Which place’s debt rules apply—and who can help?

SettleADebt — S_WA PASS-02

Remaining fee interactions and patches to PASS-01

This follow-up establishes a firmer cancellation boundary, while preserving the unresolved state-law interactions. An adjuster cannot deduct a cancellation/default fee from the direct trust account under RCW 18.28.150(2)(a). Separately, where the federal TSR dedicated-account provision applies, the FTC expressly interprets penalty-free withdrawal to prohibit a termination fee or similar fee—not merely withholding that fee from the account. The initial-$25 exception, fair-share treatment under the aggregate and cumulative caps, and attribution of nonprofit add-on charges are not conclusively resolved by the authorities retrieved.

Baseline and actual access: October 22, 2026, Pacific. All source-access checks reported below occurred on October 22, 2026 PDT; the final time check was 11:55 p.m. PDT. The eCFR displayed Title 16 as current through October 21, 2026.

The supplied PASS-01 claim records are the patch targets. The coordinator’s scoped review and supplied arithmetic checks are treated as prior-work provenance, not fresh legal-source reading. This answer addresses only the requested interactions.

For readability, S001–S013 below refer to the full source IDs S_WA-P2-S001–S_WA-P2-S013; C001–C019 refer to the corresponding full PASS-02 claim IDs in the claim table.

A. Substantive findings

1. Initial $25, the payment cap, cumulative retention, and a small first payment

What the operative clauses establish

RCW 18.28.080(1) contains distinct constraints:

• The initial charge may be no more than $25, and it forms part of total fees.
• The aggregate fee ceiling is 15% of contract-listed debt, including the specified financial-institution and account-administrator fees.
• The general retention ceiling is 15% of any one payment made by or on behalf of the debtor, subject to the nonprofit fair-share language.
• Once an initial charge is made, additional retention cannot cause cumulative retained fees to exceed 15% of cumulative payments.

The cumulative sentence regulates additional retention. It does not expressly adjudicate whether a particular earlier initial retention was lawful. Nor does the initial-charge sentence expressly address the separate requirement in RCW 18.28.110(4) to distribute at least 85% of each debtor payment to creditors within its forty-day framework. [C001–C004; S001, §§.080(1), .110(4)] app.leg.wa.gov+1

Historical evidence supports competing readings

The historical text matters, but it does not settle the current interaction:

1. 1979 c.156 §4 placed an express proviso between the per-payment limit and the initial-charge allowance. The same enactment’s §6(4) imposed the 85%-of-each-payment distribution requirement. Thus, the apparent tension existed even when the initial-charge provision used express proviso language.
2. 1999 c.151 §102 enacted the deletion of that proviso conjunction and replaced it with the present separate-sentence structure. The initial allowance and cumulative restriction remained. Section 105(4) retained the 85% distribution requirement.
3. The 2012 and 2015 enactments preserved that separate-sentence structure.

The old proviso and the continuing cumulative catch-up sentence support an argument for special initial-charge treatment. The current per-payment language and the separate distribution command support caution against assuming such treatment. The 1999 wording change, by itself, proves neither a substantive abolition of an exception nor a purely stylistic cleanup. [C003–C004; S013 §4, §6(4); S005 §102, §105(4); S006 §2; S004 §2] leg.wa.gov+4

The cases retrieved do not decide the narrow collision

In Smith v. JEM Group, the Ninth Circuit’s background discussion lists the initial, per-payment, and aggregate limits together. Its decision concerns arbitration and unconscionability. It does not decide whether $25 may be retained from a small first payment.

In Parkinson v. Freedom Fidelity Management, the district court found violations involving large initial retainers and retention of substantial portions of monthly payments. It did not decide the small-$25 exception. It also declined to decide the entire class’s distribution claim because the sample evidence was insufficiently explained. The order’s overall disposition was not a final plaintiff’s judgment against all defendants. [C005; S008 pp.3–5, 8–12; S009 pp.25–28, 33–34] cdn.ca9.uscourts.gov+3

Disposition: Do not clear a $25 retention that exceeds 15% of a small first payment or leaves an unexplained deficiency under the 85% distribution clause. Equally, this research does not establish a controlling holding categorically rejecting every possible initial-charge exception. The precise exception remains held.

Cumulative arithmetic does not establish a cure for an earlier retention or allocation defect. A claimed cure would require its own legal and transactional support, including the timing and character of any refund, credit, or reallocation.

Before any retention, §.080(2) also requires notification of all listed creditors. State fee ceilings do not displace independently applicable federal timing requirements. [C006, C017] app.leg.wa.gov+2

2. Fair share: the exact exception and the unresolved aggregate effect

Qualification and compensation source

RCW 18.28.010(4) limits fair share to creditor contributions paid to nonprofit adjusters by creditors whose consumers receive the nonprofit’s services and pay down their debts accordingly. Grants for unrelated services are outside that definition.

RCW 18.28.120(8) separately permits qualifying nonprofit fair share as an exception to its compensation-source restriction. This does not convert referral compensation or a for-profit provider’s receipts into qualifying fair share. [C007; S001 §§.010(4), .120(7)–(8); S004 §§1, 3] app.leg.wa.gov+2

Which sentence receives the exception?

The enacted 2015 amendment and the final legislative staff report both place the fee exception in the per-payment provision. The staff report is explanatory history, expressly not legislation or a statement of legislative intent. [C008; S004 §2; S010 “Summary”] lawfilesext.leg.wa.gov+1

What remains held

No controlling decision or formal Washington interpretation retrieved in this pass resolves whether qualifying fair share is excluded from:

• The aggregate 15%-of-listed-debt ceiling;
• The initial-charge cumulative calculation; or
• Contract-level allocations when a creditor pays an aggregate contribution covering multiple debtors.

There is relevant contextual evidence in both directions. The exception’s narrow placement counsels against exporting it. Conversely, the 2015 reporting provision separately identifies debtor fees and creditor fair-share contributions. That reporting distinction supports treating them as distinct categories, but it does not itself establish an aggregate-cap exemption. Neither universal inclusion nor universal exclusion is established here. [C009; S001 §.800(1)(b)–(c); S004 §4] app.leg.wa.gov+1

The potentially relevant 2017 DFI report remained inaccessible. Its search snippets are not used to settle this issue.

3. Nonprofit $15 threshold, setup charges, and add-ons

The current exclusion in RCW 18.28.010(1)(g) concerns a nonprofit organization that does not assess against the debtor a service charge exceeding $15 per month. Assessment, the nature of the charge, and the monthly unit matter; a headline monthly price does not establish the exclusion for an entire fee package. [C010; S001 §.010(1)(g)] app.leg.wa.gov

The clause supplies no express setup, enrollment, membership, administrative-add-on, or annual-averaging exception. Consequently:

• Conditional textual conclusion: If a setup or add-on amount is itself a service charge assessed by the nonprofit against the debtor, renaming it does not provide a statutory reason to exclude it from the monthly threshold.
• Unresolved attribution: A genuinely separate third-party charge, affiliate charge, mandatory donation, payment-processing amount, or optional unrelated service requires further classification. The explicit third-party aggregation wording in §.080 is not repeated in the nonprofit exclusion. That difference does not prove either that every third-party charge counts or that none counts.
• The covered-adjuster $25 initial-charge provision cannot automatically be stacked onto the $15 exclusion while claiming continued exemption.
• Failure to establish this exclusion does not, by itself, establish that the business is prohibited. The existing PASS-01 classification and other applicable conditions remain relevant. [C011]

The exact $15/month figure is verified, rather than an unverified indexed amount. Original HB 1283 proposed $50 per payment plus annual Seattle-area CPI adjustment. The committee substitute removed the proposed threshold increase; the enacted law retained $15 per month. The introduced proposal supplies no current fee permission. [C012; S012 §1(1)(g); S011 “Substitute Bill Compared to Original Bill”; S004 §1] lawfilesext.leg.wa.gov+2

4. Cancellation: calculation, direct trust, independent account, and TSR withdrawal

The state calculation does not determine the collection route

RCW 18.28.080(1)’s final paragraph permits an additional cancellation/default amount before successful completion, calculated as the lesser of:

6% of qualifying remaining contract-listed indebtedness that was due at contract entry, or $25.

The provision describes an amount additional to fees previously received. It does not expressly exempt that amount from the aggregate ceiling, authorize its deduction from every account, or deem it earned under federal law. [C013; S001 §.080(1), final paragraph] app.leg.wa.gov

The three account branches

The first row’s five- and thirty-day periods are stated as days; the other provisions expressly use business days. No calendar-deadline computation is supplied here. [C014–C016; S001 §.150; S002 §.350(1)(e); S003 §310.4(a)(5)] app.leg.wa.gov+2

A firmer federal resolution

The FTC’s formal final-rule explanation states that penalty-free withdrawal means a provider may not charge a termination fee or similar fee. A separate invoice does not avoid that prohibition when the charge is a termination penalty in a transaction subject to this dedicated-account condition.

This is supported by the current operative provision and the FTC’s 2010 Statement of Basis and Purpose, 75 FR 48491. It does not prohibit collecting an otherwise lawful, previously earned, unpaid service fee merely because the consumer later withdraws. [C016; S007 p.48491] ecfr.gov+1

For a fee to satisfy the federal earned-fee condition, the required debt alteration, customer-executed agreement, customer payment under that agreement, and applicable individual-debt allocation requirements must be met. Cancellation itself supplies none of those triggers. The same FTC rulemaking explains that state ceilings do not authorize initial or monthly advance fees contrary to the TSR. [C017; S003 §310.4(a)(5)(i); S007 pp.48480–48481 n.312] ecfr.gov+1

State-only questions that remain held

The Washington account provision concerns withdrawal from the administrator’s service, while the federal provision concerns withdrawal from the debt-relief service. The distinction prevents treating their language as interchangeable.

The 2012 act retained the adjuster cancellation calculation while enacting the administrator-withdrawal provision. It supplies no express resolution of a separately assessed adjuster cancellation charge in a state-only transaction. Nor does it establish that such a charge belongs within the earned-fee exception to the account return. [C015, C018; S006 §§2–3] lawfilesext.leg.wa.gov

The following remain unresolved:

• Whether the cancellation amount can exceed otherwise exhausted aggregate fee capacity;
• Whether and when a separately collected state-only cancellation charge is permissible;
• Its interaction with the statutory three-day cancellation right;
• Whether a particular purported cancellation charge qualifies as an earned deduction from an independent account.

Section .100(7)(c) provides the cancellation notice and mailing procedure. It does not expressly reconcile that right with the cancellation charge or declare a universal fee-free/full-refund rule. [C018; S001 §.100(7)(c)] app.leg.wa.gov

Finally, ordinary direct-trust closeout must not be mistaken for the remedy applicable to an unlawful excess-fee contract. Section .090 separately requires debtor return of received payments not distributed to creditors when its void-contract conditions apply, subject to its accidental-and-bona-fide-error exception. [C019] app.leg.wa.gov

B. Actual source register — freshly read primary material

Access date for every entry: October 22, 2026 PDT. HTML/PDF renditions and different sections of one document retain one source ID. “Current” refers to the retrieved operative compilation; historical enactments and proposals are identified separately.

C. PASS-02 claim table

“High text” means the proposition is directly established by the passage read. “Held” means the requested favorable legal conclusion has not been established.

D. Actual earlier-claim patch map

These are patches to the supplied records. The raw PASS-01 answer has not been edited.

E. Conditional examples and specific corrections

All amounts are U.S. dollars. Calculations below use exact cents; no rounding changes a result. These examples isolate the stated conditions and do not establish provider authorization.

Example 1 — Small first payment: the $25 maximum does not clear the interaction

Assume listed debt of $1,000.00, a first debtor payment of $50.00, a proposed initial retention of $25.00, ordinary consumer-paid fees, and no separate funding or fair-share issue.

Plain text

Aggregate ceiling:
$1,000.00 × 0.15 = $150.00.

General payment ceiling:
$50.00 × 0.15 = $7.50.

Proposed retention above that ceiling:
$25.00 − $7.50 = $17.50.

85% distribution benchmark:
$50.00 × 0.85 = $42.50.

Remaining payment after proposed retention:
$50.00 − $25.00 = $25.00.

Difference from the distribution benchmark:
$42.50 − $25.00 = $17.50.

Legal result: hold. The proposed flow requires an exception or reconciliation not established here. Even $7.50 is only an arithmetic boundary under the general payment test; it is not permission to collect before applicable notice and federal performance conditions.

For a separate lower-debt case, listed debt of $100.00 produces an aggregate ceiling of $15.00. A $25.00 initial charge exceeds that ceiling by $10.00 regardless of the unresolved first-payment exception. [C001–C006, C017]

Example 2 — Patch the previous-$25/cumulative-$200 example

Assume $25.00 was previously retained and cumulative debtor payments now equal $200.00.

Plain text

Cumulative ceiling:
$200.00 × 0.15 = $30.00.

Remaining arithmetic capacity:
$30.00 − $25.00 = $5.00.

If another $15.00 is retained:
$25.00 + $15.00 = $40.00.

Excess over the cumulative ceiling:
$40.00 − $30.00 = $10.00.

Patch: $5.00 is capacity under this cumulative calculation, not a verified collectible fee. The earlier $25.00, current payment base, distribution allocation, and timing remain separate premises.

If the history is two $100 payments with creditor allocations of $75 and $95, their combined $170 equals 85% of $200. That combined match does not establish compliance with the statutory each-payment language or prove a lawful correction of the first allocation. [C002–C006]

Example 3 — Fair-share aggregate ambiguity cannot be solved by arithmetic

Assume $5,000.00 of listed debt, $730.00 of fees unquestionably within the aggregate calculation, and a $40.00 contribution meeting the fair-share definition.

Plain text

Aggregate ceiling:
$5,000.00 × 0.15 = $750.00.

If the contribution counts:
$730.00 + $40.00 = $770.00.
$770.00 − $750.00 = $20.00 above the ceiling.

If the contribution is excluded:
Counted fees remain $730.00.
$750.00 − $730.00 = $20.00 remaining capacity.

Legal result: hold. The arithmetic displays the consequence of the unresolved interpretation. It does not select the favorable branch or authorize additional charges. [C007–C009]

Example 4 — Nonprofit monthly fee plus setup service charge

Assume both amounts are service charges assessed by the nonprofit against the same debtor in the same month.

Plain text

Monthly service charge: $15.00.
Setup service charge: $10.00.

Total assessed service charges:
$15.00 + $10.00 = $25.00.

Difference from the exclusion threshold:
$25.00 − $15.00 = $10.00.

Conditional classification result: The stated package does not establish the $15/month exclusion. Calling the second amount “setup” supplies no express carve-out. This does not itself prove that the business or charge is prohibited under every other applicable pathway.

If the additional amount instead belongs to a genuinely separate third party, its attribution under the exclusion remains held. [C010–C012]

Example 5 — Cancellation formula and account destination are separate

Assume qualifying remaining originally-due debt of $300.00, an account balance of $1,000.00, and $100.00 of ordinary fees independently established as lawful, earned, unpaid, and deductible under the applicable branch.

Plain text

State cancellation calculation:
$300.00 × 0.06 = $18.00.
min($18.00, $25.00) = $18.00.

Balance after the assumed ordinary-fee deduction:
$1,000.00 − $100.00 = $900.00.

The legal outcomes differ:

• Direct adjuster trust: cancellation-fee deduction is $0.00. The modeled $900.00 goes to creditors under §.150’s deadline.
• State independent account: the modeled $900.00 goes to the debtor within seven business days. The $18.00 is not established as an earned-fee deduction or separately collectible entitlement.
• Applicable TSR dedicated account: additional termination fee is $0.00, including a separately invoiced termination penalty. The modeled $900.00 returns within seven business days.
• Same federal branch, no qualifying earned fee: ordinary provider-fee deduction is $0.00; return is $1,000.00.

The assumed $100.00 is unpaid; it is not a second deduction of fees previously paid. [C013–C018]

Near-exhausted aggregate variant: With $1,000.00 listed debt and $145.00 of prior counted fees, aggregate capacity is $150.00 − $145.00 = $5.00. Adding the $18.00 cancellation calculation would produce $163.00, exceeding $150.00 by $13.00. Neither an $18 entitlement beyond the cap nor automatic permission to collect $5 is established by this calculation. [C013, C018]

F. Failed routes and discovery-only material

These entries are not part of the actual source register and do not support substantive fee conclusions.

No access restriction was bypassed, and no browser permission expansion or contact was used.

G. Dependency crosswalk — prior work versus fresh evidence

H. Component coverage and remaining-evidence table

Researcher self-check

The operative passages, enacted amendment clauses, relevant judicial passages, and FTC rulemaking passages identified in the actual source register were freshly read. The report distinguishes current codification, enacted historical versions, staff explanations, and an introduced proposal.

The inaccessible DFI materials were not read. Search snippets, index results, and provider statements were not substituted for their contents. The judicial materials were not treated as narrow controlling holdings they do not supply, and a complete citator review was not performed.

This work stayed in the same conversation with existing public-web retrieval. The interface’s actual model selection was not verified or changed. No Deep Research task, external chat conversation, browser-access request, account change, purchase, contact, private-data retrieval, local deliverable, or publication was undertaken.

This is a researcher self-check, not independent review. The continuation boundary is the specifically identified held interactions; all broader Washington categories remain open.

END S_WA PASS-02.