Credit Counseling, Debt Management and Debt Settlement 2009 Legislation

Last Updated: September 8, 2010

NCSL Staff Contact: Heather Morton, Denver, (303) 364-7700

Each year millions of consumers turn to credit counseling agencies and debt management services for help in managing their debts. As an alternative to credit counseling, debt settlement offers to reduce consumers' debt through negotiating with creditors.  Credit counselors, debt managers and debt settlement services all provide resources to help consumers get out of debt. State legislators and other policymakers have been raising questions regarding how these services work and whether they really help consumers to get out of debt.

During the 2009 legislative session, 25 states introduced legislation regarding credit counseling, debt management and/or debt settlement. Connecticut, Delaware, Iowa, Maine, Minnesota, Montana, Nevada, New Hampshire, New Jersey, Oregon, Tennessee, and Utah enacted legislation this year.

Click here to review the state statutes.

Click here to review the 2010 legislation.

CA | CT | DE | FL | IL | IN | IA | ME | MD | MN | MO | MT | NV | NH | NJNMNYNC | ND | OR | PA | TN | TX | UT | WA
STATES
TITLE
Alabama
none
Alaska
none
Arizona
none
Arkansas
none
California

A.B. 350
Passed Assembly 6/2/09
Enacts the Debt Settlement Services Act and, commencing January 1, 2012, provides for the licensing and regulation by the commissioner of providers, defined as persons who provide, offer to provide, or agree to provide debt settlement services, as defined, directly or through others. Requires a provider to submit specified fees and an application for licensure with the commissioner. An applicant, and any person who signs an application on behalf of an applicant, who knowingly misrepresents or submits any material matter that is false, or a person who otherwise willfully violates a provision of the act, would be guilty of a misdemeanor. Specifies the conditions under which the commissioner may issue or deny licensure as a provider, requires renewal of a provider's license on an annual basis, and requires a provider to satisfy certain requirements before entering into an agreement with an individual for the provision of debt settlement services, including providing specified disclosures. Requires an agreement for debt settlement services to contain specified terms and imposes limits on the fees charged by providers. Prohibits providers from engaging in specified practices. Authorizes the commissioner to take enforcement actions against a provider for violations of the bill's provisions and also authorizes an injured individual to recover specified damages from a provider that violates the bill's provisions. The bill enacts other related provisions.

Colorado
none
Connecticut

H.B. 5907
Failed Joint Favorable deadline 3/12/09
Requires individuals selling debt reduction services to (1) clearly describe in a contract the services to be provided, including an analysis of the consumer's debt; (2) provide consumers with a three-day right of cancellation; and (3) document all costs associated with the provision of debt reduction services to prohibit debt reducers from charging upfront or advance fees, to prohibit for-profit corporations from providing debt reduction services and to authorize the Banking commissioner to investigate and reduce debt reducer fees that are excessive in relation to common industry fees and the financial benefit received by the consumer for such services.

 

H.B. 6327
Signed by governor 5/8/09, Public Act 23
Changes the method for calculating the required surety bond that debt adjustors must file with the banking commissioner. It also sets the bond for a debt adjustor applicant who acquires a predecessor's business. The act (1) allows the banking commissioner to change the bond amount based on certain conditions and (2) requires applicants who cannot meet the bond requirements to deposit a certain amount in a bank, instead of obtaining an insurance policy as is the option under current law. It also makes conforming changes.

 

H.B. 6366
Amends licensing provisions regarding debt adjusters.

 

H.B. 6482
Failed Joint Favorable deadline 3/12/09
Adopts the Uniform Debt-Management Services Act.

 

S.B. 705
Defines, regulates, and requires certain actions of debt reduction services, similar to current law's requirements for credit clinics, and requires debt reduction services to be tax-exempt nonprofit entities, as defined under federal law, to operate in the state. It creates a three-day period during which a consumer may break a debt reduction contract without consequence, and extends this to credit clinic service contracts. The bill applies to contracts of a credit clinic service or debt reduction service, which includes certain foreclosure rescue services, when the consumer who signs the contract is a Connecticut resident or maintains a home in the state and negotiates or agrees to the contract terms in person, by mail or telephone, or via the Internet while physically present in the state. Under the bill, the banking commissioner may review any fees or charges a credit clinic or person offering debt reduction services assesses. He has the same investigative powers for these purposes as with other banking issues. Violations under the bill, as with current law concerning credit clinics, are an unfair trade practice. The bill also provides funding for oversight of these services. Specifically, it requires that some funds the Banking Department receives or collects from assessments or fees that the law requires credit unions and banks pay to fund the department be used for oversight of people providing debt reduction, foreclosure rescue, or credit clinics services. It requires the Office of Policy and Management secretary to allocate enough of the Banking Department funds to the Department of Consumer Protection (DCP) and the state comptroller for this oversight.

 

S.B. 950
Signed by governor 7/7/09, Public Act 09-208
Broadens those who can be a licensed debt adjuster to include for-profit entities and sets additional consumer-protection type requirements for all debt adjusters. It defines debt negotiation, which includes debt settlement, foreclosure rescue, and short sales, and creates a new license for debt negotiators that tracks the same licensing requirements as for debt adjusters with regard to application procedures, requirements, and enforcement.

Delaware

H.B. 232
Signed by governor 10/5/09, Chapter 213
Clarifies that the Debt Management Services Act is intended to regulate providers who negotiate terms or concessions related to an individual’s unsecured debt. Businesses offering to negotiate modification of mortgage loans on behalf of individuals with homes in foreclosure are required to comply with provisions of the “Mortgage Rescue Fraud Protection Act” in 6 Del. C. Chapter 24B.

District of Columbia
none
Florida

H.B. 959
Indefinitely postponed 5/2/09
Requires credit counseling organizations to annually register with the Office of Financial Regulation (OFR); provides registration requirements; provides grounds for denying registration; provides for registration fee; authorizes OFR to adopt rules; prohibits credit counseling organization from engaging in certain additional specified acts; deletes provision that allows organization to collect fee for insufficient fund transactions.

 

H.B. 1045
Indefinitely postponed 5/2/09
Creates "Debt Settlement Services Act"; requires that person be licensed in order to provide or offer debt settlement services to client residing in state; provides exceptions to application of act; provides for application form; requires fee and proof of insurance policy or surety bond; requires debt settlement advisor to notify OFR of change of license information within prescribed time.

 

S.B. 1132
Indefinitely postponed 5/2/09
Prohibits a credit counseling organization from engaging in certain additional specified acts. Deletes a provision that allows the organization to collect a fee for insufficient fund transactions. Requires said organization to obtain a surety bond. Provides for service contracts. Requires said organization to provide the consumer with copies of all signed documents.

 

S.B. 2412
Indefinitely postponed 5/2/09
Creates Debt Settlement Services Act. Requires that a person be licensed if he or she intends to provide or offers to provide debt settlement services to a client who resides in this state. Provides for an application form and requires a fee and proof of an insurance policy or a surety bond. Requires the debt settlement advisor to provide certain documents to a prospective client before signing a debt settlement services agreement.

Georgia
none
Guam
none
Hawaii
none
Idaho
none
Illinois

H.B. 4682
Amends the Debt Management Service Act and renames the Act to the Debt Relief and Consumer Protection Act, including all cross-references in various other Acts. Changes the requirements for a license to include someone who operates a debt relief service (instead of debt management service). Changes the requirements concerning the (1) application for, (2) qualification for, (3) examination of, (4) renewal of, (5) fees for, and (6) revocation or suspension of a license from the Department of Financial and Professional Regulation. Changes provisions concerning the display and location of a license. Adds provisions concerning a written debt relief agreement between a debtor and licensee. Adds (1) disclosure requirements, (2) required terms, (3) accounting, and (4) the debtor's right to cancel with respect to debt relief services. Changes provisions concerning prohibited actions by a licensee. Adds provisions concerning the advertisement and solicitation of debt relief services. Requires the Department to post an annual report concerning debt relief agencies. Makes other changes.

 

S.B. 2244
Creates the Debt Settlement Act. Provides that no person shall engage in the business of debt settlement in the State without a license. Provides that an applicant for a license to engage in the business of debt settlement shall file an application with the director of the Division of Financial Institutions of the Department of Financial and Professional Regulation that contains specified provisions. Contains provisions concerning the renewal of licenses. Requires a licensee to create, maintain, and preserve accurate and complete books relating to the licensee's business. Contains provisions concerning contract fees. Provides for debt settlement contract requirements. Specifies the functions required to be performed and acts that are prohibited by a debt settlement provider. Provides that without limiting the generality of the Act and other applicable laws, the debt settlement provider, manager, or an employee of the debt settlement provider (except a licensed attorney who provides legal services in an attorney-client relationship or who is otherwise authorized to practice law in the state) shall not perform specified actions. Provides that the attorney general or the prosecuting attorney of any county within the state may bring an action in the name of the state against any person to restrain and prevent any violation of the Act and specifies penalties for violations of the Act.

 

S.B. 2480
Amends the Debt Management Service Act and renames the Act to the Debt Relief and Consumer Protection Act, including all cross-references in various other Acts. Changes the requirements for a license to include someone who operates a debt relief service (instead of debt management service). Changes the requirements concerning the (1) application for, (2) qualification for, (3) examination of, (4) renewal of, (5) fees for, and (6) revocation or suspension of a license from the Department of Financial and Professional Regulation. Changes provisions concerning the display and location of a license. Adds provisions concerning a written debt relief agreement between a debtor and licensee. Adds (1) disclosure requirements, (2) required terms, (3) accounting, and (4) the debtor's right to cancel with respect to debt relief services. Changes provisions concerning prohibited actions by a licensee. Adds provisions concerning the advertisement and solicitation of debt relief services. Requires the Department to post an annual report concerning debt relief agencies. Makes other changes.

Indiana

H.B. 1612
To conference committee 4/20/09
Makes various changes to the laws concerning: (1) financial institutions; (2) debt management companies; (3) pawnbrokers; (4) money transmitters; (5) check cashers; (6) persons licensed under the Uniform Consumer Credit Code; (7) first lien mortgage lenders; and (8) rental purchase agreements. Repeals provisions being superseded by this bill. Repeals a provision requiring the display of a license by a debt management company.

 

S.B. 571
Passed Senate 2/23/09
Makes various changes to the laws concerning: (1) financial institutions; (2) debt management companies; (3) pawnbrokers; (4) money transmitters; (5) check cashers; (6) persons licensed under the Uniform Consumer Credit Code; (7) rental purchase agreements; and (8) first lien mortgage lenders. Repeals provisions being superseded by this bill. Repeal provisions concerning: (1) requiring the display of a license by a debt management company; (2) court and personal jurisdiction; and (3) no right to trial by jury.

Iowa

H.F. 724
Substituted by S.F. 311 3/23/09
H.S.B. 152
Became H.F. 724 3/13/09
Relates to the regulation of the business of debt management pursuant to Code chapter 533A. The bill modifies definitions applicable to debt management. The bill adds to the definition of a "creditor" a person who grants credit or who takes assignment of the rights to payments of a person granting credit. The bill expands the definition of "debt management" to mean arranging or negotiating, or attempting to arrange or negotiate, for a fee, the amount or terms of debt owed by a debtor to a creditor; receiving from a debtor, directly or indirectly, money or evidences thereof for the purposes of distributing it to one or more creditors of the debtor in payment or partial payment of the debtor's obligations; serving as an intermediary between a debtor and one or more creditors of the debtor for the purpose of obtaining concessions from the creditors, or engaging in debt settlement. The bill defines "debt settlement" as seeking to settle the principal amount of a debtor's debts with creditors for less than the principal amounts owed on the debts. The bill additionally deletes a definition of "allowable cost" which was not utilized within the chapter. The bill adds to the list of persons exempt from the chapter's licensing requirements a person licensed pursuant to Code chapter 533C in connection with money transmission or currency exchange and related persons as specified in the bill. The bill requires additional information to be supplied on an application for licensure, including in the case of a foreign corporation applicant a duly acknowledged irrevocable consent that suits and actions may be commenced against the licensee by service of process performed as provided in Code §617.3 or as provided in the Iowa rules of civil procedure, and proof of authorization to do business. The bill requires furnishing the name, physical address, and telephone number of the licensee's agent for service of process, which replaces a provision repealed by the bill which had designated the superintendent of banking as the agent for service of process. The bill also requires an applicant to furnish a description of their proposed debt management program and a copy of disclosures required in the chapter to be provided to debtors. The bill replaces current Code §533A.8 specifying written contract requirements with a new list of requirements applicable to a licensee when dealing with a potential debtor client or otherwise engaging in the business of debt management. The requirements include describing the methodology of the debt management program so a debtor can make an informed decision regarding the appropriateness of the program, conducting a comprehensive review of the debtor's debts and the debtor's monthly budget, and performing a thorough written budget analysis. The bill provides additional requirements relating to disclosures required to be made by a licensee. The bill provides that a licensee, including any third party who markets or sells a debt management program on behalf of a licensee, must make a series of disclosures to a debtor both verbally and in writing before the debtor signs a contract to enroll in the debt management program. The disclosures include the total estimated fee the debtor will pay for participating in the program, that the licensee cannot guarantee any specific results, that the debtor may elect to discontinue participation in the program without penalty at any time, and that any concession obtained regarding the principal amount of debt may be considered income to the debtor subject to income tax. Disclosures are also specified applicable to debt management programs which do not require receipt of money from the debtor to distribute to the debtor's creditors, and to debt settlement programs. The bill contains requirements regarding the form and manner of verbal and written disclosures, and states that it is a violation of the Code chapter for a licensee, or any third party who markets or sells a debt management program on behalf of the licensee, to contradict the required disclosures in any representation, advertising, or solicitation. Further, the bill specifies the nature of the contents of a written contract entered into between a licensee and a debtor, including the duration of the contract, charges, termination options, licensee information, and a description of services to be performed. If the debt management program is based on a model which requires the licensee or any licensee to receive money or evidences thereof from the debtor to distribute to the debtor's creditors, the bill specifies procedures regarding such receipt and distribution. If it does not, the bill requires the debtor to maintain control of the funds. The licensee may not receive consideration from third parties in connection with services rendered to a debtor. Requirements relating to books, accounts, records, advertising, and internet website content are also provided. In addition, the bill addresses fees. The bill provides for a one-time initiation fee not to exceed $50, and additional fees in amounts and at intervals which vary depending upon whether the debt management program requires distribution of money to the debtor's creditors. The bill adds several new licensee actions which are considered unlawful acts and a violation of the Code chapter. They include making, or facilitating the debtor in making, any false or misleading claim regarding a creditor's right to collect a debt; disputing, or facilitating the debtor to dispute, the validity of the debt absent a good faith belief by the debtor that the debt is not validly owing; challenging a debt without the written consent of the debtor; providing or offering to provide legal advice or legal services unless the person providing or offering to provide legal advice is licensed to practice law in the state in which the debtor resides; executing a power of attorney or any other oral or written express or implied agreement that extinguishes or limits the debtor's right at any time to contact or communicate with any creditor; taking a wage assignment or lien or other security to secure the payment of compensation; and inducing or attempting to induce a debtor to enter into a contract which does not comply in all respects with the requirements of Code chapter 533A. Additional unlawful acts specified in the bill relate to advertising and misrepresentation. Finally, the bill provides that a waiver of the provisions of Code chapter 533A is void and unenforceable as contrary to public policy, and prohibits the attempt by a licensee to induce a debtor to waive the debtor's rights.

 

S.F. 311
Signed by governor 4/2/09
S.S.B. 1163
Became S.F. 311 3/3/09
Relates to the regulation of the business of debt management pursuant to Code chapter 533A. The bill modifies definitions applicable to debt management. The bill adds to the definition of a "creditor" a person who grants credit or who takes assignment of the rights to payments of a person granting credit. The bill expands the definition of "debt management" to mean arranging or negotiating, or attempting to arrange or negotiate, for a fee, the amount or terms of debt owed by a debtor to a creditor; receiving from a debtor, directly or indirectly, money or evidences thereof for the purposes of distributing it to one or more creditors of the debtor in payment or partial payment of the debtor's obligations; serving as an intermediary between a debtor and one or more creditors of the debtor for the purpose of obtaining concessions from the creditors, or engaging in debt settlement. The bill defines "debt settlement" as seeking to settle the principal amount of a debtor's debts with creditors for less than the principal amounts owed on the debts. The bill additionally deletes a definition of "allowable cost" which was not utilized within the chapter. The bill adds to the list of persons exempt from the chapter's licensing requirements a person licensed pursuant to Code chapter 533C in connection with money transmission or currency exchange and related persons as specified in the bill. The bill requires additional information to be supplied on an application for licensure, including in the case of a foreign corporation applicant a duly acknowledged irrevocable consent that suits and actions may be commenced against the licensee by service of process performed as provided in Code §617.3 or as provided in the Iowa rules of civil procedure, and proof of authorization to do business. The bill requires furnishing the name, physical address, and telephone number of the licensee's agent for service of process, which replaces a provision repealed by the bill which had designated the superintendent of banking as the agent for service of process. The bill also requires an applicant to furnish a description of their proposed debt management program and a copy of disclosures required in the chapter to be provided to debtors. The bill replaces current Code §533A.8 specifying written contract requirements with a new list of requirements applicable to a licensee when dealing with a potential debtor client or otherwise engaging in the business of debt management. The requirements include describing the methodology of the debt management program so a debtor can make an informed decision regarding the appropriateness of the program, conducting a comprehensive review of the debtor's debts and the debtor's monthly budget, and performing a thorough written budget analysis. The bill provides additional requirements relating to disclosures required to be made by a licensee. The bill provides that a licensee, including any third party who markets or sells a debt management program on behalf of a licensee, must make a series of disclosures to a debtor both verbally and in writing before the debtor signs a contract to enroll in the debt management program. The disclosures include the total estimated fee the debtor will pay for participating in the program, that the licensee cannot guarantee any specific results, that the debtor may elect to discontinue participation in the program without penalty at any time, and that any concession obtained regarding the principal amount of debt may be considered income to the debtor subject to income tax. Disclosures are also specified applicable to debt management programs which do not require receipt of money from the debtor to distribute to the debtor's creditors, and to debt settlement programs. The bill contains requirements regarding the form and manner of verbal and written disclosures, and states that it is a violation of the Code chapter for a licensee, or any third party who markets or sells a debt management program on behalf of the licensee, to contradict the required disclosures in any representation, advertising, or solicitation. Further, the bill specifies the nature of the contents of a written contract entered into between a licensee and a debtor, including the duration of the contract, charges, termination options, licensee information, and a description of services to be performed. If the debt management program is based on a model which requires the licensee or any licensee to receive money or evidences thereof from the debtor to distribute to the debtor's creditors, the bill specifies procedures regarding such receipt and distribution. If it does not, the bill requires the debtor to maintain control of the funds. The licensee may not receive consideration from third parties in connection with services rendered to a debtor. Requirements relating to books, accounts, records, advertising, and internet website content are also provided. In addition, the bill addresses fees. The bill provides for a one-time initiation fee not to exceed $50, and additional fees in amounts and at intervals which vary depending upon whether the debt management program requires distribution of money to the debtor's creditors. The bill adds several new licensee actions which are considered unlawful acts and a violation of the Code chapter. They include making, or facilitating the debtor in making, any false or misleading claim regarding a creditor's right to collect a debt; disputing, or facilitating the debtor to dispute, the validity of the debt absent a good faith belief by the debtor that the debt is not validly owing; challenging a debt without the written consent of the debtor; providing or offering to provide legal advice or legal services unless the person providing or offering to provide legal advice is licensed to practice law in the state in which the debtor resides; executing a power of attorney or any other oral or written express or implied agreement that extinguishes or limits the debtor's right at any time to contact or communicate with any creditor; taking a wage assignment or lien or other security to secure the payment of compensation; and inducing or attempting to induce a debtor to enter into a contract which does not comply in all respects with the requirements of Code chapter 533A. Additional unlawful acts specified in the bill relate to advertising and misrepresentation. Finally, the bill provides that a waiver of the provisions of Code chapter 533A is void and unenforceable as contrary to public policy, and prohibits the attempt by a licensee to induce a debtor to waive the debtor's rights.

Kansas
none
Kentucky
none
Louisiana
none
Maine

L.D. 1289
Repeals the existing law governing debt management services and enacts in its stead the Uniform Debt Management Services Act.

 

L.D. 1326
Signed by governor 6/3/09, Public Law 243
Allocates regulatory costs of the Department of Professional and Financial Regulation, Bureau of Consumer Credit Protection among licensed entities by increasing the cap on loan officer registration fees, permitting recovery of costs of certifying educational courses for providers, increasing loan broker license fees, establishing loan broker and debt management branch office licenses and increasing debt collector license fees.

Maryland

H.B. 1269
Alters an exemption from the Maryland Debt Management Services Act for a person engaged as an attorney at law; prohibits a person from providing, or offering or attempting to provide, specified debt settlement services in the state.

Massachusetts
none
Michigan
none
Minnesota

H.F. 549
S.F. 518
Regulates debt management and debt settlement services.

 

H.F. 1853
Signed by governor 5/22/09, Chapter 178
Regulates debt management and debt settlement services.

 

H.F. 2123
Signed by governor 5/7/09, Chapter 37
Modifies provisions related to insurance audits, insurers and insurance products, certain financial institutions, regulated activities related to certain mortgage transactions and professionals, and debt management and debt settlement services.

 

S.F. 892
Enacts the Uniform Debt-Management Services Act approved and recommended for enactment in all the states by the National Conference of Commissioners on Uniform State Laws.

Mississippi
none
Missouri

H.B. 336
Establishes the Uniform Debt-Management Services Act to regulate debt-management services. In its main provisions, the bill: (1) Requires a debt-service company to register with the attorney general by submitting detailed information including its financial condition, the identity of its principals, locations at which the service will be offered, a copy of the form used for agreements with debtors, and its business history in other jurisdictions; (2) Requires a debt-service company to carry an insurance policy against fraud, dishonesty, and theft in an amount of at least $250,000 and provide a security bond of at least $50,000 which has the attorney general as a beneficiary; (3) Requires a debt-service company to renew its registration annually; (4) Requires a debt-service company to disclose its services and any fees as well as any risks or benefits of entering into the debt-management service agreement; (5) Allows for a penalty-free, three-day cancellation of the agreement by the debtor or cancellation within 30 days, subject to specified fees; (6) Allows a debt-service company to terminate the agreement if the required payments are more than 60 days late; (7) Requires a debt-service company to keep any debtor payments in a separate trust account that may not be used to hold any other company funds; (8) Prohibits a debt-service company from misappropriating trust funds, settling for more than 50 percent of a debt with a creditor without a debtor's consent, or representing that a settlement has occurred without certification from the creditor; (9) Authorizes the attorney general to investigate debt-service companies, order an individual to cease and desist debt counseling services, bring civil actions, and assess civil penalties of up to $10,000; (10) Allows an individual to bring a civil action for compensatory damages, including triple damages, if a debt-service company obtains payments not authorized in the bill; and (11) Specifies that a proceeding brought by the attorney general must commence within four years of the action and within two years for a proceeding brought by an individual.

 

S.B. 216
Veoted by governor 7/13/09
Requires debt settlement providers only to provide debt settlement services under a debt settlement plan when performing the services for a fee. Debt settlement services are defined as the negotiation, settlement, or alteration of the terms of payment of a consumer's debt with the consumer's creditor without receiving or holding money from a consumer for the purpose of distributing that money to the creditor. Under the plan, the provider may only charge reasonable consideration not to exceed four percent of the principal amount of the debt in enrollment fees and 20 percent of the principal amount of the debt in aggregate fees. The balance shall be collected in equal payments over a period determined by the provider as long as the last payment is due no sooner than the median month in the plan. Upon completion of the plan, aggregate fees shall not exceed the amount the plan reduces the principal amount of the debt originally enrolled in the plan. The debtor may voluntarily prepay fees, and the provider may collect fees on a pro rata basis once the provider obtains reasonable offers. Debt settlement providers are required to carry insurance in the amount of at least 1 million dollars. The attorney general is charged with the enforcement of these provisions and injunctions and orders for restitution may be issued for violations.

Montana

H.B. 318
Signed by governor 4/24/09, Chapter 338
Regulates debt settlement providers; provides definitions; provides insurance and accounting requirements for debt settlement providers; establishes prohibited practices for debt settlement providers; and provides remedies.

Nebraska
none
Nevada

S.B. 355
Signed by governor 5/29/09, Chapter 376
Enacts the Uniform Debt-Management Services Act.

New Hampshire

H.B. 334
Signed by governor 7/15/09, Chapter 204
Allows the bank commissioner to bar certain persons from registering as being licensed as certain retail sellers, mortgage loan servicers, debt adjustment services personnel, and money transmitters. Allows the bank commissioner to expand criminal record checks for certain retail sellers, mortgage loan servicers, debt adjustment services personnel, and money transmitters. Allows for the collection of certain examination expenses, fines, and other penalties. Allows the banking department to examine business records in certain situations. Amends the St. Mary’s Bank Charter to allow the union to pay certain committee members a reasonable fee. Clarifies that the reimbursement of members of credit union board of directors and credit union credit or supervisory committees for reasonable expenses in the execution of their duties shall not be considered compensation.

New Jersey

A.B. 4124
Provides for for-profit debt settlement services in this State. Under current law, at P.L.1979, c.16 (C.17:16G-1 et seq.), only nonprofit social service agencies or nonprofit consumer credit counseling agencies may engage in debt settlement activities on behalf of debtors. The bill would replace the current non-profit practice with a for-profit model, but allow nonprofit agencies providing services under the previous scheme to continue to provide nonprofit debt settlement services if properly licensed in accordance with the bill. The bill would require any person engaging in business as a debt settlement provider to be licensed, with limited exceptions for: (1) an attorney-at-law who is not principally engaged as a debt settlement provider; (2) a person who is a regular, full-time employee of a debtor, and who negotiates or settles his employer’s debts; (3) a person acting pursuant to a court order or other legal authority; (4) a person who is a creditor of the debtor, whose services are rendered without cost to the debtor; and (5) a person who provides debt settlement services without compensation. Any debt settlement provider licensed under the bill shall maintain and provide to the commissioner of Banking and Insurance adequate proof of insurance, of the type and amount required by the commissioner. This insurance shall include not less than $500,000 of coverage and contain a deductible of not more than $10,000. The insurance shall not be cancellable without notice to the commissioner, and an effective policy available to replace the cancelled insurance. In lieu of insurance, the debt settlement provider may be bonded to the satisfaction of the commissioner. The bill provides the commissioner with the authority to establish the maximum fee that may be charged for debt settlement services, which the bill also states shall be fair and reasonable. Every licensee acting as a debt settlement provider shall, with respect to a debtor: conduct a financial analysis of the debtor to verify the debtor's ability to afford any debt settlement plan proposed; provide a reasonable education about the management of personal finance; and inform the debtor about the nature of the services provided, the relationship between the debtor and debt settlement provider, and the lack of authority for the debt settlement provider to require creditors to negotiate or settle any debt. Whenever the services of a debt settlement provider result in a creditor agreeing to accept as payment in full on a debt an amount less than the principal amount, the debt settlement provider shall inform the debtor in writing of: the total amount to satisfy the debt under the settlement, and the terms of the settlement; the amount of debt owed to the creditor, at the time the debtor contracted for debt settlement services and at the time the creditor agreed to the settlement; and information concerning any settlement fee owed to the debt settlement provider, that calculates any portion of the fee based upon a percentage of savings realized by the debtor from the creditor’s settlement on the debt for less than the amount owed. The bill requires that every licensee acting as a debt settlement provider shall file with the commissioner, on or before April 1 of each year, a copy of its annual report, containing information specified in regulation. The debt settlement provider shall have its financial records relating to debt settlement services reviewed annually by a certified public accountant or public accountant, and this report shall additionally be filed with the commissioner. The commissioner, after reviewing these annual reports, may cause an audit of the financial records or an examination of the debt settlement provider to be made. Finally, the bill makes it unlawful for a debt settlement provider to engage in certain practices, including: purchasing from a creditor any debt obligation of a debtor; advertising in a false, misleading, or deceptive manner; and misrepresenting that the debt settlement provider is authorized or competent to provide legal advice or perform any legal services.

 

A.B. 4231
Substituted 12/7/09
S.B. 2765
Signed by governor 1/11/10, Chapter 173
Exempts counseling agencies from the State licensing and regulatory requirements of the debt adjusters act, P.L.1979, c.16 (C.17:16G-1 et seq.), if they are: (1) certified by the United States Secretary of Housing and Urban Development as a housing counseling organization or agency pursuant to section 106 of Pub.L.90-448 (12 U.S.C. 1701x); (2) participating in a counseling program approved by the New Jersey Housing and Mortgage Finance Agency; and (3) not holding or disbursing the debtor’s funds. Additionally, the bill updates the criminal practice, under N.J.S.2C:21-19, of improperly acting as an unlicensed debt adjuster, or acting without an appropriate licensing exemption, by cross-referencing to the licensing requirements and exemptions under the debt adjusters act, instead of maintaining a separate, but identical definition, in the criminal statute.

 

A.B. 4312
This bill, titled the “Debt-Management Services Act of New Jersey,” is based upon a national model act drafted by the National Conference of Commissioners on Uniform State Laws. The bill intends to provide a comprehensive reworking of the state’s debt settlement law, P.L.1979, c.16 (C.17:16G-1 et seq.), by repealing this existing law and establishing a new registration requirement for debt-management providers (covering credit counseling and debt settlement activities), mandatory notices and other provisions for consumer agreements, and enforcement through the Department of Banking and Insurance, as well as private causes of action Under the bill, a debt-management provider, which may be organized for-profit or nonprofit, shall not provide, offer to provide, or agree to provide any debt-management services in this state unless the provider is registered with the department. An application for registration shall be in a form prescribed by the commissioner of Banking and Insurance, properly certified, and which documents the applicant’s contact information, business organization, proof of coverage by a surety bond or other form of financial assurance and insurance coverage, past and proposed business practices, and includes a submission for criminal history record background checks on officers, directors, owners, and employees and agents authorized to access the applicant’s trust accounts containing consumer money. The application shall also include evidence of accreditation for debt-management services by an independent accrediting organization recognized by the commissioner pursuant to regulation, and an affirmation, with supporting evidence as appropriate, that each consumer counselor employed is, or will become within 12 months of being employed, properly certified for counseling based upon accreditation from a similarly recognized independent accrediting organization. Within 120 days of receipt of an application for registration, the commissioner shall issue a one-year certificate of registration to an applicant in order for the applicant to act as a debt-management provider in this state, if: the application and all supporting materials are provided; and the commissioner finds the applicant is duly qualified, based upon an examination of the financial responsibility, experience, character, and general fitness of the applicant and its owners, directors, employees, and agents. Under the bill, the commissioner may extend this review period for up to an additional 60 days, or issue a temporary certificate of registration, to last no more than 180 days after issuance, for an applicant that has submitted an incomplete application but is making a timely effort to obtain any necessary information or supporting material. A registered debt-management provider shall obtain a renewal of its registration annually in order to continue conducting business in this state. This application for registration renewal, containing updated information for review by the commissioner as well as financial disclosures concerning the previous year’s business operations, shall be filed not more than 60 days, but not less than 30 days, prior to the expiration of the debt-management provider’s current registration. If the commissioner denies the registration renewal, the debt-management provider, pending outcome of an appeal of the denial, shall be permitted to continue to provide services to individuals with whom it already has debt-management agreements. If the denial is affirmed, the commissioner shall oversee the transfer of any on-going debt-management agreements to another registered debt-management provider or the return of all unexpended money received from or on behalf of individuals with agreements under the control of the provider. A debt-management provider holding a current license or certificate of registration issued in another state to provide debt-management services may submit to the commissioner a copy of this other state’s license or registration, along with a copy of the other state’s application for this license or registration, and this shall be accepted by the commissioner as an application for this state, if: (1) the submission from the other state contains information and supporting materials substantially similar or more comprehensive than that required by an application prepared pursuant to this bill; and (2) the submission contains additional information specific to conducting business in this state, including a listing of in-state service locations and a submission for criminal history record background checks on officers, directors, owners, employees, and agents. This submission in lieu of a standard application shall be reviewed, and a certificate of registration (or registration renewal) issued or denied, in the same manner as set forth for a standard, in-state application. Any nonprofit social service agency or nonprofit consumer credit counseling agency that was licensed as a debt adjuster pursuant to P.L.1979, c.16 (C.17:16G-1 et seq.) prior to the effective date of this bill may continue on or after that effective date to provide debt-management services, so long as the nonprofit social service agency or nonprofit consumer credit counseling agency applies and is registered accordingly as a debt-management provider pursuant to this bill. Prior to providing any debt-management services for any individual, a debt-management provider shall give the individual an itemized list of goods and services, and the corresponding fee or other charge for each. This list shall indicate all goods and services the provider offers for a charge, by dollar amount or other method of determination, which may include with respect to a debt-management agreement a set-up fee, monthly service fee, and debt-management settlement fee. The debt-management provider shall not provide any debt-management service to an individual, unless a properly certified consumer counselor provides the individual with reasonable education about the management of personal finance, has prepared a financial analysis of the individual, and made a determination about the suitability of any payment plan to reduce debt prepared for the individual. Further, in a separate notice, the debt-management provider shall inform the individual, prior to entering an agreement, of the potential financial and legal consequences of entering the agreement, which shall include: (1) an indication that a debt-management plan may adversely impact the individual’s credit rating or credit score, making it more difficult to obtain credit; (2) an indication that nonpayment of debt may lead creditors to increase finance and other charges or undertake collection actions against the individual, including litigation; and (3) if applicable, an indication that if a creditor settles for less than the full amount of a debt owed as a result of a debt-management plan, it may result in the creation of taxable income to the individual, even though the individual did not actually receive any money. The debt-management agreement shall be in writing, in accordance with the provisions of the bill. Any such agreement may confer on the debt-management provider a power of attorney to settle an individual’s debt for no more than 50 percent of the principal amount of that debt. An agreement shall provide that the debt-management provider obtain approval from the individual of a negotiated settlement of more than 50 percent of the principal amount owed on any debt. An agreement shall not: provide for the application of the law of any jurisdiction other than the United States and this state; contain any provision modifying or limiting otherwise available legal forums or procedural rights, except as set forth in any pre-dispute arbitration clause; and contain any provision that modifies or limits the individual’s available remedies under this bill and any other applicable law. An individual may cancel a debt-management agreement for any reason, and receive a full refund of any moneys paid to a debt-management provider, within three business days after assenting to the agreement. However, this period shall extend to 30 days if the agreement does not comply with the requirements set forth under the bill as stated above as well as the requirement to notify the individual in writing regarding this right to cancel. This right to cancel may also be waived, in writing, by the individual, if a personal financial emergency necessitates the disbursement of an individual’s money to a creditor before the expiration of the initial cancellation period. A debt-management provider shall hold in trust all money paid to it by or on behalf of an individual with whom it has a debt-management agreement for distribution to creditors. Within two business days after receipt, the provider shall deposit the money in a trust account indicated in the information submitted to the commissioner as part of its application to be registered to conduct business in this state. The debt-management provider shall reconcile each trust account at least once per month, by comparing the cash balance in the trust account with the sum of balances in each individual’s account within the trust account. If the debt-management provider knows, or has a reasonable suspicion, of embezzlement or other unlawful appropriation of money held in trust, the provider shall immediately notify the department. Unless otherwise set forth in regulation, within five business days of first notifying the department of any occurrence, the debt-management provider shall provide the department with further information describing the remedial action taken or to be taken in response to the occurrence. With respect to enforcement, the commissioner may take appropriate actions to enforce the provisions of this bill, including investigations, requests for voluntary compliance, making references on activities to the attorney general, and seeking various remedies, including: the suspension or revocation of a certificate of registration; issuance of cease and desist orders; ordering a civil penalty in an amount not to exceed $10,000 for each violation; and ordering restitution for any person harmed by a violation. The commissioner may also enter into cooperative arrangements with any other state or federal agency having authority over debt-management providers or debt-management services, and exchange information with any agency about any person under investigation by the commissioner. Additionally, a person may file a private cause of action in a court of competent jurisdiction against any person who violates the bill. The person may recover: (1) compensatory damages, including for noneconomic injury, or $5,000, whichever is greater, for each violation, except for monies already paid to creditors; or (2) treble these damages, if the private cause of action involves an individual who voided a debt-management agreement due to a debt-management provider imposing a fee or other charge not permitted under the bill. The person may also recover punitive damages, reasonable attorney’s fees and costs. A debt-management provider shall not be liable in a private cause of action if the provider’s action or omission was not intentional and resulted from a good faith error; except that, this good faith defense shall not apply if, in connection with any violation concerning fees or other charges imposed, the provider received more money than authorized by the bill or the agreement with an individual, and the provider did not refund the excess money within two business days of discovering the violation. This bill shall take effect on the first day of the thirteenth month next following enactment, but the commissioner of Banking and Insurance may take any anticipatory administrative action in advance thereof as shall be necessary for the implementation of the bill.

New Mexico

H.B. 851
Passed House 3/15/09
Enacts the Uniform Debt-Management Services Act.

New York

A.B. 7268
S.B. 6167
Establishes the Uniform Debt-Management Services Act.

 

A.B. 7739
Relates to licensed lenders, licensed cashers of checks, sales finance companies, premium finance companies, budget planners, and transmitters of money.

 

S.B. 3727
Relates to licensed lenders, licensed cashers of checks, sales finance companies, premium finance companies, budget planners, and transmitters of money.

North Carolina

H.B. 1397
Enacts certain restrictions and requirements relating to the practice or business of debt settling. Relates to licensed lenders, licensed cashers of checks, sales finance companies, premium finance companies, budget planners, and transmitters of money.

North Dakota

H.C.R. 3006
Adopted 4/1/09
Directs the Legislative Council to study the feasibility and desirability of adopting the Uniform Debt-Management Services Act, including consideration of the most appropriate administrator of the law, how the Act would impact existing state laws, and what issues other states have addressed in enacting the Act.

Ohio
none
Oklahoma
none
Oregon

H.B. 2191
Signed by governor 6/26/09, Chapter 604
Requires the director of the Department of Consumer and Business Services to register persons that provide debt management services. Requires person to register as debt management service provider in order to provide debt management services, unless exempt. Specifies information director may require for registration. Requires applicants for registration to file and maintain bond issued by corporate surety. Specifies prohibitions on and duties and rights of debt management service providers. Makes violations of certain prohibitions and duties unlawful business practice. Imposes liability on debt management service provider when consumer suffers ascertainable loss of money or property in connection with specified violations. Specifies that consumer right of action exists against bond issued by corporate surety. Punishes violation of specified provisions of debt consolidation law by maximum of one year's imprisonment, $6,250 fine, or both. Specifies conditions under which director may deny, suspend, condition, revoke or refuse to issue or renew registration. Authorizes director to perform certain actions to enforce provisions of Act.

 

H.B. 2368
Prohibits person from providing or offering to provide debt management service in return for money or other consideration. Exempts certain persons. Provides that court may enjoin violation of Act. Punishes violation by maximum of one year's imprisonment, $6,250 fine, or both.

Pennsylvania

H.B. 1655
Establishes a moratorium on applicability to debt settlement services pending regulatory action.

Puerto Rico
none
Rhode Island
none
South Carolina
none
South Dakota
none
Tennessee

H.B. 1278
S.B. 812
Signed by governor 6/23/09, Public Chapter 469
Enacts the "Uniform Debt Management Services Act."

 

H.B. 1279
Substituted by S.B. 812 5/26/09
S.B. 813
Enacts the "Uniform Debt Management Services Act."

Texas

S.B. 2233
Passed Senate 5/1/09
Relates to the regulation of debt management services providers; provides a penalty.

Utah

H.B. 408
Relates to the Uniform Debt Management Services Act.

 

S.B. 167
Signed by governor 3/24/09, Chapter 229
Amends the insurance requirements for a debt-management services provider; amends the advertising requirements for a debt-management services provider; and makes technical corrections.

Vermont
none
Virginia
none
Washington

H.B. 1213
Creates uniform debt management services. Provides uniform rules to govern both consumer credit counseling and debt settlement services. Establishes the registration of services and service-debtor agreements, and provides for enforcement. Repeals existing debt adjusting services provisions.

West Virginia
none
Wisconsin
none
Wyoming
none