Bill Text: PA SB1193 | 2011-2012 | Regular Session | Amended

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Bill Title: Providing for the licensure of persons providing debt settlement services, for powers and duties of the Department of Banking and for enforcement; imposing civil penalties; and repealing in part the Debt Management Services Act.

Spectrum: Slight Partisan Bill (Republican 7-4)

Status: (Introduced - Dead) 2012-06-28 - Re-referred to APPROPRIATIONS [SB1193 Detail]

Download: Pennsylvania-2011-SB1193-Amended.html

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PRIOR PRINTER'S NO. 1478 PRINTER'S NO. 2311
THE GENERAL ASSEMBLY OF PENNSYLVANIA
SENATE BILL
No. 1193 Session of2011
INTRODUCED BY WARD, D. WHITE, MENSCH, HUGHES, WAUGH, SOLOBAY, SCHWANK, ERICKSON, RAFFERTY, TARTAGLIONE AND BRUBAKER, JULY 21, 2011
SENATOR D. WHITE, BANKING AND INSURANCE, AS AMENDED, JUNE 20, 2012
AN ACT
Providing for the licensure of persons providing debt settlement <--
services, for powers and duties of the Department of Banking
and for enforcement; and making a related repeal.
Providing for the licensure of persons providing debt settlement <--
services, for powers and duties of the Department of Banking
and for enforcement; imposing civil penalties; and repealing
in part the Debt Management Services Act.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
CHAPTER 1 <--
PRELIMINARY PROVISIONS
Section 101. Short title.
This act shall be known and may be cited as the Debt
Settlement Services Act.
Section 102. Definitions.
The following words and phrases when used in this act shall
have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Affiliate." Any of the following:
(1) A person hat directly controls, is controlled by or
is under common control with the licensee.
(2) An officer of or an individual performing similar
functions with respect to the licensee.
(3) A director of or an individual performing similar
functions with respect to the licensee.
(4) An officer or director of or an individual
performing similar functions with respect to a person
described in paragraph (1).
"Agreement." An agreement between a provider and an
individual for the performance of debt settlement services.
"Bank." A financial institution, including a commercial
bank, savings bank, savings and loan association, credit union,
mortgage bank and trust company, engaged in the business of
banking, chartered under Federal or state law and regulated by a
Federal or state banking regulatory authority.
"Concessions." Assent to repayment of a debt on terms more
favorable to an individual than the terms of the contract
between the individual and a creditor.
"Debt settlement services." Services as an intermediary
between an individual and one or more unsecured creditors of the
individual for the purpose of obtaining concessions where the
contemplated concessions involve a reduction in principal of the
individual's unsecured debt, but does not include:
(1) Legal services provided in an attorney-client
relationship by an attorney licensed or otherwise authorized
to practice law in this Commonwealth.
(2) Accounting services provided in an accountant-client
relationship by a certified public accountant licensed to
provide accounting services in this Commonwealth.
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(3) Financial planning services provided in a financial
planner-client relationship by a licensed member of a
financial planning profession.
"Department." The Department of Banking of the Commonwealth.
"Good faith." Honesty in fact and the observance of
reasonable standards of fair dealing.
"Person." An individual, corporation, business trust,
estate, trust, partnership, limited liability company,
association, joint venture or any other legal or commercial
entity. The term does not include a public corporation,
government or governmental subdivision, agency or
instrumentality.
"Principal amount of the debt." The amount of a debt at the
time of the execution of the agreement.
"Program." A program or strategy in which a provider
furnishes debt settlement services.
"Provider." A person required to be registered pursuant to
this act and that provides, offers to provide or agrees to
provide debt settlement services.
"Record." Information that is inscribed on a tangible medium
or that is stored in an electronic or other medium and is
retrievable in perceivable form.
Section 103. Nonapplicability.
(a) Providers.--This act does not apply to a provider to the
extent that the provider receives no compensation for debt
settlement services from or on behalf of the individuals to whom
it provides the services or from their creditors.
(b) Certain persons.--This act does not apply to the
following persons or their employees when the person or the
employee is engaged in the regular course of the person's
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business or profession:
(1) A judicial officer, a person acting under an order
of a court or an administrative agency or an assignee for the
benefit of creditors.
(2) A bank, bank holding company or the subsidiary,
agent or affiliate of either, or a credit union or other
financial institution licensed under Federal or state law.
(3) A title insurer, escrow company or other person that
provides bill-paying services if the provision of debt
settlement services is incidental to the bill-paying
services.
CHAPTER 3
LICENSING
Section 301. Licensing required.
(a) General rule.--Except as otherwise provided in
subsection (b), on or after July 1, 2012, a provider may not
provide debt settlement services to an individual who it
reasonably should know resides in this Commonwealth at the time
it agrees to provide the services, unless the provider is
licensed under this act.
(b) Nonapplicability.--If a provider is licensed under this
act, subsection (a) does not apply to an employee or agent of
the provider.
(c) Listing.--The department shall maintain and publicize a
list of the names of all licensed providers.
Section 302. Form of application and required documentation.
(a) Form.--An application for licensure as a provider must
be in a form prescribed by the department.
(b) Fee and documentation.--Subject to adjustment of dollar
amounts pursuant to section 901(f), an application for licensure
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as a provider must be accompanied by:
(1) The fee established by the department.
(2) Evidence of minimum insurance in an amount specified
by the department.
(3) In lieu of the aggregate umbrella insurance, a
surety bond filed with the department, in a form approved by
the department, for a term no less than the expiration of the
license and in the amount of not less than $10,000 or other
larger amount that the department determines is warranted by
the financial condition and business experience of the
provider, the history of the provider in performing debt
settlement services, the risk to individuals and any other
factor the department considers appropriate, but in no event
greater than $50,000. The surety bond shall run to the
Commonwealth for the benefit of this Commonwealth and of
individuals who reside in this Commonwealth when they agree
to receive debt settlement services from the provider, as
their interests may appear, payment of which is conditioned
upon noncompliance of the provider or its agent with this
act.
(4) Proof that the provider is authorized by the laws of
this Commonwealth to conduct business in this Commonwealth.
Section 303. Required information for application.
An application for licensure must be signed by the applicant
and declare as true any material matter pursuant to the
application for licensure. The application form shall contain a
statement informing the applicant that a false or dishonest
answer to a question may be grounds for denial or subsequent
suspension or revocation of the applicant's license. An
application shall include the following:
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(1) The applicant's name, principal business address and
telephone number, and all other business addresses in this
Commonwealth, electronic mail addresses and Internet website
addresses.
(2) All names under which the applicant conducts
business.
(3) The address of each location in this Commonwealth at
which the applicant will provide debt settlement services or
a statement that the applicant will have no such location.
(4) The name and home address of each officer and
director of the applicant and each person that owns at least
10% of the applicant's business.
(5) A statement describing, to the extent it is known or
should be known by the applicant, any material civil or
criminal judgment relating to financial fraud or misuse and
any material administrative or enforcement action relating to
financial fraud or misuse by a governmental agency in any
jurisdiction against the applicant, any of its officers,
directors, owners or agents.
(6) A copy of each form of agreement that the applicant
will use with individuals who reside in this Commonwealth.
(7) The schedule of fees and charges that the applicant
will use with individuals who reside in this Commonwealth.
(8) A copy or description of the financial analysis or
budget that the provider will use in reviewing an
individual's financial condition.
(9) A description of any ownership interest of at least
10% by a director, owner or employee of the applicant in:
(i) any affiliate of the applicant; or
(ii) any entity that provides products or services
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to the applicant or any individual relating to the
applicant's debt settlement services.
(10) The identity of each director who is an affiliate
of the applicant.
(11) The applicant's financial statements, reviewed by
an accountant licensed in the state of the applicant's
principal place of business, for each of the two years
immediately preceding the application or, if the applicant
has not been in operation for the two years preceding the
application, for the period of its existence.
(12) Evidence that the provider has a resident agent in
this Commonwealth for service of process.
(13) A description of the three most commonly used
educational programs that the applicant provides or intends
to provide to individuals who agree to use the provider's
services and a copy of any materials used or to be used in
those programs.
Section 304. Obligation to update application information.
An applicant or licensed provider shall notify the department
within 60 days after a change in the information specified in
section 302(b)(2) or section 303(1), (3) or (5).
Section 305. Public availability of application information.
Except the addresses required by section 303(4) and the
proprietary information required by section 303(8), (9), (10)
and (11), the department shall make the information in an
application for licensure and renewal of licensure as a provider
available to the public.
Section 306. Certificate of licensure.
(a) Issuance.--Except as otherwise provided in subsection
(b), the department shall issue a certificate of licensure as a
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provider to a person that complies with sections 302 and 303.
(b) Grounds for denial.--The department may deny licensure
if:
(1) The application contains information that is
materially erroneous or incomplete.
(2) An officer, director or owner of the applicant has
been convicted of a crime, or suffered a civil judgment,
involving dishonesty or the violation of Federal or state
securities laws.
(3) The application is not accompanied by the fee
established by the department.
(4) There is reasonable evidence to support the
department's opinion that the applicant will not operate as a
debt settlement services provider in a lawful, honest and
fair manner.
Section 307. Procedure for licensure.
(a) Time frame.--The department shall approve or deny an
initial license as a provider within 60 days after an
application is filed. The department may extend the 60-day
period for not more than 45 days. Within seven days after
denying an application, the department, in a record, shall
inform the applicant of the reasons for the denial.
(b) Appeal.--If the department denies an application for
licensure as a provider or does not act on an application within
the time prescribed in subsection (a), the applicant may appeal
and request a hearing under 2 Pa.C.S. (relating to
administrative law and procedure).
(c) Validity.--Subject to section 308(d), a license as a
provider is valid for one year.
(d) Interim period.--Upon submission of an application for
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licensure and until such time as an application is approved or
denied, the applicant may continue to provide debt settlement
services, but a denial of licensure terminates any further power
to provide services unless approved by the department.
Section 308. License renewal.
(a) Annual renewal.--A provider must obtain a renewal of its
license annually.
(b) Application.--An application for renewal of a license as
a provider must be in a form prescribed by the department,
signed under penalty of false statement, and:
(1) Be filed not less than 30 days nor more than 60 days
before the registration expires.
(2) Be accompanied by the fee established by the
department.
(3) Disclose any changes in the information contained in
the applicant's application for licensure or its immediately
previous application for renewal, as applicable.
(4) Provide any other information that the department
reasonably requires to perform the department's duties under
this section.
(c) Public information.--Except for the information required
by section 303(4), (8), (9), (10) and (11), the department shall
make the information in an application for renewal of licensure
as a provider available to the public.
(d) Effectiveness.--If a licensed provider files a timely
and complete application for renewal of licensure, the license
remains effective until the department, in a record, notifies
the applicant of a denial and states the reasons for the denial.
(e) Appeal.--If the department denies an application for
renewal of licensure as a provider, the applicant, within 30
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days after receiving notice of the denial, may appeal and
request a hearing under 2 Pa.C.S. (relating to administrative
law and procedure), subject to section 903. While the appeal is
pending, the applicant shall continue to provide debt settlement
services to individuals with whom it has agreements. If the
denial is affirmed, subject to the department's order and
section 904, the applicant shall continue to provide debt
settlement services to individuals with whom it has agreements
until, with the approval of the department, it transfers the
agreements to another licensed provider.
Section 309. Licensure in another state.
If a provider holds a license or certificate of registration
in another state authorizing it to provide debt settlement
services, the provider may submit a copy of that license or
certificate and the application for it instead of an application
in the form prescribed by section 302(a), 303 or 308(b). The
department shall accept the application and the license or
certificate from the other state as an application for
registration as a provider or for renewal of registration as a
provider, as appropriate, in this Commonwealth if:
(1) The application in the other state contains
information substantially similar to or more comprehensive
than that required in an application submitted in this
Commonwealth.
(2) The applicant, under penalty of false statement,
certifies that the information contained in the application
is current or, to the extent it is not current, supplements
the application to make the information current.
CHAPTER 5
PROVIDER RESPONSIBILITIES
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Section 501. Requirement of good faith.
A provider shall act in good faith in all matters under this
act.
Section 502. Customer service.
A provider that is required to be licensed under this act
shall maintain a toll-free communication system, staffed at a
level that reasonably permits an individual to speak to a
customer-service representative, as appropriate, during ordinary
business hours.
Section 503. Prerequisites for providing debt settlement
services.
(a) List of goods and services.--Before providing debt
settlement services, a licensed provider shall give the
individual an itemized list of goods and services and the
charges for each. The list must be clear and conspicuous.
(b) Financial analysis required.--A provider may not furnish
debt settlement services unless the provider has prepared a
financial analysis.
(c) Financial analysis copy and information.--Before an
individual assents to an agreement to engage in a program, a
provider shall:
(1) Provide the individual with a copy of the analysis
required by subsection (b) in a record that identifies the
provider and that the individual may keep whether or not the
individual assents to the agreement.
(2) Inform the individual of the availability, at the
individual's option, of assistance by a toll-free
communication system or in person to discuss the financial
analysis required by subsection (b).
(d) Information to be provided.--Before an individual
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assents to an agreement to engage in a program, the provider
shall inform the individual of the following:
(1) Programs are not suitable for all individuals.
(2) Participation in a program may adversely affect the
individual's credit rating or credit scores.
(3) Nonpayment of debt may lead creditors to increase
finance and other charges or undertake collection activity,
including litigation.
(4) Unless the individual is insolvent, if a creditor
settles for less than the full amount of the debt, the
program may result in the creation of taxable income to the
individual, even though the individual does not receive any
money.
(5) Specific results cannot be predicted or guaranteed
and the provider cannot force negotiations or settlements
with creditors but will advocate solely on behalf of the
individual.
(6) Programs require that individuals meet a certain
savings goal in order to maximize settlement results.
(7) The provider does not provide accounting or legal
advice to individuals, unless the provider is professionally
licensed to provide such advice.
(8) The provider does not make monthly payments to the
individual's creditors.
(9) The name and business address of the provider.
Section 504. Communication by electronic or other means.
(a) Compliance.--A provider may satisfy the requirements of
sections 503, 505 and 512 by means of the Internet or other
electronic means if the provider obtains a consumer's consent in
the manner provided by section 101(c)(1) of the Electronic
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Signatures in Global and National Commerce Act (Public Law
106-229, 15 U.S.C. § 7001 et seq.).
(b) Form.--The disclosures and materials required by
sections 503, 505 and 512 shall be presented in a form that is
capable of being accurately reproduced for later reference.
(c) Written copy.--At the time of providing the materials
and agreement required by sections 503(c) and (d), 505 and 512,
a provider shall inform the individual that upon electronic,
telephonic or written request, it will send the individual a
written copy of the materials and shall comply with a request as
provided in subsection (f).
(d) Request for written copy.--If a provider is requested,
before the expiration of 90 days after a program is completed or
terminated, to send a written copy of the materials required by
sections 503(c) and (d), 505 and 512, the provider shall send
the copy at no charge within three business days after the
request, but the provider need not comply with a request more
than once per calendar month or if it reasonably believes the
request is made for purposes of harassment. If a request is made
more than 90 days after a program is completed or terminated,
the provider shall send within a reasonable time a written copy
of the materials requested.
(e) Disclosure.--A provider that maintains an Internet
website shall disclose on the home page of its Internet website
or on a page that is clearly and conspicuously connected to the
home page by a link that clearly reveals its contents:
(1) Its name and all names under which it does business.
(2) Its principal business address, telephone number and
electronic mail address, if any.
(f) Withdrawal of consent.--Subject to subsection (g), if a
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consumer who has consented to electronic communication in the
manner provided by section 101 of the Electronic Signatures in
Global and National Commerce Act (Public Law 106-229, 15 U.S.C.
§ 7001 et seq.), withdraws consent as provided in the Electronic
Signatures in Global and National Commerce Act, a provider may
terminate its agreement with the consumer.
(g) Termination of agreement.--If a provider wishes to
terminate an agreement with a consumer pursuant to subsection
(f), it shall notify the consumer that it will terminate the
agreement unless the consumer, within 30 days after receiving
the notification, consents to electronic communication in the
manner provided in section 101(c) of the Electronic Signatures
in Global and National Commerce Act.
(h) Definition.--As used in this section, the term
"consumer" means an individual who seeks or obtains goods or
services that are used primarily for personal, family or
household purposes.
Section 505. Form and contents of agreement.
(a) Form and contents.--An agreement must:
(1) Be in a record.
(2) Be dated and signed by the individual.
(3) Include the name of the individual and the address
where the individual resides.
(4) Include the name, business address and telephone
number of the provider.
(5) Be delivered to the individual immediately upon
formation of the agreement.
(6) Disclose the following:
(i) The services to be provided.
(ii) The amount, or method of determining the
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amount, of all fees, individually itemized, to be paid by
the individual.
(iii) How the provider will comply with its
obligations under section 512(a).
(iv) That the individual may cancel the agreement as
provided in this chapter.
(v) That the individual may contact the department
with any questions or complaints regarding the provider.
(vi) The address, telephone number and Internet
address or Internet website of the department.
(b) Delivery.--For purposes of subsection (a)(5), delivery
of an electronic record occurs when it is made available in a
format in which the individual may retrieve, save and print it,
and the individual is notified that it is available.
(c) Termination provision.--An agreement must provide that
the individual has a right to terminate the agreement at any
time by giving the provider written or electronic notice, in
which event all powers of attorney granted by the individual to
the provider are revoked and ineffective.
(d) Restrictions.--An agreement may not:
(1) Provide for application of the law of any
jurisdiction other than the United States and this
Commonwealth.
(2) Except as permitted by 9 U.S.C. § 2 (relating to
validity, irrevocability, and enforcement of agreements to
arbitrate) and 42 Pa.C.S. Ch. 73 (relating to arbitration),
contain a provision that modifies or limits otherwise
available forums or procedural rights, including the right to
trial by jury, that are generally available to the individual
under law other than this act.
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(3) Contain a provision that restricts the individual's
remedies under this act or law other than this act.
(4) Contain a provision that:
(i) Limits or releases the liability of any person
for not performing the agreement or for violating this
act.
(ii) Indemnifies any person for liability arising
under the agreement or this act.
(e) Other rights and obligations.--All rights and
obligations specified in subsection (d) and section 506 exist
even if not provided in the agreement.
Section 506. Bank accounts.
A provider may request or require an individual to place
funds in an account, separate from the individual's then-
existing bank account, to be used for the provider's fees and
for payments to creditors or debt collectors in connection with
the debt settlement services provided that:
(1) The funds are held in an account at an insured
financial institution.
(2) The individual owns the funds held in the account
and is paid accrued interest on the account, if any.
(3) The entity administering the account is not owned or
controlled by, or in any way affiliated with, the provider.
(4) The entity administering the account does not give
or accept any money or other compensation in exchange for
referrals of business involving the provider or program.
(5) The individual may withdraw from the debt settlement
program at any time without penalty, and must immediately
receive all funds in the account, other than fees earned in
compliance with section 511.
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Section 507. Required language.
Unless the department, by regulation, provides otherwise, the
disclosures and documents required by this act must be in
English. If a provider communicates with an individual primarily
in a language other than English, the provider must furnish a
translation into the other language of the disclosures and
documents required by this act.
Section 508. Fees and other charges.
(a) Prohibition.--A provider may not impose, directly or
indirectly, a fee or other charge on an individual or receive
money from or on behalf of an individual for debt settlement
services except as permitted by this section.
(b) Conditions.--A provider may not request or receive
payment of any fee or consideration until and unless:
(1) the provider has settled the terms of at least one
debt pursuant to a settlement agreement or other such valid
contractual agreement executed by the individual;
(2) the individual has made at least one payment
pursuant to that settlement agreement or other valid
contractual agreement between the individual and the creditor
or debt collector; and
(3) the fee or consideration either:
(i) bears the same proportional relationship to the
total fee for settling the terms of the entire debt
balance as the individual debt amount bears to the entire
debt amount. The individual debt amount and the entire
debt amount are those owed at the time the debt was
enrolled in the service; or
(ii) is a percentage of the amount saved as a result
of the settlement. The percentage charged cannot change
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from one individual debt to another. The amount saved is
the difference between the amount owed at the time the
debt was enrolled in the plan and the amount actually
paid to satisfy the debt.
(c) Agreement.--A provider may not impose charges or receive
payment for debt settlement services until the provider and the
individual have signed an agreement that complies with sections
505 and 701.
(d) Payment dishonored.--If a payment to a provider by an
individual under this act is dishonored, a provider may impose a
reasonable charge to the individual, not to exceed the amount
permitted by law.
Section 509. Voluntary contributions.
A provider may not solicit a voluntary contribution from an
individual or an affiliate of the individual for any service
provided to the individual.
Section 510. Voidable agreements.
(a) Unauthorized fees.--If a provider imposes a fee or other
charge or receives money or other payments not authorized by
section 508, the individual may void the agreement and recover
as provided in section 905.
(b) Nonregistered provider.--If a provider is not registered
as required by this act when an individual assents to an
agreement, the agreement is voidable by the individual.
(c) Claim.--If an individual voids an agreement under this
section, the provider does not have a claim against the
individual for breach of contract or for restitution.
Section 511. Termination of agreement.
If an individual who has entered into a fee agreement fails
for 60 days to make payments required by the agreement, a
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provider may terminate the agreement.
Section 512. Periodic reports and retention of records.
(a) Accounting.--If a creditor has agreed to accept as
payment in full an amount less than the principal amount of the
debt owed by an individual, a provider who has established a
program for the individual shall document, in a record, an
accounting of all of the following:
(1) The amount the creditor accepts as settlement in
full of the debt.
(2) Any other terms of the settlement.
(3) The amount of the debt when the creditor agreed to
the settlement.
(4) For providers using fee agreements that calculate
any portion of the fee based on a percentage of savings the
individual realizes from a settled debt, the calculation of
that fee.
(b) Records.--A provider shall maintain records for each
individual for whom it provides debt settlement services for
four years after the final payment made by the individual and
produce a copy of them to the individual within a reasonable
time after a request for them. The provider may use electronic
or other means of storage of the records.
CHAPTER 7
VIOLATIONS
Section 701. Prohibited acts and practices.
A provider may not:
(1) Exercise or attempt to exercise a power of attorney
after an individual has terminated an agreement.
(2) Initiate a transfer from an individual's account at
a bank or with another person unless the transfer is:
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(i) A return of money to the individual.
(ii) Before termination of an agreement, properly
authorized by the agreement and this act, for payment of
a fee.
(iii) In payment of a creditor to fund a negotiated
settlement authorized by the individual.
(3) Structure a settlement in a manner that would result
in a negative amortization of any of an individual's debts.
(4) Settle a debt or lead an individual to believe that
a payment to a creditor is in settlement of a debt to the
creditor unless, at the time of settlement, the individual
receives a certification or confirmation by the creditor that
the payment is in full settlement of the debt, or is part of
a payment plan that is in full settlement of the debt.
(5) Make a representation that:
(i) The provider will furnish money to pay bills or
prevent attachments.
(ii) Payment of a certain amount will guarantee
satisfaction of a certain amount or range of
indebtedness.
(iii) Participation in a program will or may prevent
litigation, garnishment, attachment, repossession,
foreclosure, eviction or loss of employment.
(6) Represent that it is authorized or competent to
furnish legal advice or perform legal services unless such
advice or services are provided by a licensed attorney
working with the provider.
(7) Represent that it is a not-for-profit entity unless
it is organized and properly operating as a not-for-profit
under the law of the state in which it was formed or that it
20110SB1193PN2311 - 20 -
is a tax-exempt entity unless it has received certification
of tax-exempt status from the Internal Revenue Service.
(8) Take a confession of judgment or power of attorney
to confess judgment against an individual.
(9) Employ an unfair, unconscionable or deceptive act or
practice, including the knowing omission of any material
information.
(10) Purchase a debt or obligation of the individual.
Section 702. Advertising.
A provider that advertises debt settlement services shall not
make statements that are misleading or deceptive, and the
advertisements shall not conflict with the information specified
in section 503(d)(2), (3) and (5).
CHAPTER 9
ADMINISTRATION AND ENFORCEMENT
Section 901. Powers of department.
(a) Action by department.--The department may act on its own
initiative or in response to complaints and may receive
complaints, take action to obtain voluntary compliance with this
act and seek or provide remedies as provided in this act.
(b) Investigation.--The department may investigate and
examine, in this Commonwealth or elsewhere, by subpoena or
otherwise, the activities, books, accounts and records of a
person that provides or offers to provide debt settlement
services, or a person to which a provider has delegated its
obligations under an agreement or this act, to determine
compliance with this act. Information that identifies
individuals who have agreements with the provider shall not be
disclosed to the public. In connection with the investigation,
the department may:
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(1) Charge the person the reasonable expenses
necessarily incurred to conduct the examination.
(2) Require or permit a person to file a statement under
oath as to all the facts and circumstances of a matter to be
investigated.
(c) Regulations.--The department may adopt regulations to
implement the provisions of this act.
(d) Fees.--The department, by rule, shall establish
reasonable fees to be paid by providers for the expense of
administering this act. The department shall use fees collected
under this act to defray the costs of administering this act.
(e) Adjustment.--The department, by rule, shall adopt dollar
amounts instead of those specified in sections 302, 902 and 904
to reflect inflation, as measured by the United States Bureau of
Labor Statistics Consumer Price Index for All Urban Consumers
or, if that index is not available, another index adopted by
rule by the department. The department shall adopt a base year
and adjust the dollar amounts, effective on July 1 of each year,
if the change in the index from the base year, as of December 31
of the preceding year, is at least 10%. The dollar amount must
be rounded to the nearest $10.
(f) Notification.--The department shall notify registered
providers of any change in dollar amounts made pursuant to
subsection (e) and make that information available to the
public.
Section 902. Administrative remedies.
(a) Enforcement.--The department may enforce this act and
rules adopted under this act by taking one or more of the
following actions:
(1) Ordering a provider or a director, employee or other
20110SB1193PN2311 - 22 -
agent of a provider to cease and desist from any violations.
(2) Ordering a provider or a person that has caused a
violation to correct the violation, including making
restitution of money or property to a person aggrieved by a
violation.
(3) Imposing on a provider or a person that has caused a
violation a civil penalty not exceeding $1,000 for each
violation.
(4) Prosecuting a civil action to enforce an order or to
obtain restitution or an injunction or other equitable
relief, or both.
(5) Intervening in an action brought under section 904.
(b) Additional penalty.--If a person violates or knowingly
authorizes, directs, or aids in the violation of a final order
issued under subsection (a)(1) or (2), the department may impose
an additional civil penalty not exceeding $1,000 for each
violation.
(c) Costs.--The department may recover the reasonable costs
of enforcing this act under subsections (a) and (b), including
attorney fees.
(d) Factors.--In determining the amount of a civil penalty
to impose under subsection (a) or (b), the department shall
consider the seriousness of the violation, the good faith of the
violator, any previous violations by the violator, the
deleterious effect of the violation on the public, the net worth
of the violator and any other factor the department considers
relevant to the determination of the civil penalty.
Section 903. Suspension, revocation or nonrenewal of
registration.
(a) General rule.--The department may suspend, revoke or
20110SB1193PN2311 - 23 -
deny renewal of a provider's registration if:
(1) A fact or condition exists that, if it had existed
when the registrant applied for registration as a provider,
would have been a reason for denying registration.
(2) The provider has committed a material violation of
this act or a rule or order of the department under this act.
(3) The provider is insolvent.
(4) The provider or an employee or affiliate of the
provider has refused to permit the department to make an
examination authorized by this act, failed to comply with
section 901(b)(2) within 30 days after request or made a
material misrepresentation or omission in complying with
section 901(b)(2).
(5) The provider has not responded within a reasonable
time and in an appropriate manner to communications from the
department.
(b) Appeal.--If the department suspends or revokes a
provider's registration, the provider may appeal and request a
hearing pursuant to 2 Pa.C.S. (relating to administrative law
and procedure).
(c) Definition.--As used in this section, the term
"insolvent" means:
(1) Having generally ceased to pay debts in the ordinary
course of business other than as a result of good-faith
dispute.
(2) Being unable to pay debts as they become due.
(3) Being insolvent within the meaning of 11 U.S.C
(relating to bankruptcy).
Section 904. Private enforcement.
(a) Agreement voided.--If an individual voids an agreement
20110SB1193PN2311 - 24 -
under section 510, the individual may recover in a civil action
all money paid by or on behalf of the individual pursuant to the
agreement, in addition to the recovery under subsection (b)(3).
(b) Violation.--Subject to subsection (c), an individual
with respect to whom a licensee violates this act may recover in
a civil action from the provider and any person that caused the
violation:
(1) Compensatory damages for economic injury caused by
the violation.
(2) Except as otherwise provided in subsection (c) and
subject to adjustment of the dollar amount pursuant to
section 901(f), with respect to a violation of section 503,
505, 506, 507, 508, 512 or 701, the greater of the amount
recoverable under paragraph (1) or $1,000.
(3) Reasonable attorney fees and costs.
(c) Class action.--In a class action, the minimum damages
provided in subsection (b)(2) do not apply.
(d) Additional recovery.--In addition to the remedy
available under subsection (b), if a provider violates an
individual's rights under section 506, the individual may
recover in a civil action all money paid by or on behalf of the
individual pursuant to the agreement, except for amounts paid to
creditors.
(e) Nonliability.--A provider is not liable under this
section for a violation of this act if the provider proves that
the violation was not intentional and resulted from a good faith
error notwithstanding the maintenance of procedures reasonably
adopted to avoid the error. If, in connection with a violation,
the provider has received more money than authorized by an
agreement or this act, the defense provided by this subsection
20110SB1193PN2311 - 25 -
is not available unless the provider refunds the excess within
three business days after learning of the violation.
Section 905. Violation of unfair or deceptive practices
statute.
If an act or practice of a provider violates both this act
and the act of December 17, 1968 (P.L.1224, No.387), known as
the Unfair Trade Practices and Consumer Protection Law, an
individual may not recover under both for the same act or
practice.
CHAPTER 21
MISCELLANEOUS PROVISIONS
Section 2101. Relation to Electronic Signatures in Global and
National Commerce Act.
This act modifies, limits and supersedes the Electronic
Signatures in Global and National Commerce Act (Public Law
106-229, 15 U.S.C. § 7001 et seq.), but does not modify, limit
or supersede section 101(c) of the Electronic Signatures in
Global and National Commerce Act or authorize electronic
delivery of any of the notices described in section 103(b) of
the Electronic Signatures in Global and National Commerce Act.
Section 2102. Transitional provisions.
Transactions entered into before this act takes effect and
the rights, duties and interests resulting from them may be
completed, terminated or enforced as required or permitted by a
law amended, repealed or modified by this act as though the
amendment, repeal or modification had not occurred.
Section 2103. Repeal.
Repeals are as follows:
(1) The General Assembly declares that the repeal under
paragraph (2) is necessary to effectuate this act.
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(2) The act of October 9, 2008 (P.L.1421, No.117), known
as the Debt Management Services Act, is repealed.
Section 2104. Effective date.
This act shall take effect in 60 days.
CHAPTER 1 <--
PRELIMINARY PROVISIONS
Section 101. Short title.
This act shall be known and may be cited as the Debt
Settlement Services Act.
Section 102. Definitions.
The following words and phrases when used in this act shall
have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Affiliate." Any of the following:
(1) A person that directly controls, is controlled by or
is under common control with the licensee.
(2) An officer of or individual performing similar
functions with respect to the licensee.
(3) A director of or individual performing similar
functions with respect to the licensee.
(4) An officer or director of or an individual
performing similar functions with respect to a person
described in paragraph (1).
"Agreement." An agreement between a provider and an
individual for the performance of debt settlement services.
"Bank." A financial institution, including a commercial
bank, savings bank, savings and loan association, credit union,
mortgage bank and trust company, engaged in the business of
banking, chartered under Federal or state law and regulated by a
Federal or state banking regulatory authority.
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"Concessions." Assent to repayment of a debt on terms more
favorable to an individual than the terms of the contract
between the individual and a creditor.
"Debt settlement services." Services as an intermediary
between an individual and one or more unsecured creditors of the
individual for the purpose of obtaining concessions where the
contemplated concessions involve a reduction in principal of the
individual's unsecured debt, but does not include:
(1) Legal services provided in an attorney-client
relationship by an attorney licensed or otherwise authorized
to practice law in this Commonwealth.
(2) Accounting services provided in an accountant-client
relationship by a certified public accountant licensed to
provide accounting services in this Commonwealth.
(3) Financial planning services provided in a financial
planner-client relationship by a licensed member of a
financial planning profession.
"Department." The Department of Banking of the Commonwealth.
"Good faith." Honesty in fact and the observance of
reasonable standards of fair dealing.
"Person." An individual, corporation, business trust,
estate, trust, partnership, limited liability company,
association, joint venture or any other legal or commercial
entity. The term does not include a public corporation,
government or governmental subdivision, agency or
instrumentality.
"Program." A program or strategy in which a provider
furnishes debt settlement services.
"Provider." A person required to be licensed pursuant to
this act and that provides, offers to provide or agrees to
20110SB1193PN2311 - 28 -
provide debt settlement services.
"Record." Information that is inscribed on a tangible medium
or that is stored in an electronic or other medium and is
retrievable in perceivable form.
Section 103. Nonapplicability.
This act does not apply to the following persons or their
employees when the person or the employee is engaged in the
regular course of the person's business or profession:
(1) A judicial officer, a person acting under an order
of a court or an administrative agency or an assignee for the
benefit of creditors.
(2) A bank, bank holding company or the subsidiary,
agent or affiliate of either, or a credit union or other
financial institution licensed under Federal or State law.
(3) A title insurer, escrow company or other person that
provides bill-paying services if the provision of debt
settlement services is incidental to the bill-paying
services.
CHAPTER 3
LICENSURE
Section 301. Licensing required.
(a) General rule.--Except as otherwise provided in
subsection (b), on or after July 1, 2012, a provider may not
provide debt settlement services to an individual who it
reasonably should know resides in this Commonwealth at the time
it agrees to provide the services, unless the provider is
licensed under this act.
(b) Nonapplicability.--If a provider is licensed under this
act, subsection (a) does not apply to an employee or agent of
the provider.
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(c) Listing.--The department shall maintain and publicize a
list of the names of all licensed providers.
Section 302. Form of application and required documentation.
(a) Form.--An application for licensure as a provider must
be in a form prescribed by the department.
(b) Fee and documentation.--An application for licensure as
a provider must be accompanied by:
(1) A licensing fee established by the department.
(2) Evidence of minimum insurance in an amount specified
by the department.
(3) In lieu of the aggregate umbrella insurance, a
surety bond filed with the department, in a form approved by
the department, for a term no less than the expiration of the
license and in the amount of not less than $10,000 or other
larger amount that the department determines is warranted by
the financial condition and business experience of the
provider, the history of the provider in performing debt
settlement services, the risk to individuals and any other
factor the department considers appropriate, but in no event
greater than $50,000. The surety bond shall run to the
Commonwealth for the benefit of the Commonwealth and of
individuals who reside in this Commonwealth when they agree
to receive debt settlement services from the provider, as
their interests may appear, payment of which is conditioned
upon noncompliance of the provider or its agent with this
act.
(4) Proof that the provider is authorized by the laws of
this Commonwealth to conduct business in this Commonwealth.
Section 303. Required information for application.
An application for licensure must be signed by the applicant
20110SB1193PN2311 - 30 -
and declare as true any material matter pursuant to the
application for licensure. The application form shall contain a
statement informing the applicant that a false or dishonest
answer to a question may be grounds for denial or subsequent
suspension or revocation of the applicant's license. An
application shall include the following:
(1) The applicant's name, principal business address and
telephone number, and all other business addresses in this
Commonwealth, e-mail addresses and Internet website
addresses.
(2) All names under which the applicant conducts
business.
(3) The address of each location in this Commonwealth at
which the applicant will provide debt settlement services or
a statement that the applicant will have no such location.
(4) The name and home address of each officer and
director of the applicant and each person that owns at least
10% of the applicant's business.
(5) A statement describing, to the extent it is known or
should be known by the applicant, any material civil or
criminal judgment relating to financial fraud or misuse and
any material administrative or enforcement action relating to
financial fraud or misuse by a governmental agency in any
jurisdiction against the applicant, any of its officers,
directors, owners or agents.
(6) A copy of each form of agreement that the applicant
will use with individuals who reside in this Commonwealth.
(7) The schedule of fees and charges that the applicant
will use with individuals who reside in this Commonwealth.
(8) A copy or description of the financial analysis or
20110SB1193PN2311 - 31 -
budget that the provider will use in reviewing an
individual's financial condition.
(9) A description of any ownership interest of at least
10% by a director, owner or employee of the applicant in:
(i) any affiliate of the applicant; or
(ii) any entity that provides products or services
to the applicant or any individual relating to the
applicant's debt settlement services.
(10) The identity of each director who is an affiliate
of the applicant.
(11) The applicant's financial statements, reviewed by
an accountant licensed in the state of the applicant's
principal place of business, for each of the two years
immediately preceding the application or, if the applicant
has not been in operation for the two years preceding the
application, for the period of its existence.
(12) Evidence that the provider has a resident agent in
this Commonwealth for service of process.
(13) A description of the three most commonly used
educational programs that the applicant provides or intends
to provide to individuals who agree to use the provider's
services and a copy of any materials used or to be used in
those programs.
Section 304. Obligation to update application information.
An applicant or licensed provider shall notify the department
within 60 days after a change in the information required in
section 302(b)(2) or 303(1), (3) or (5).
Section 305. Public availability of application information.
Except the addresses required by section 303(4) and the
proprietary information required by section 303(8), (9), (10)
20110SB1193PN2311 - 32 -
and (11), the department shall make the information in an
application for licensure and renewal of licensure as a provider
available to the public.
Section 306. Certificate of licensure.
(a) Issuance.--Except as otherwise provided in subsection
(b), the department shall issue a certificate of licensure as a
provider to a person that complies with sections 302 and 303.
(b) Grounds for denial.--The department may deny licensure
if:
(1) The application contains information that is
materially erroneous or incomplete.
(2) An officer, director or owner of the applicant has
been convicted of a crime, or suffered a civil judgment,
involving dishonesty or the violation of Federal or state
securities laws.
(3) The application is not accompanied by the fee
established by the department.
(4) There is reasonable evidence to support the
department's opinion that the applicant will not operate as a
debt settlement services provider in a lawful, honest and
fair manner.
Section 307. Procedure for licensure.
(a) Time frame.--The department shall approve or deny an
initial license as a provider within 60 days after an
application is filed. The department may extend the 60-day
period for not more than 45 days. Within seven days after
denying an application, the department, in a record, shall
inform the applicant of the reasons for the denial.
(b) Appeal.--If the department denies an application for
licensure as a provider or does not act on an application within
20110SB1193PN2311 - 33 -
the time prescribed in subsection (a), the applicant may appeal
and request a hearing under 2 Pa.C.S. (relating to
administrative law and procedure).
(c) Validity.--Subject to section 308(d), a license as a
provider is valid for one year.
(d) Interim period.--Upon submission of an application for
licensure and until such time as an application is approved or
denied, the applicant may continue to provide debt settlement
services, but a denial of licensure terminates any further power
to provide services unless approved by the department.
Section 308. License renewal.
(a) Annual renewal.--A provider must obtain a renewal of its
license annually.
(b) Application.--An application for renewal of a license as
a provider must be in a form prescribed by the department,
signed under penalty of false statement, and:
(1) Be filed not less than 30 days nor more than 60 days
before the registration expires.
(2) Be accompanied by the fee established by the
department.
(3) Disclose any changes in the information contained in
the applicant's application for licensure or its immediately
previous application for renewal, as applicable.
(4) Provide any other information that the department
reasonably requires to perform the department's duties under
this section.
(c) Public information.--Except for the information required
by section 303(4), (8), (9), (10) and (11), the department shall
make the information in an application for renewal of licensure
as a provider available to the public.
20110SB1193PN2311 - 34 -
(d) Effectiveness.--If a licensed provider files a timely
and complete application for renewal of licensure, the license
remains effective until the department, in a record, notifies
the applicant of a denial and states the reasons for the denial.
(e) Appeal.--If the department denies an application for
renewal of licensure as a provider, the applicant, within 30
days after receiving notice of the denial, may appeal and
request a hearing under 2 Pa.C.S. (relating to administrative
law and procedure). While the appeal is pending, the applicant
shall continue to provide debt settlement services to
individuals with whom it has agreements. If the denial is
affirmed, the applicant shall continue to provide debt
settlement services to individuals with whom it has agreements
until, with the approval of the department, it transfers the
agreements to another licensed provider.
CHAPTER 5
PROVIDER RESPONSIBILITIES
Section 501. Requirement of good faith.
A provider shall act in good faith in all matters under this
act.
Section 502. Prerequisites for providing debt settlement
services.
(a) Disclosure.--Before an individual consents to pay for
goods or services offered, providers shall disclose truthfully,
in a clear and conspicuous manner, the following material
information:
(1) The amount of time necessary to achieve the
represented results, and the extent that the debt settlement
services may include a settlement offer to any of the
individual's creditors or debt collectors, the time by which
20110SB1193PN2311 - 35 -
the provider will make a bona fide settlement offer to each
of them and the cost to the individual for providing debt
settlement services.
(2) To the extent that the debt settlement services may
include a settlement offer to any of the individual's
creditors or debt collectors, the amount of money or the
percentage of each outstanding debt that the individual shall
accumulate before the provider will make a bona fide
settlement offer to each of them.
(3) To the extent that any aspect of the debt settlement
services relies upon or results in the individual's failure
to make timely payments to creditors or debt collectors, that
the use of the debt settlement services will likely adversely
affect the individual's creditworthiness, may result in the
individual being subject to collection actions or sued by
creditors or debt collectors, and may increase the amount of
money the individual owes due to the accrual of fees and
interest.
(4) To the extent that the provider requests or requires
the individual to place funds in an account at a bank, that
the individual owns the funds held in the account, the
individual may withdraw from the debt settlement services at
any time without penalty, and, if the individual withdraws,
the individual shall receive all funds in the account, other
than funds earned by the provider, within seven business days
of the individual's request.
(b) Prohibition.--A provider shall not misrepresent,
directly or by implication, any material aspect of any debt
settlement services, including, but not limited to:
(1) The amount of money or the percentage of the debt
20110SB1193PN2311 - 36 -
amount that an individual may save by using such service.
(2) The amount of time necessary to achieve the
represented results.
(3) The amount of money or the percentage of each
outstanding debt that the individual shall accumulate before
the provider will initiate attempts with the individual's
creditors or debt collectors or make a bona fide offer to
negotiate, settle or modify the terms of the individual's
debt.
(4) The effect of the service on the individual's
creditworthiness.
(5) The effect of the service on collection efforts of
the individual's creditors or debt collectors.
(6) The percentage or number of individuals who attain
the represented results.
(7) Whether debt settlement services are offered or
provided by a nonprofit entity.
(c) Payment or consideration.--A provider shall not receive
payment of any fee or consideration for any debt settlement
services until and unless:
(1) The provider has renegotiated, settled, reduced or
otherwise altered the terms of at least one debt under a debt
settlement plan.
(2) The individual has made at least one payment under
such debt settlement plan.
(3) The fee or consideration for settling each
individual debt enrolled in a debt settlement plan shall meet
one of the following criteria:
(i) Bear the same proportional relationship to the
total fee for settling the entire debt balance as the
20110SB1193PN2311 - 37 -
individual debt amount bears to the entire debt amount.
For purposes of this subparagraph, the individual debt
amount and the entire debt amount are amounts owed at the
time the debt was enrolled in the debt settlement
service.
(ii) Be a percentage of the amount saved as a result
of the settlement. The percentage charged shall not
change from one individual debt to another. For purposes
of this subparagraph, the amount saved is the difference
between the amount owed at the time the debt was enrolled
in the debt settlement service and the amount actually
paid to satisfy the debt.
(d) Construction.--Nothing in this section prohibits
requesting or requiring the individual to place funds in an
account to be used for the provider's fees for payments to
creditors or debt collectors in connection with the
renegotiation, settlement, reduction or other alteration of the
terms of payment or other terms of debt, provided that:
(1) The funds are held in an account at a bank.
(2) The individual owns the funds held in the account
and is paid accrued interest on the account, if any.
(3) If the provider does not administer the account, the
entity administering the account is not owned or controlled
by, or in any way affiliated with, the provider.
(4) The entity administering the account does not give
or accept any money or other compensation in exchange for
referrals of business by the provider.
(5) The individual may withdraw from the debt settlement
services at any time without penalty, and shall receive all
funds in the account, other than funds earned by the provider
20110SB1193PN2311 - 38 -
in compliance with this section, within seven days of the
individual's request.
(e) Nonlicensed provider.--If a provider is not licensed as
required by this act when an individual assents to an agreement,
the agreement is voidable by the individual.
CHAPTER 7
ADMINISTRATION AND ENFORCEMENT
Section 701. Powers of department.
(a) Action by department.--The department may act on its own
initiative or in response to complaints and may receive
complaints, take action to obtain voluntary compliance with this
act and seek or provide remedies as provided in this act.
(b) Investigation.--The department may investigate and
examine, in this Commonwealth or elsewhere, by subpoena or
otherwise, the activities, books, accounts and records of a
person that provides or offers to provide debt settlement
services, or a person to which a provider has delegated its
obligations under an agreement or this act, to determine
compliance with this act. Information that identifies
individuals who have agreements with the provider shall not be
disclosed to the public. In connection with the investigation,
the department may:
(1) Charge the person the reasonable expenses
necessarily incurred to conduct the examination.
(2) Require or permit a person to file a statement under
oath as to all the facts and circumstances of a matter to be
investigated.
(c) Enforcement.--The department may enforce violations of
this act by taking one or more of the following actions:
(1) Ordering a provider or a director, employee or other
20110SB1193PN2311 - 39 -
agent of a provider to cease and desist from any violations.
(2) Ordering a provider or a person that has caused a
violation to correct the violation, including making
restitution of money or property to a person aggrieved by a
violation.
(3) Imposing on a provider or a person that has caused a
violation a civil penalty not exceeding $1,000 for each
violation.
(4) Prosecuting a civil action to enforce an order or to
obtain restitution or an injunction or other equitable
relief, or both.
Section 702. Suspension, revocation or nonrenewal of a license
(a) General rule.--The department may suspend, revoke or
deny renewal of a provider's license if:
(1) The provider has committed a material violation of
this act.
(2) The provider is insolvent.
(b) Appeal.--If the department suspends or revokes a
provider's license, the provider may appeal and request a
hearing pursuant to 2 Pa.C.S. (relating to administrative law
and procedure).
CHAPTER 21
MISCELLANEOUS PROVISIONS
Section 2101. Relation to Electronic Signatures in Global and
National Commerce Act.
This act modifies, limits and supersedes the Electronic
Signatures in Global and National Commerce Act (Public Law
106-229, 15 U.S.C. § 7001 et seq.), but does not modify, limit
or supersede section 101(c) of the Electronic Signatures in
Global and National Commerce Act or authorize electronic
20110SB1193PN2311 - 40 -
delivery of any of the notices described in section 103(b) of
the Electronic Signatures in Global and National Commerce Act.
Section 2102. Transitional provisions.
Transactions entered into before this act takes effect and
the rights, duties and interests resulting from them may be
completed, terminated or enforced as required or permitted by a
law repealed or modified by this act as though the repeal or
modification had not occurred.
Section 2103. Repeal.
The act of October 9, 2008 (P.L.1421, No.117), known as the
Debt Management Services Act, is repealed insofar as it applies
to debt settlement services.
Section 2104. Effective date.
This act shall take effect immediately.
20110SB1193PN2311 - 41 -