Bill Text: IA HSB40 | 2019-2020 | 88th General Assembly | Introduced
Bill Title: A bill for an act relating to the provision of debt management services in connection with educational loans, and making penalties applicable.
Spectrum: Committee Bill
Status: (N/A - Dead) 2019-02-06 - Committee report, recommending passage. H.J. 229. [HSB40 Detail]
Download: Iowa-2019-HSB40-Introduced.html
House
Study
Bill
40
-
Introduced
SENATE/HOUSE
FILE
_____
BY
(PROPOSED
ATTORNEY
GENERAL
BILL)
A
BILL
FOR
An
Act
relating
to
the
provision
of
debt
management
services
1
in
connection
with
educational
loans,
and
making
penalties
2
applicable.
3
BE
IT
ENACTED
BY
THE
GENERAL
ASSEMBLY
OF
THE
STATE
OF
IOWA:
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H.F.
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Section
1.
Section
533A.1,
subsection
2,
Code
2019,
is
1
amended
by
adding
the
following
new
paragraph:
2
NEW
PARAGRAPH
.
e.
Serving
as
an
intermediary
between
a
3
debtor
and
one
or
more
creditors
or
loan
servicers
of
the
4
debtor
for
the
purpose
of
seeking
modification
of
the
terms
of
5
an
educational
loan.
6
Sec.
2.
Section
533A.1,
Code
2019,
is
amended
by
adding
the
7
following
new
subsections:
8
NEW
SUBSECTION
.
5A.
“Educational
loan”
means
the
same
as
9
defined
in
section
261F.1.
10
NEW
SUBSECTION
.
8A.
“Loan
servicer”
means
a
person
who
is
11
engaged
in
the
direct
collection
of
payments
on
a
loan
from
12
the
debtor
or
holds
the
right
to
undertake
direct
collection
13
of
payments
on
a
loan
from
the
debtor,
including
but
not
14
limited
to
receiving
scheduled
periodic
payments
from
the
15
debtor
pursuant
to
the
terms
of
the
loan
or
holding
the
right
16
to
service
the
loan,
such
as
by
contracting
with
or
otherwise
17
arranging
for
another
person
to
service
the
loan.
18
Sec.
3.
NEW
SECTION
.
533A.8A
Educational
loan
debt
19
management
services
——
contract
requirements
——
prohibitions
——
20
remedies.
21
1.
In
addition
to
any
other
requirements
applicable
to
a
22
licensee
pursuant
to
this
chapter,
a
licensee
engaging
in
the
23
business
of
debt
management
in
connection
with
educational
24
loans,
as
described
in
section
533A.1,
subsection
2,
paragraph
25
“e”
,
shall
do
so
in
accordance
with
this
section.
The
26
provisions
of
this
section
are
not
exclusive
and
do
not
relieve
27
persons
or
a
contract
from
compliance
with
other
applicable
28
law.
29
2.
A
licensee
shall
not
receive
any
compensation
for
30
providing
educational
loan
debt
management
services
until
after
31
the
licensee
has
fully
performed
all
services
that
the
licensee
32
contracted
to
perform
or
represented
the
licensee
would
33
perform,
and
shall
not
request
any
payment
from
the
debtor
or
34
require
the
debtor
to
provide
payment
to
any
third
party
prior
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to
fully
performing
all
services.
1
3.
a.
A
debtor
has
an
unconditional
right
to
cancel
a
2
contract
with
a
licensee
for
educational
loan
debt
management
3
services
at
any
time
prior
to
midnight
of
the
third
business
4
day
following
the
date
a
contract
which
complies
with
this
5
section
is
signed
and
executed.
6
b.
Cancellation
of
a
contract
occurs
when
the
debtor
7
delivers,
by
any
means,
written
notice
of
cancellation
to
the
8
address
specified
in
the
contract.
Notice
of
cancellation,
9
if
delivered
by
mail,
is
effective
when
deposited
in
the
10
mail
properly
addressed
with
postage
prepaid.
Notice
of
11
cancellation
delivered
by
electronic
mail
is
effective
upon
12
transmission.
Notice
of
cancellation
delivered
personally
is
13
effective
upon
delivery.
Notice
of
cancellation
given
by
the
14
debtor
need
not
take
the
particular
form
as
provided
in
the
15
contract
and,
however
expressed,
is
effective
if
the
notice
of
16
cancellation
indicates
the
intention
of
the
debtor
not
to
be
17
bound
by
the
contract.
18
4.
A
contract
to
provide
debt
management
services
in
19
connection
with
an
educational
loan
shall
be
written
in
clear,
20
understandable
language,
shall
clearly
and
conspicuously
set
21
forth
any
and
all
terms,
restrictions,
and
conditions
governing
22
the
contract,
and
shall
describe
fully
and
in
detail
all
23
services
that
the
licensee
contracts
to
perform
for
the
debtor.
24
The
contract
shall
be
dated
and
signed
by
the
debtor.
The
25
contract
shall
set
forth
information
required
in
this
section
26
in
at
least
ten
point
type.
The
following
shall
be
included
in
27
the
contract:
28
a.
The
licensee’s
name,
the
licensee’s
electronic
mail
29
address,
and
the
physical
address
of
the
licensee’s
place
of
30
business
to
which
the
notice
of
cancellation
is
to
be
mailed
31
or
otherwise
delivered.
A
post
office
box
does
not
constitute
32
a
physical
address.
A
post
office
box
may
be
designated
for
33
delivery
by
mail
only
if
it
is
accompanied
by
a
physical
34
address
at
which
the
notice
could
be
delivered
by
a
method
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other
than
mail.
1
b.
A
disclosure
statement
in
substantially
the
following
2
form
shall
appear
in
at
least
fourteen
point
boldface
type
3
immediately
above
the
place
where
the
debtor
is
to
sign:
4
You,
the
debtor,
may
cancel
this
contract
at
any
time
prior
5
to
midnight
of
the
third
business
day
after
the
contract
is
6
signed
and
executed.
See
the
attached
notice
of
cancellation
7
form
for
an
explanation
of
this
right.
8
c.
A
completed,
easily
detachable
form
in
duplicate,
9
captioned
“notice
of
cancellation”,
as
an
attachment,
in
at
10
least
fourteen
point
boldface
type,
containing
the
following
11
statement
in
substantially
the
following
form
and
language:
12
NOTICE
OF
CANCELLATION
13
........
14
(date
contract
is
signed
and
executed)
15
You,
the
debtor,
may
cancel
this
contract
without
any
16
penalty
or
obligation,
within
three
business
days
from
the
17
above
date.
18
To
cancel
this
contract,
you
may
use
any
of
the
following
19
methods:
(1)
send
by
postal
mail
or
otherwise
deliver
a
20
signed
and
dated
copy
of
this
cancellation
notice,
or
any
21
other
written
notice
of
cancellation,
to
(physical
address
of
22
licensee’s
place
of
business);
or
(2)
send
by
electronic
mail
a
23
notice
of
cancellation
to
(licensee’s
electronic
mail
address).
24
No
later
than
midnight
of
(date).
25
I
hereby
cancel
this
contract.
26
......
27
(date)
28
............
29
(debtor’s
signature)
30
d.
A
disclosure
statement
in
substantially
the
following
31
form
shall
appear
in
at
least
fourteen
point
boldface
type
32
immediately
above
the
“Notice
of
Cancellation”
form
described
33
in
paragraph
“c”
:
34
NOTICE
REQUIRED
BY
IOWA
LAW
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(Insert
name
of
licensee)
or
anyone
working
for
(insert
name
1
of
licensee)
CANNOT
take
payment
directly
from
you
or
require
2
you
to
pay
for
or
finance
its
services
through
a
third
party
3
until
(insert
name
of
licensee)
has
fully
performed
each
and
4
every
service
that
(insert
name
of
licensee)
contracted
to
5
perform
or
represented
that
(insert
name
of
licensee)
would
6
perform.
7
5.
A
licensee
engaging
in
the
business
of
debt
management
8
in
connection
with
educational
loans
shall
not
do
any
of
the
9
following:
10
a.
Claim,
demand,
charge,
collect,
or
receive
compensation
11
until
after
the
licensee
has
fully
performed
each
and
every
12
service
the
licensee
contracted
to
perform
or
represented
the
13
licensee
would
perform.
14
b.
Execute
a
contract
with
a
debtor
for
educational
loan
15
debt
management
services
in
violation
of
this
section.
16
c.
Receive
consideration
from
any
third
party
in
connection
17
with
services
rendered
to
a
debtor
unless
the
consideration
is
18
first
fully
disclosed
to
the
debtor.
19
d.
Prohibit
or
impede
a
debtor
from
contacting
any
creditor,
20
lender,
loan
servicer,
government
entity,
attorney,
counselor,
21
individual,
or
company
that
may
seek
to
help
the
debtor.
Any
22
such
provision
is
void
and
unenforceable.
23
e.
Access
or
obtain
a
debtor’s
federal
student
aid
24
information
in
violation
of
federal
law.
25
f.
Compensate
employees,
including
independent
contractors,
26
based
on
the
number
of
debtors
recruited
by
the
employees
or
27
enrolled
in
particular
programs,
or
provide
compensation
to
28
employees
on
any
other
commission-based
system.
29
g.
Pay
or
offer
to
pay
any
compensation,
bonus,
gift,
30
commission,
or
other
consideration
to
any
person
for
the
31
referral
of
a
debtor
to
the
licensee’s
business.
32
h.
Accept
or
receive
any
compensation,
bonus,
gift,
33
commission,
or
other
consideration
for
service
to
the
34
debtor
from
any
person
other
than
the
debtor,
the
debtor’s
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representative,
or
any
third
party
providing
financing
that
is
1
otherwise
in
compliance
with
the
requirements
of
this
section.
2
i.
Disclose
any
information
regarding
a
debtor
to
anyone
3
other
than
law
enforcement,
government
entities,
loan
4
servicers,
creditors
of
the
debtor,
or
as
required
by
law.
5
j.
Disclose
any
information
regarding
the
creditor
of
6
a
debtor
to
anyone
other
than
the
debtor,
the
debtor’s
7
representative,
or
as
required
by
law.
8
6.
a.
A
violation
of
this
section
is
an
unlawful
practice
9
pursuant
to
section
714.16,
and
all
remedies
of
section
10
714.16
are
available
for
such
an
action.
A
private
cause
of
11
action
brought
under
this
section
by
a
debtor
is
in
the
public
12
interest.
A
debtor
may
bring
an
action
against
a
licensee
13
for
a
violation
of
this
section.
If
the
court
finds
that
the
14
licensee
violated
this
section,
the
court
shall
award
the
15
debtor
actual
damages,
appropriate
equitable
relief,
and
the
16
costs
of
the
action,
and
shall
award
reasonable
fees
to
the
17
debtor’s
attorney.
18
b.
The
rights
and
remedies
provided
in
paragraph
“a”
are
19
cumulative
to,
and
not
a
limitation
of,
any
other
rights
and
20
remedies
provided
by
law.
Any
action
brought
by
a
person
other
21
than
the
attorney
general
or
the
superintendent
pursuant
to
22
this
section
must
be
commenced
within
four
years
from
the
date
23
of
the
alleged
violation.
24
c.
Notwithstanding
any
other
provision
of
this
section,
25
an
action
shall
not
be
brought
on
the
basis
of
a
violation
of
26
this
section,
except
by
a
debtor
against
whom
the
violation
was
27
committed
or
by
the
attorney
general
or
superintendent.
This
28
limitation
does
not
apply
to
administrative
action
by
either
29
the
attorney
general
or
the
superintendent.
30
EXPLANATION
31
The
inclusion
of
this
explanation
does
not
constitute
agreement
with
32
the
explanation’s
substance
by
the
members
of
the
general
assembly.
33
This
bill
relates
to
debt
management
services
in
connection
34
with
educational
loans.
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Current
law
requires
persons
engaged
in
the
business
of
debt
1
management
in
Iowa,
as
defined,
to
be
licensed
and
regulated
by
2
the
superintendent
of
the
banking
division
of
the
department
of
3
commerce
under
Code
chapter
533A.
4
The
bill
expands
the
definition
of
“debt
management”
5
by
including
in
the
definition
the
act
of
serving
as
an
6
intermediary
between
a
debtor
and
one
or
more
creditors
or
loan
7
servicers
of
the
debtor
for
the
purpose
of
modifying
the
terms
8
of
an
educational
loan.
The
bill
defines
“educational
loan”
9
as
any
loan
that
is
made,
insured,
or
guaranteed
under
Tit.
10
IV
of
the
federal
Higher
Education
Act
solely
for
educational
11
purposes,
or
any
private
educational
loan.
12
The
bill
provides
that
in
addition
to
any
other
requirements
13
applicable
to
a
licensed
debt
management
services
provider
14
pursuant
to
Code
chapter
533A,
a
licensee
engaging
in
the
15
business
of
debt
management
services
in
connection
with
16
educational
loans
shall
do
so
pursuant
to
the
bill.
The
bill
17
specifies
that
the
provisions
of
the
bill
are
not
exclusive
and
18
do
not
relieve
persons
or
contracts
from
compliance
with
other
19
applicable
laws.
20
The
bill
provides
that
a
licensee
shall
not
receive
21
any
compensation
in
connection
with
educational
loan
debt
22
management
services
until
after
the
licensee
has
fully
23
performed
all
services
that
the
licensee
contracted
to
perform
24
or
represented
the
licensee
would
perform,
and
shall
not
25
request
any
payment
or
require
payment
to
any
third
party
prior
26
to
fully
performing
all
services.
27
The
bill
provides
that
a
debtor
has
an
unconditional
right
28
to
cancel
a
contract
with
a
licensee
for
educational
loan
debt
29
management
services
at
any
time
prior
to
midnight
of
the
third
30
business
day
following
the
date
a
contract
which
complies
with
31
the
bill
is
signed
and
executed.
Cancellation
of
a
contract
32
occurs
when
the
debtor
delivers,
by
any
means,
written
notice
33
of
cancellation
to
the
specified
address.
A
written
notice
34
delivered
by
mail
is
effective
when
deposited
in
the
mail
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properly
addressed
with
postage
prepaid.
A
written
notice
1
delivered
by
electronic
mail
is
effective
upon
transmission.
A
2
written
notice
delivered
personally
is
effective
upon
delivery.
3
A
written
notice
of
cancellation
may
take
any
form
and
is
4
effective
if
it
indicates
the
debtor’s
intent
to
cancel
the
5
contract.
6
The
bill
provides
that
a
contract
to
provide
educational
7
loan
debt
management
services
shall
be
written
in
clear
and
8
understandable
language,
clearly
set
forth
all
terms
and
9
conditions,
and
fully
describe
all
services
that
the
licensee
10
contracts
to
perform
for
the
debtor.
The
contract
shall
be
in
11
at
least
10
point
type
and
shall
include
the
following:
the
12
licensee’s
name,
electronic
mail
address,
and
physical
address
13
of
the
licensee’s
place
of
business;
a
disclosure
statement
14
located
in
the
contract
regarding
the
debtor’s
cancellation
15
rights,
as
specified
in
the
bill;
an
attached
“notice
of
16
cancellation”
form
regarding
the
debtor’s
cancellation
rights,
17
as
specified
in
the
bill;
and
a
disclosure
statement
located
18
on
the
attached
“notice
of
cancellation”
form
regarding
the
19
requirement
that
a
licensee
fully
perform
all
services
prior
20
to
receiving
any
payment
from
the
debtor,
as
specified
in
the
21
bill.
22
The
bill
prohibits
a
licensee
engaging
in
educational
loan
23
debt
management
from
doing
any
of
the
following:
requesting
or
24
receiving
compensation
prior
to
fully
performing
all
contracted
25
or
represented
services;
executing
a
contract
in
violation
of
26
the
bill;
receiving
consideration
from
any
third
party
unless
27
the
consideration
is
first
fully
disclosed
to
the
debtor;
28
prohibiting
or
impeding
a
debtor
from
contacting
any
creditor,
29
lender,
loan
servicer,
as
defined
in
the
bill,
government
30
entity,
attorney,
or
other
individual
that
may
seek
to
help
the
31
debtor;
accessing
or
obtaining
a
debtor’s
federal
student
aid
32
information
in
violation
of
federal
law;
compensating
employees
33
and
independent
contractors
on
a
commission-based
system;
34
paying
or
offering
to
pay
any
consideration
to
any
person
for
35
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S.F.
_____
H.F.
_____
referring
debtors
to
the
licensee’s
business;
accepting
or
1
receiving
any
consideration
for
service
to
the
debtor
from
any
2
person
other
than
the
debtor,
the
debtor’s
representative,
or
3
certain
third
parties;
disclosing
any
information
regarding
4
a
debtor
to
anyone
other
than
certain
specified
entities,
or
5
as
required
by
law;
or
disclosing
any
information
regarding
6
the
creditor
of
a
debtor
to
anyone
other
than
the
debtor,
the
7
debtor’s
representative,
or
as
required
by
law.
8
A
violation
of
the
bill’s
provisions
constitutes
an
9
unlawful
practice
under
Code
section
714.16,
which
relates
10
to
consumer
frauds.
Pursuant
to
that
Code
section,
the
11
attorney
general
may
investigate,
issue
subpoenas,
and
commence
12
civil
proceedings
seeking
restraining
orders
or
injunctions
13
prohibiting
persons
from
engaging
in
unlawful
practices
14
or
seeking
termination
of
the
business
affairs
of
a
person
15
engaging
in
unlawful
practices.
A
court
may
further
impose
a
16
civil
penalty
of
up
to
$40,000
per
violation
against
a
person
17
found
guilty
of
committing
an
unlawful
practice.
The
bill
also
18
provides
that
a
debtor
may
bring
an
action
against
a
licensee
19
for
a
violation
of
the
bill’s
provisions.
The
debtor
must
20
bring
the
action
within
four
years
from
the
date
of
the
alleged
21
violation.
If
the
court
finds
that
a
violation
has
occurred,
22
the
court
shall
award
actual
damages,
appropriate
equitable
23
relief,
court
costs,
and
reasonable
attorney
fees.
24
In
addition
to
the
remedies
provided
in
the
bill,
Code
25
section
533A.16
allows
the
superintendent
to
apply
for
an
26
injunction
in
district
court
upon
the
belief
that
a
person
27
has
engaged
in
or
is
about
to
engage
in
an
act
or
practice
28
in
violation
of
Code
chapter
533A.
The
superintendent
may
29
also
investigate
or
initiate
a
complaint
against
a
person
30
not
licensed
under
Code
chapter
533A
to
determine
whether
a
31
violation
has
occurred,
issue
an
order
requiring
compliance
32
with
Code
chapter
533A
after
providing
written
notice
and
the
33
opportunity
for
a
hearing,
impose
a
penalty
of
up
to
$5,000
for
34
each
violation,
and
order
the
person
to
pay
restitution.
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