Bill Text: MN HF2500 | 2011-2012 | 87th Legislature | Introduced
Bill Title: Debt settlement services agreements laws changed.
Spectrum: Moderate Partisan Bill (Republican 5-1)
Status: (Introduced - Dead) 2012-04-18 - Author stricken Atkins [HF2500 Detail]
Download: Minnesota-2011-HF2500-Introduced.html
1.2relating to commerce; changing laws relating to debt settlement services
1.3agreements;amending Minnesota Statutes 2010, sections 332B.06, subdivisions
1.42, 5, 8; 332B.07, subdivisions 1, 4; 332B.09, subdivision 1; 332B.10; 332B.13,
1.5subdivision 3; repealing Minnesota Statutes 2010, section 332B.09, subdivisions
1.62, 3.
1.7BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.8 Section 1. Minnesota Statutes 2010, section 332B.06, subdivision 2, is amended to read:
1.9 Subd. 2. Actions prior to executing a written agreement. No person may provide
1.10debt settlement services for a debtor or execute a debt settlement services agreement
1.11unless the person first has:
1.12(1) informed the debtor, in writing, that debt settlement is not appropriate for all
1.13debtors and that there are other ways to deal with debt, including using credit counseling
1.14or debt management services, or filing bankruptcy;
1.15(2) prepared in writing and provided to the debtor, in a form the debtor may keep,
1.16an individualized financial analysis of the debtor's financial circumstances, including
1.17income and liabilities, and made a determination supported by the individualized financial
1.18analysis that:
1.19(i) the debt settlement plan proposed for addressing the debt is suitable for the
1.20individual debtor;
1.21(ii) the debtor can reasonably meet the requirements of the proposed debt settlement
1.22services plan; and
1.23(iii) based on the totality of the circumstances, there is a net tangible benefit to the
1.24debtor of entering into the proposed debt settlement services plan; and
2.1(3) provided, on a document separate from any other document, the total amount and
2.2an itemization of fees, including any origination fees, monthly fees, and settlement fees
2.3reasonably anticipated to be paid by the debtor over the term of the agreement.
2.4 Sec. 2. Minnesota Statutes 2010, section 332B.06, subdivision 5, is amended to read:
2.5 Subd. 5. Required terms. (a) Each debt settlement services agreement must contain
2.6on the front page of the agreement, segregated by bold lines from all other information
2.7on the page and disclosed prominently and clearly in bold print, the total amount and an
2.8itemization of fees, including any origination fees, monthly fees, and settlement fees
2.9reasonably anticipated to be paid by the debtor over the term of the agreement.
2.10(b) Each debt settlement services agreement must also contain the following:
2.11(1) a prominent statement describing the terms upon which the debtor may cancel
2.12the contract as set forth in section332B.07 ;
2.13(2) a detailed description of all services to be performed by the debt settlement
2.14services provider for the debtor;
2.15(3) the debt settlement services provider's refund policy;
2.16(4) the debt settlement services provider's principal business address, which must
2.17not be a post office box, and the name and address of its agent in this state authorized to
2.18receive service of process; and
2.19(5) the name of each creditor the debtor has listed and the aggregate debt owed to
2.20each creditor that will be the subject of settlement.
2.21 Sec. 3. Minnesota Statutes 2010, section 332B.06, subdivision 8, is amended to read:
2.22 Subd. 8.Funds held in trust Holding funds prohibited. (a) No debt settlement
2.23services provider shall hold a debtor's funds intended for distribution to creditors.
2.24(b) This subdivision does not prohibit requesting or requiring the debtor to place
2.25funds in an account to be used for the debt settlement provider's fees and for payments to
2.26creditors or debt collectors in connection with the renegotiation, settlement, reduction, or
2.27other alteration of the terms of payment or other terms of a debt, provided that:
2.28(1) the funds are held in an account at an insured financial institution;
2.29(2) the debtor owns the funds held in the account and is paid accrued interest on
2.30the account, if any;
2.31(3) the entity administering the account is not owned or controlled by, or in any way
2.32affiliated with, the debt settlement service;
3.1(4) the entity administering the account does not give or accept any money or
3.2other compensation in exchange for referrals of business involving the debt settlement
3.3service; and
3.4(5) the debtor may withdraw from the debt settlement service at any time without
3.5penalty, and must receive all funds in the account, other than funds paid to the entity
3.6administering the account or earned by the debt settlement service in compliance with
3.7section 332B.07.
3.8(c) Debtor funds may be held in trust for the purpose of writing exchange checks for
3.9no longer than 42 days. If the registrant holds debtor funds, the registrant must maintain a
3.10separate trust account, except that the registrant may commingle debtor funds with the
3.11registrant's own funds, in the form of an imprest fund, to the extent necessary to ensure
3.12maintenance of a minimum balance, if the financial institution at which the trust account is
3.13held requires a minimum balance to avoid the assessment of fees or penalties for failure
3.14to maintain a minimum balance.
3.15 Sec. 4. Minnesota Statutes 2010, section 332B.07, subdivision 1, is amended to read:
3.16 Subdivision 1. Debtor's right to cancel. (a) A debtor has the right to cancel a debt
3.17settlement services agreement without cause at any time upon ten days' written notice
3.18to the debt settlement services provider.
3.19(b) In the event of cancellation, the debt settlement services provider must, within
3.20ten days of the cancellation, notify the debtor's creditors with whom the debt settlement
3.21services provider is or has been, under the terms of the debt settlement agreement, in
3.22communication, of the cancellation and immediately refund all fees paid by the debtor to
3.23the debt settlement services provider that exceed the fees allowed under section332B.09 .
3.24(c) Upon cancellation, the debt settlement services provider must cease collection of
3.25any monthly fees beginning in the month following cancellation.
3.26(d) Notwithstanding paragraph (c), a debt settlement services provider is entitled to
3.27the full amount of the fees provided for in the debt settlement services agreement if the
3.28provider can show that:
3.29(1) the provider obtained a settlement offer from the creditor or creditors in
3.30accordance with the debt settlement services agreement;
3.31(2) the debtor rejected the settlement offer; or
3.32(3) within the period contemplated in the debt settlement services agreement, the
3.33debtor entered into a settlement agreement with the same creditor or creditors for an
3.34amount equal to or lower than the settlement offer obtained by the provider.
4.1 Sec. 5. Minnesota Statutes 2010, section 332B.07, subdivision 4, is amended to read:
4.2 Subd. 4. Debt settlement services provider's right to cancel. (a) A debt settlement
4.3services provider may cancel a debt settlement services agreement with good cause upon
4.430 days' written notice to the debtor.
4.5(b) Within ten days after the cancellation, the debt settlement services provider
4.6must notify the debtor's creditors with whom the debt settlement services provider is or
4.7has been, under the terms of the debt settlement services agreement, in communication,
4.8of the cancellation.
4.9(c) Upon cancellation, the debt settlement services provider must cease collection of
4.10any monthly fees beginning in the month following cancellation.
4.11 Sec. 6. Minnesota Statutes 2010, section 332B.09, subdivision 1, is amended to read:
4.12 Subdivision 1.Choice of fee structure Fees permitted. A debt settlement services
4.13provider may calculate fees on a percentage of debt basis or on a percentage of savings
4.14basis. The fee structure shall be clearly disclosed and explained in the debt settlement
4.15services agreement. A debt settlement provider may not request or receive payment of any
4.16fee or consideration for any debt settlement service until and unless:
4.17(1) a debt is renegotiated, settled, reduced, or otherwise altered pursuant to a
4.18settlement agreement, or other such valid contractual agreement executed by the customer;
4.19(2) the debtor has made at least one payment pursuant to that settlement agreement,
4.20or other valid contractual agreement between the debtor and the creditor or debt collector;
4.21and
4.22(3) to the extent that debts enrolled in a service are renegotiated, settled, reduced, or
4.23otherwise altered individually, the fee or consideration either:
4.24(i) bears the same proportional relationship to the total fee for renegotiating, settling,
4.25reducing, or altering the terms of the entire debt balance as the individual debt amount
4.26bears to the entire debt amount. The individual debt amount and the entire debt amount
4.27are those owed at the time the debt was enrolled in the service; or
4.28(ii) is a percentage of the amount saved as a result of the renegotiation, settlement,
4.29reduction, or alteration. The percentage charged cannot change from one individual debt
4.30to another. The amount saved is the difference between the amount owed at the time the
4.31debt was enrolled in the service and the amount actually paid to satisfy the debt.
4.32 Sec. 7. Minnesota Statutes 2010, section 332B.10, is amended to read:
4.33332B.10 PROHIBITIONS.
4.34No debt settlement services provider shall:
5.1(1) engage in any activity, act, or omission prohibited under section332A.14 ;
5.2(2) promise, guarantee, or directly or indirectly imply, infer, or in any manner
5.3represent that any debt will be settled prior to the presentation to the debtor of an offer
5.4by the creditors participating in the debt settlement services plan to settle, except as
5.5required by law;
5.6(3) misrepresent the timing of negotiations with creditors;
5.7(4) imply, infer, or in any manner represent that:
5.8(i) fees, interest, and other charges will not continue to accrue prior to the time
5.9debts are settled;
5.10(ii) wages or bank accounts are not subject to garnishment;
5.11(iii) creditors will not continue to contact the debtor;
5.12(iv) the debtor is not subject to legal action; and
5.13(v) the debtor will not be subject to tax consequences for the portion of any debts
5.14forgiven;
5.15(5) execute a power of attorney or any other agreement, oral or written, express
5.16or implied, that extinguishes or limits the debtor's right at any time to contract or
5.17communicate with any creditor or the creditor's right at any time to communicate with
5.18the debtor;
5.19(6) exercise or attempt to exercise a power of attorney after an individual has
5.20terminated an agreement;
5.21(7) state, imply, infer, or, in any other manner, indicate that entering into a debt
5.22settlement services agreement or settling debts will either have no effect on, or improve,
5.23the debtor's credit, credit rating, and credit score;
5.24(8) challenge a debt without the written consent of the debtor;
5.25(9) make any false or misleading claim regarding a creditor's right to collect a debt;
5.26(10) falsely represent that the debt settlement services provider can negotiate better
5.27settlement terms with a creditor than the debtor alone can negotiate;
5.28(11) provide or offer to provide legal advice or legal services unless the person
5.29providing or offering to provide legal advice is licensed to practice law in the state;
5.30(12) misrepresent that it is authorized or competent to furnish legal advice or
5.31perform legal services; and
5.32(13) settle a debt or lead an individual to believe that a payment to a creditor is in
5.33settlement of a debt to the creditor unless, at the time of settlement, the individual receives
5.34a certification from the creditor that the payment is in full settlement of the debt or part of
5.35a payment plan that upon completion will lead to full settlement of the debt.
6.1 Sec. 8. Minnesota Statutes 2010, section 332B.13, subdivision 3, is amended to read:
6.2 Subd. 3. Injunctive relief. (a) A debtor may sue a debt settlement services provider
6.3for temporary or permanent injunctive or other appropriate equitable relief to prevent
6.4violations of any provision of this chapter. A court must grant injunctive relief on a
6.5showing that the debt settlement services provider has materially violated any provision of
6.6this chapter, or in the case of a temporary injunction, on a showing that the debtor is likely
6.7to prevail on allegations that the debt settlement services provider materially violated any
6.8provision of this chapter.
6.9(b) A debtor may sue a lead generator for temporary or permanent injunctive or other
6.10appropriate equitable relief to prevent violations of section332B.11 . A court must grant
6.11injunctive relief on a showing that the lead generator has violated section332B.11 , or in
6.12the case of a temporary injunction, on a showing that the debtor is likely to prevail on
6.13allegations that the lead generator violated section332B.11 .
6.14 Sec. 9. REPEALER.
6.15Minnesota Statutes 2010, section 332B.09, subdivisions 2 and 3, are repealed.
6.16 Sec. 10. EFFECTIVE DATE.
6.17Sections 1 to 9 are effective for debt settlement services agreements entered into on
6.18or after August 1, 2012.
1.3agreements;amending Minnesota Statutes 2010, sections 332B.06, subdivisions
1.42, 5, 8; 332B.07, subdivisions 1, 4; 332B.09, subdivision 1; 332B.10; 332B.13,
1.5subdivision 3; repealing Minnesota Statutes 2010, section 332B.09, subdivisions
1.62, 3.
1.7BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.8 Section 1. Minnesota Statutes 2010, section 332B.06, subdivision 2, is amended to read:
1.9 Subd. 2. Actions prior to executing a written agreement. No person may provide
1.10debt settlement services for a debtor or execute a debt settlement services agreement
1.11unless the person first has:
1.12(1) informed the debtor, in writing, that debt settlement is not appropriate for all
1.13debtors and that there are other ways to deal with debt, including using credit counseling
1.14or debt management services, or filing bankruptcy;
1.15(2) prepared in writing and provided to the debtor, in a form the debtor may keep,
1.16an individualized financial analysis of the debtor's financial circumstances, including
1.17income and liabilities, and made a determination supported by the individualized financial
1.18analysis that:
1.19(i) the debt settlement plan proposed for addressing the debt is suitable for the
1.20individual debtor;
1.21(ii) the debtor can reasonably meet the requirements of the proposed debt settlement
1.22services plan; and
1.23(iii) based on the totality of the circumstances, there is a net tangible benefit to the
1.24debtor of entering into the proposed debt settlement services plan; and
2.1(3) provided, on a document separate from any other document, the total amount and
2.2an itemization of fees
2.3reasonably anticipated to be paid by the debtor over the term of the agreement.
2.4 Sec. 2. Minnesota Statutes 2010, section 332B.06, subdivision 5, is amended to read:
2.5 Subd. 5. Required terms. (a) Each debt settlement services agreement must contain
2.6on the front page of the agreement, segregated by bold lines from all other information
2.7on the page and disclosed prominently and clearly in bold print, the total amount and an
2.8itemization of fees
2.9reasonably anticipated to be paid by the debtor over the term of the agreement.
2.10(b) Each debt settlement services agreement must also contain the following:
2.11(1) a prominent statement describing the terms upon which the debtor may cancel
2.12the contract as set forth in section
2.13(2) a detailed description of all services to be performed by the debt settlement
2.14services provider for the debtor;
2.15(3) the debt settlement services provider's refund policy;
2.16(4) the debt settlement services provider's principal business address, which must
2.17not be a post office box, and the name and address of its agent in this state authorized to
2.18receive service of process; and
2.19(5) the name of each creditor the debtor has listed and the aggregate debt owed to
2.20each creditor that will be the subject of settlement.
2.21 Sec. 3. Minnesota Statutes 2010, section 332B.06, subdivision 8, is amended to read:
2.22 Subd. 8.
2.23services provider shall hold a debtor's funds intended for distribution to creditors.
2.24(b) This subdivision does not prohibit requesting or requiring the debtor to place
2.25funds in an account to be used for the debt settlement provider's fees and for payments to
2.26creditors or debt collectors in connection with the renegotiation, settlement, reduction, or
2.27other alteration of the terms of payment or other terms of a debt, provided that:
2.28(1) the funds are held in an account at an insured financial institution;
2.29(2) the debtor owns the funds held in the account and is paid accrued interest on
2.30the account, if any;
2.31(3) the entity administering the account is not owned or controlled by, or in any way
2.32affiliated with, the debt settlement service;
3.1(4) the entity administering the account does not give or accept any money or
3.2other compensation in exchange for referrals of business involving the debt settlement
3.3service; and
3.4(5) the debtor may withdraw from the debt settlement service at any time without
3.5penalty, and must receive all funds in the account, other than funds paid to the entity
3.6administering the account or earned by the debt settlement service in compliance with
3.7section 332B.07.
3.8(c) Debtor funds may be held in trust for the purpose of writing exchange checks for
3.9no longer than 42 days. If the registrant holds debtor funds, the registrant must maintain a
3.10separate trust account, except that the registrant may commingle debtor funds with the
3.11registrant's own funds, in the form of an imprest fund, to the extent necessary to ensure
3.12maintenance of a minimum balance, if the financial institution at which the trust account is
3.13held requires a minimum balance to avoid the assessment of fees or penalties for failure
3.14to maintain a minimum balance.
3.15 Sec. 4. Minnesota Statutes 2010, section 332B.07, subdivision 1, is amended to read:
3.16 Subdivision 1. Debtor's right to cancel. (a) A debtor has the right to cancel a debt
3.17settlement services agreement without cause at any time upon ten days' written notice
3.18to the debt settlement services provider.
3.19(b) In the event of cancellation, the debt settlement services provider must, within
3.20ten days of the cancellation, notify the debtor's creditors with whom the debt settlement
3.21services provider is or has been, under the terms of the debt settlement agreement, in
3.22communication, of the cancellation and immediately refund all fees paid by the debtor to
3.23the debt settlement services provider that exceed the fees allowed under section
3.24
3.25
3.26
3.27
3.28
3.29
3.30
3.31
3.32
3.33
3.34
4.1 Sec. 5. Minnesota Statutes 2010, section 332B.07, subdivision 4, is amended to read:
4.2 Subd. 4. Debt settlement services provider's right to cancel. (a) A debt settlement
4.3services provider may cancel a debt settlement services agreement with good cause upon
4.430 days' written notice to the debtor.
4.5(b) Within ten days after the cancellation, the debt settlement services provider
4.6must notify the debtor's creditors with whom the debt settlement services provider is or
4.7has been, under the terms of the debt settlement services agreement, in communication,
4.8of the cancellation.
4.9
4.10
4.11 Sec. 6. Minnesota Statutes 2010, section 332B.09, subdivision 1, is amended to read:
4.12 Subdivision 1.
4.13
4.14
4.15
4.16fee or consideration for any debt settlement service until and unless:
4.17(1) a debt is renegotiated, settled, reduced, or otherwise altered pursuant to a
4.18settlement agreement, or other such valid contractual agreement executed by the customer;
4.19(2) the debtor has made at least one payment pursuant to that settlement agreement,
4.20or other valid contractual agreement between the debtor and the creditor or debt collector;
4.21and
4.22(3) to the extent that debts enrolled in a service are renegotiated, settled, reduced, or
4.23otherwise altered individually, the fee or consideration either:
4.24(i) bears the same proportional relationship to the total fee for renegotiating, settling,
4.25reducing, or altering the terms of the entire debt balance as the individual debt amount
4.26bears to the entire debt amount. The individual debt amount and the entire debt amount
4.27are those owed at the time the debt was enrolled in the service; or
4.28(ii) is a percentage of the amount saved as a result of the renegotiation, settlement,
4.29reduction, or alteration. The percentage charged cannot change from one individual debt
4.30to another. The amount saved is the difference between the amount owed at the time the
4.31debt was enrolled in the service and the amount actually paid to satisfy the debt.
4.32 Sec. 7. Minnesota Statutes 2010, section 332B.10, is amended to read:
4.33332B.10 PROHIBITIONS.
4.34No debt settlement services provider shall:
5.1(1) engage in any activity, act, or omission prohibited under section
5.2(2) promise, guarantee, or directly or indirectly imply, infer, or in any manner
5.3represent that any debt will be settled prior to the presentation to the debtor of an offer
5.4by the creditors participating in the debt settlement services plan to settle, except as
5.5required by law;
5.6(3) misrepresent the timing of negotiations with creditors;
5.7(4) imply, infer, or in any manner represent that:
5.8(i) fees, interest, and other charges will not continue to accrue prior to the time
5.9debts are settled;
5.10(ii) wages or bank accounts are not subject to garnishment;
5.11(iii) creditors will not continue to contact the debtor;
5.12(iv) the debtor is not subject to legal action; and
5.13(v) the debtor will not be subject to tax consequences for the portion of any debts
5.14forgiven;
5.15(5) execute a power of attorney or any other agreement, oral or written, express
5.16or implied, that extinguishes or limits the debtor's right at any time to contract or
5.17communicate with any creditor or the creditor's right at any time to communicate with
5.18the debtor;
5.19(6) exercise or attempt to exercise a power of attorney after an individual has
5.20terminated an agreement;
5.21(7) state, imply, infer, or, in any other manner, indicate that entering into a debt
5.22settlement services agreement or settling debts will either have no effect on, or improve,
5.23the debtor's credit, credit rating, and credit score;
5.24(8) challenge a debt without the written consent of the debtor;
5.25(9) make any false or misleading claim regarding a creditor's right to collect a debt;
5.26(10) falsely represent that the debt settlement services provider can negotiate better
5.27settlement terms with a creditor than the debtor alone can negotiate;
5.28(11) provide or offer to provide legal advice or legal services unless the person
5.29providing or offering to provide legal advice is licensed to practice law in the state;
5.30(12) misrepresent that it is authorized or competent to furnish legal advice or
5.31perform legal services; and
5.32(13) settle a debt or lead an individual to believe that a payment to a creditor is in
5.33settlement of a debt to the creditor unless, at the time of settlement, the individual receives
5.34a certification from the creditor that the payment is in full settlement of the debt or part of
5.35a payment plan that upon completion will lead to full settlement of the debt.
6.1 Sec. 8. Minnesota Statutes 2010, section 332B.13, subdivision 3, is amended to read:
6.2 Subd. 3. Injunctive relief. (a) A debtor may sue a debt settlement services provider
6.3for temporary or permanent injunctive or other appropriate equitable relief to prevent
6.4violations of any provision of this chapter. A court must grant injunctive relief on a
6.5showing that the debt settlement services provider has materially violated any provision of
6.6this chapter, or in the case of a temporary injunction, on a showing that the debtor is likely
6.7to prevail on allegations that the debt settlement services provider materially violated any
6.8provision of this chapter.
6.9(b) A debtor may sue a lead generator for temporary or permanent injunctive or other
6.10appropriate equitable relief to prevent violations of section
6.11injunctive relief on a showing that the lead generator has violated section
6.12the case of a temporary injunction, on a showing that the debtor is likely to prevail on
6.13allegations that the lead generator violated section
6.14 Sec. 9. REPEALER.
6.15Minnesota Statutes 2010, section 332B.09, subdivisions 2 and 3, are repealed.
6.16 Sec. 10. EFFECTIVE DATE.
6.17Sections 1 to 9 are effective for debt settlement services agreements entered into on
6.18or after August 1, 2012.
