S.B. 177

1

REGULATION OF DEBT CANCELLATION
2 AGREEMENTS AND DEBT SUSPENSION
3 AGREEMENTS
4 2003 GENERAL SESSION
5 STATE OF UTAH
6 Sponsor: John L. Valentine
7 This act modifies the Financial Institutions Act and the Insurance Code to provide
8 guidelines for the issuance and regulation of debt cancellation agreements and debt
9 suspension agreements.
10 This act affects sections of Utah Code Annotated 1953 as follows:
11 ENACTS:
12 7-1-324, Utah Code Annotated 1953
13 31A-21-109, Utah Code Annotated 1953
14 Be it enacted by the Legislature of the state of Utah:
15 Section 1. Section 7-1-324 is enacted to read:
16 7-1-324. Debt cancellation agreements and debt suspension agreements.
17 (1) As used in this section:
18 (a) "Class of depository institution" means a class consisting of:
19 (i) banks;
20 (ii) credit unions;
21 (iii) industrial loan corporations; or
22 (iv) savings and loan associations.
23 (b) "Debt cancellation agreement" is as defined in Section 31A-21-109 .
24 (c) "Debt suspension agreement" is as defined in Section 31A-21-109 .
25 (2) Subject to the other provisions of this section, the commissioner may by rule, made
26 in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act:
27 (a) authorize any member of a class of depository institution that is subject to the

28 jurisdiction of the department to issue a debt cancellation agreement or a debt suspension
29 agreement; and
30 (b) regulate the issuance of a debt cancellation agreement or a debt suspension
31 agreement issued in this state by a member of a class of depository institution.
32 (3) (a) Any rule adopted by the commissioner under this section as applied to a class of
33 depository institution shall be substantially similar to any federal regulation applying to the
34 same class of depository institution.
35 (b) Any rule adopted by the commissioner applicable to a class of depository institution
36 described in this Subsection (3)(b) shall be substantially similar to any federal regulation
37 applicable to a bank if no federal regulation authorizes or regulates the issuance of a debt
38 cancellation agreement or debt suspension agreement for that class of depository institution.
39 (4) (a) An out-of-state depository institution may issue a debt cancellation agreement
40 or debt suspension agreement in this state if:
41 (i) the home state of the out-of-state depository institution authorizes and regulates the
42 issuance of a debt cancellation agreement or debt suspension agreement by the out-of-state
43 depository institution; and
44 (ii) subject to Subsection (4)(b), the out-of-state depository institution complies with
45 regulations from the out-of-state depository institution's home state that regulate the issuance of
46 a debt cancellation agreement or a debt suspension agreement.
47 (b) Notwithstanding Subsection (4)(a), an out-of-state depository institution described
48 in Subsection (4)(a) shall comply with rules adopted by the commissioner under this section
49 that regulate the issuance of a debt cancellation agreement or a debt suspension agreement in
50 this state by the class of depository institution to which the out-of-state depository institution
51 belongs if the regulations of the out-of-state depository institution's home state do not provide
52 at least the same level of protection with respect to a debt cancellation agreement or debt
53 suspension agreement as the rules adopted by the commissioner under this section with respect
54 to the same class of depository institution:
55 (i) for the safety and soundness of the depository institution; and
56 (ii) for consumer protections for the borrowers of the depository institution.
57 Section 2. Section 31A-21-109 is enacted to read:
58 31A-21-109. Debt cancellation agreements and debt suspension agreements.

59 (1) As used in this section:
60 (a) "Debt cancellation agreement" means a contract between a lender and a borrower
61 where the lender, for a separately stated consideration, agrees to waive all or part of the debt in
62 the event of a fortuitous event such as death, disability, or the destruction of the lender's
63 collateral.
64 (b) "Debt suspension agreement" means a contract between a lender and a borrower
65 where the lender, for a separately stated consideration, agrees to suspend scheduled installment
66 payments for an agreed period of time in the event of a:
67 (i) fortuitous event such as involuntary unemployment or accident; or
68 (ii) fortuitous condition such as sickness.
69 (c) "Institution" means:
70 (i) a bank as defined in Section 7-1-103 ;
71 (ii) a credit union as defined in Section 7-1-103 ;
72 (iii) an industrial loan corporation as defined in Section 7-1-103 ; or
73 (iv) a savings and loan association as defined in Section 7-1-103 .
74 (d) "Regulate the issuance" includes regulation of the following with respect to a debt
75 cancellation agreement or a debt suspension agreement:
76 (i) terms;
77 (ii) conditions;
78 (iii) rates;
79 (iv) forms; and
80 (v) claims.
81 (2) Except as provided in Subsection (6), the commissioner has sole jurisdiction over
82 the regulation of a debt cancellation agreement or debt suspension agreement.
83 (3) Subject to this section, the commissioner may by rule, made in accordance with
84 Title 63, Chapter 46a, Utah Administrative Rulemaking Act:
85 (a) authorize an insurer to issue a debt cancellation agreement or debt suspension
86 agreement; and
87 (b) regulate the issuance of a debt cancellation agreement or debt suspension
88 agreement.
89 (4) Except as provided in Subsection (6), a debt cancellation agreement or a debt

90 suspension agreement may be issued only by an insurer authorized to issue a debt cancellation
91 agreement or debt suspension agreement under this section.
92 (5) (a) The rules promulgated by the commissioner under this section shall regulate the
93 issuance of a debt cancellation agreement or debt suspension agreement according to the
94 functional insurance equivalent of each type of debt cancellation agreement or debt suspension
95 agreement.
96 (b) Except as provided in Subsection (5)(c), in accordance with Title 63, Chapter 46a,
97 Utah Administrative Rulemaking Act, the commissioner may by rule determine the functional
98 insurance equivalent of each type of debt cancellation agreement or debt suspension agreement.
99 (c) Notwithstanding Subsection (5)(b), the functional insurance equivalent of a debt
100 cancellation agreement that provides for the cancellation of indebtedness at death is credit life
101 insurance.
102 (6) Notwithstanding the other provisions of this section, the issuance of a debt
103 cancellation agreement or a debt suspension agreement by an institution is:
104 (a) not subject to this section; and
105 (b) is subject to the jurisdiction of the institution's primary regulator.




Legislative Review Note
as of 2-11-03 12:33 PM

A limited legal review of this legislation raises no obvious constitutional or statutory concerns.

Office of Legislative Research and General Counsel