Starting January 1, 2026, individuals offering debt resolution services to Tennessee consumers must first obtain a license through the Tennessee Department of Commerce & Insurance (TDCI) before providing those services.
This is just one change that is part of Tennessee’s Debt Resolution Services Act (DRSA), a new statutory framework which was approved in 2025 that will govern traditional debt settlement services in Tennessee starting in 2026.
TDCI’s Division of Regulatory Boards oversees the licensure of credit and debt collection professionals through the Collection Service Board, Debt Management Program, and the Credit Services Business registration program.
“The Debt Resolution Services Act creates a comprehensive and modern regulatory framework for traditional debt settlement services while creating new protections for Tennessee consumers,” said TDCI Assistant Commissioner for Regulatory Boards Reid Witcher. “I remind providers to be mindful of the changes that took effect on January 1, 2026. Providers should not engage in activity requiring licensure until a license has been approved.”
Licensing and Application Requirements
In the past, debt settlement activity, including those providing services as regulated under the federal Telemarketing Sales Rule, fell under Tennessee’s Uniform Debt Management Services Act (UDMSA), which was drafted with traditional debt management models in mind, rather than debt settlement.
Under the new DRSA, providers may not offer debt resolution services to Tennessee consumers without first obtaining a license from TDCI. The definition of debt resolution services includes any program represented to negotiate, settle, or otherwise alter the terms of unsecured debt.
- The licensing framework incorporates several requirements familiar from the UDMSA.
- Applicants must submit financial statements for the preceding two fiscal years, a copy of their consumer agreement forms and fee schedules, and evidence of accreditation or certification by an approved independent accrediting body or national trade group.
- Applicants must also file a surety bond of up to $50,000 and provide fingerprints for executive officers to support national criminal background checks, as required by TDCI’s commissioner.
- Licenses must be obtained through the CORE online licensing system.
- Licenses are issued for two years and are subject to renewal and ongoing recordkeeping, disclosure, and reporting obligations.
Exempt Entities
The DRSA contains several important exemptions.
- Attorneys licensed in Tennessee who provide debt resolution services within an attorney-client relationship are fully exempt, as are dedicated account service providers that perform only account administration functions.
- Banks, certified public accountants, certain nonprofit entities, creditors negotiating on their own behalf, and government officers are also excluded.
- In addition, employees of a licensee and individuals who only market on behalf of a licensed provider, without performing any debt resolution services themselves, are exempt from the Act’s licensing requirement.
Consumer Protections and Earned Fee Requirements
- The DRSA establishes detailed consumer protection requirements, including mandatory disclosures in the service agreement addressing the nature of the services, the method of calculating fees, anticipated timelines, the effect of nonpayment on credit and collection activity, and potential tax implications. Agreements must identify each enrolled debt and must be provided promptly to consumers.
- Providers may request or require the use of a dedicated account, but the account must meet requirements consistent with the Telemarketing Sales Rule. Funds must be held in an FDIC insured bank, owned by the consumer, and administered by an unaffiliated dedicated account provider. The consumer must be able to terminate services at any time without penalty.
- The fee structure aligns closely with the federal earned fee model. No fee may be collected until at least one debt has been renegotiated or resolved and the consumer has made a payment under the resulting agreement. Fees must then be calculated either in proportion to the total enrolled debt or as a percentage of the savings achieved, applied consistently across all debts.
Enforcement and Transition
- The DRSA includes a range of prohibited practices, such as misrepresentations regarding anticipated savings or timelines, sending creditor cease and desist communications, receiving consumer funds beyond earned fees, and operating or influencing consumer review platforms.
- Penalties may reach $5,000 per violation, subject to a maximum of $100,000.
Existing agreements and licenses issued under the Uniform Debt Management Services Act may continue for non-debt resolution activity, but providers engaging only in debt resolution services will be required to transition into the new licensing regime.
Questions? Contact TDCI by email at reg.boards@tn.gov.
Subscribe to our Newsletter!
 before providing those services.){kind=link}