsewhere?
Once a funder files a judgment from another state with the clerk of an Idaho district court, it can begin to enforce the judgment 5 days later pursuant to Idaho Code 10-1303. Under the Idaho Enforcement of Foreign Judgments Act, the clerk will mail notice to you, and the judgment can be stayed if an appeal is pending with security posted, or on any ground that would stay an Idaho judgment, pursuant to Idaho Code 10-1304.
Idaho has done away with its confession of judgment chapter (chapter 9 of Title 10). Most funders bring suit in another state under the forum selection clauses in their contracts. Your best bet is a provider negotiating before that filing. Read more about the rules in New York, where most MCA contracts are governed.
What can a guarantor keep under Idaho exemptions?
A homestead not to exceed $175,000 in value is exempt pursuant to Idaho Code 55-1003 as amended in 2020, with no limit to the amount of land. It is claimed as soon as you occupy the property as your principal place of residence pursuant to Idaho Code 55-1004. An example: if you have $240,000 in equity, only $65,000 of it is available to the judgment creditor. A good provider weighs this when negotiating a lump sum.
Exemptions for individuals in Idaho
| Type of Property | Exempt Amount | Idaho Code Section |
|---|
| Homestead | $175,000 | Idaho Code 55-1003 |
| Tools of Trade and Business Equipment | $10,000 | Idaho Code 11-605 |
| One Motor Vehicle | $10,000 | Idaho Code 11-605 |
| Household Goods | $1,000 per item, $7,500 total | Idaho Code 11-605 |
| Wildcard, Tangible Property | $1,500 | Idaho Code 11-605 |
| Wages | At least 75% of weekly disposable earnings | Idaho Code 11-207 |
There are additional exemptions in Idaho Code 11-605 for jewelry of up to $1,000, one firearm of up to $1,500, crops of up to $5,000 plus water rights, and life insurance. These exemptions apply to you as an individual, but they do not apply to your company’s operating account or receivables.
Frequently Asked Questions
Is an out-of-state law firm that settles business debt exempt from Idaho licensing?
No. Under Idaho Code 26-2239, the attorney exemption covers only attorneys licensed in Idaho, and only for activities that are incidental to the practice of law.
What happens if my debt settlement provider is not licensed in Idaho?
It is a felony under Idaho Code 26-2238 to operate as a debt settlement services provider without a license in Idaho. The penalty is a fine of up to $5,000 or imprisonment for up to 5 years, or both. If you know of someone operating without a license, you can report them on the Department of Finance complaint page.
Can I argue my merchant cash advance is usurious under Idaho law?
Not really. The legal rate of interest is 12% under Idaho Code 28-22-104, but only where there is no written contract fixing a different rate. Any usury argument will need to be based on the law of the state that your contract is subject to, which is often New York.
Can the funder garnish my wages in Idaho after they get a judgment?
Yes, but Idaho Code 11-207 limits the amount that can be garnished to 25% of your weekly disposable earnings or the amount by which those earnings exceed 30 times the federal minimum hourly wage, whichever is less.