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S.B. 167

             1     

AMENDMENTS TO UNIFORM

             2     
DEBT-MANAGEMENT SERVICES ACT

             3     
2009 GENERAL SESSION

             4     
STATE OF UTAH

             5     
Chief Sponsor: Lyle W. Hillyard

             6     
House Sponsor: Jack R. Draxler

             7     
             8      LONG TITLE
             9      General Description:
             10          This bill amends the Uniform Debt-Management Services Act.
             11      Highlighted Provisions:
             12          This bill:
             13          .    amends the insurance requirements for a debt-management services provider;
             14          .    amends the advertising requirements for a debt-management services provider; and
             15          .    makes technical corrections.
             16      Monies Appropriated in this Bill:
             17          None
             18      Other Special Clauses:
             19          None
             20      Utah Code Sections Affected:
             21      AMENDS:
             22          13-42-105, as last amended by Laws of Utah 2008, Chapter 382
             23          13-42-111, as last amended by Laws of Utah 2008, Chapter 382
             24          13-42-114, as enacted by Laws of Utah 2006, Chapter 154
             25          13-42-117, as enacted by Laws of Utah 2006, Chapter 154
             26          13-42-118, as enacted by Laws of Utah 2006, Chapter 154
             27          13-42-119, as last amended by Laws of Utah 2008, Chapter 3


             28          13-42-120, as enacted by Laws of Utah 2006, Chapter 154
             29          13-42-122, as enacted by Laws of Utah 2006, Chapter 154
             30          13-42-123, as enacted by Laws of Utah 2006, Chapter 154
             31          13-42-128, as enacted by Laws of Utah 2006, Chapter 154
             32          13-42-130, as enacted by Laws of Utah 2006, Chapter 154
             33     
             34      Be it enacted by the Legislature of the state of Utah:
             35          Section 1. Section 13-42-105 is amended to read:
             36           13-42-105. Application for registration -- Form, fee, and accompanying
             37      documents.
             38          (1) An application for registration as a provider must be in a form prescribed by the
             39      administrator.
             40          (2) Subject to adjustment of dollar amounts pursuant to Subsection 13-42-132 (6), an
             41      application for registration as a provider must be accompanied by:
             42          (a) the fee established by the administrator in accordance with Section 63J-1-303 ;
             43          (b) the bond required by Section 13-42-113 ;
             44          (c) identification of all trust accounts required by Section 13-42-122 and an irrevocable
             45      consent authorizing the administrator to review and examine the trust accounts;
             46          (d) evidence of insurance in the amount of $250,000:
             47          (i) against the risks of dishonesty, fraud, theft, and other misconduct on the part of the
             48      applicant or a director, employee, or agent of the applicant;
             49          (ii) issued by an insurance company authorized to do business in this state and rated at
             50      least A or equivalent by a nationally recognized rating organization approved by the
             51      administrator;
             52          (iii) with [no] a deductible not exceeding $5,000;
             53          (iv) payable [to] for the benefit of the applicant, [the] this state, and individuals who
             54      [have agreements with the applicant, and] are residents of this state, as their interests may
             55      appear; and
             56          (v) not subject to cancellation by the applicant [without the approval of] or the insurer
             57      until 60 days after written notice has been given to the administrator;
             58          (e) a record consenting to the jurisdiction of this state containing:


             59          (i) the name, business address, and other contact information of its registered agent in
             60      this state for purposes of service of process; or
             61          (ii) the appointment of the administrator as agent of the provider for purposes of
             62      service of process; and
             63          (f) if the applicant is organized as a not-for-profit entity or is exempt from taxation,
             64      evidence of not-for-profit and tax-exempt status applicable to the applicant under the Internal
             65      Revenue Code, 26 U.S.C. Section 501.
             66          Section 2. Section 13-42-111 is amended to read:
             67           13-42-111. Renewal of registration.
             68          (1) A provider must obtain a renewal of its registration annually.
             69          (2) An application for renewal of registration as a provider must be in a form
             70      prescribed by the administrator, signed under penalty of perjury, and:
             71          (a) be filed no fewer than 30 and no more than 60 days before the registration expires;
             72          (b) be accompanied by the fee established by the administrator in accordance with
             73      Section 63J-1-303 and the bond required by Section 13-42-113 ;
             74          (c) contain the matter required for initial registration as a provider by Subsections
             75      13-42-106 (8) and (9) and a financial statement, audited by an accountant licensed to conduct
             76      audits, for the applicant's fiscal year immediately preceding the application;
             77          (d) disclose any changes in the information contained in the applicant's application for
             78      registration or its immediately previous application for renewal, as applicable;
             79          (e) supply evidence of insurance in an amount equal to the larger of $250,000 or the
             80      highest daily balance in the trust account required by Section 13-42-122 during the six-month
             81      period immediately preceding the application:
             82          (i) against risks of dishonesty, fraud, theft, and other misconduct on the part of the
             83      applicant or a director, employee, or agent of the applicant;
             84          (ii) issued by an insurance company authorized to do business in this state and rated at
             85      least A or equivalent by a nationally recognized rating organization approved by the
             86      administrator;
             87          (iii) with [no] a deductible not exceeding $5,000;
             88          (iv) payable [to] for the benefit of the applicant, [the] this state, and individuals who
             89      [have agreements with the applicant, and] are residents of this state, as their interests may


             90      appear; and
             91          (v) not subject to cancellation by the applicant [without the approval of] or the insurer
             92      until 60 days after written notice has been given to the administrator;
             93          (f) disclose the total amount of money received by the applicant pursuant to plans
             94      during the preceding 12 months from or on behalf of individuals who reside in this state and
             95      the total amount of money distributed to creditors of those individuals during that period;
             96          (g) disclose, to the best of the applicant's knowledge, the gross amount of money
             97      accumulated during the preceding 12 months pursuant to plans by or on behalf of individuals
             98      who reside in this state and with whom the applicant has agreements; and
             99          (h) provide any other information that the administrator reasonably requires to perform
             100      the administrator's duties under this section.
             101          (3) Except for the information required by Subsections 13-42-106 (7), (14), and (17)
             102      and the addresses required by Subsection 13-42-106 (4), the administrator shall make the
             103      information in an application for renewal of registration as a provider available to the public.
             104          (4) If a registered provider files a timely and complete application for renewal of
             105      registration, the registration remains effective until the administrator, in a record, notifies the
             106      applicant of a denial and states the reasons for the denial.
             107          (5) If the administrator denies an application for renewal of registration as a provider,
             108      the applicant, within 30 days after receiving notice of the denial, may appeal and request a
             109      hearing pursuant to Title 63G, Chapter 4, Administrative Procedures Act. Subject to Section
             110      13-42-134 , while the appeal is pending the applicant shall continue to provide
             111      debt-management services to individuals with whom it has agreements. If the denial is
             112      affirmed, subject to the administrator's order and Section 13-42-134 , the applicant shall
             113      continue to provide debt-management services to individuals with whom it has agreements
             114      until, with the approval of the administrator, it transfers the agreements to another registered
             115      provider or returns to the individuals all unexpended money that is under the applicant's
             116      control.
             117          Section 3. Section 13-42-114 is amended to read:
             118           13-42-114. Bond required -- Substitute.
             119          (1) Instead of the surety bond required by Section 13-42-113 , a provider may deliver to
             120      the administrator, in the amount required by Subsection 13-42-113 (2), and, except as otherwise


             121      provided in Subsection (1)(c)(i), payable or available to this state and to individuals who reside
             122      in this state when they agree to receive debt-management services from the provider, as their
             123      interests may appear, if the provider or its agent does not comply with this chapter:
             124          (a) a certificate of insurance:
             125          (i) issued by an insurance company authorized to do business in this state and rated at
             126      least A or equivalent by a nationally recognized rating organization[,] approved by the
             127      administrator; and
             128          (ii) with no deductible, or if the provider supplies a bond in the amount of $5,000, a
             129      deductible not exceeding $5,000;
             130          (b) a certificate of deposit issued or confirmed by a bank approved by the
             131      administrator, payable upon presentation of a certificate by the administrator stating that the
             132      provider or its agent has not complied with this chapter; or
             133          (c) with the approval of the administrator:
             134          (i) an irrevocable letter of credit, issued or confirmed by a bank approved by the
             135      administrator, payable upon presentation of a certificate by the administrator stating that the
             136      provider or its agent has not complied with this chapter; or
             137          (ii) bonds or other obligations of the United States or guaranteed by the United States
             138      or bonds or other obligations of this state or a political subdivision of this state, to be deposited
             139      and maintained with a bank approved by the administrator for this purpose.
             140          (2) If a provider furnishes a substitute pursuant to Subsection (1), the provisions of
             141      Subsections 13-42-113 (1), (3), (4), and (5) apply to the substitute.
             142          Section 4. Section 13-42-117 is amended to read:
             143           13-42-117. Prerequisites for providing debt-management services.
             144          (1) Before providing debt-management services, a registered provider shall give the
             145      individual an itemized list of goods and services and the charges for each. The list must be
             146      clear and conspicuous, be in a record the individual may keep whether or not the individual
             147      assents to an agreement, and describe the goods and services the provider offers:
             148          (a) free of additional charge if the individual enters into an agreement;
             149          (b) for a charge if the individual does not enter into an agreement; and
             150          (c) for a charge if the individual enters into an agreement, using the following
             151      terminology, as applicable, and format:


             152              Set-up fee _________________________________________________
             153                              dollar amount of fee
             154              Monthly service fee __________________________________________
             155                          dollar amount of fee or method of determining amount
             156              Settlement fee ______________________________________________
             157                          dollar amount of fee or method of determining amount
             158              Goods and services in addition to those provided in connection with a plan:
             159              _____________ ____________________________________________
             160                  (item) dollar amount or method of determining amount
             161              _____________ ____________________________________________
             162                  (item) dollar amount or method of determining amount.
             163          (2) A provider may not furnish debt-management services unless the provider, through
             164      the services of a certified counselor:
             165          (a) provides the individual with reasonable education about the management of
             166      personal finance;
             167          (b) has prepared a financial analysis; and
             168          (c) if the individual is to make regular, periodic payments:
             169          (i) has prepared a plan for the individual;
             170          (ii) has made a determination, based on the provider's analysis of the information
             171      provided by the individual and otherwise available to it, that the plan is suitable for the
             172      individual and the individual will be able to meet the payment obligations under the plan; and
             173          (iii) believes that each creditor of the individual listed as a participating creditor in the
             174      plan will accept payment of the individual's debts as provided in the plan.
             175          (3) Before an individual assents to an agreement to engage in a plan, a provider shall:
             176          (a) provide the individual with a copy of the analysis and plan required by Subsection
             177      (2) in a record that identifies the provider and that the individual may keep whether or not the
             178      individual assents to the agreement;
             179          (b) inform the individual of the availability, at the individual's option, of assistance by
             180      a toll-free communication system or in person to discuss the financial analysis and plan
             181      required by Subsection (2); and
             182          (c) with respect to all creditors identified by the individual or otherwise known by the


             183      provider to be creditors of the individual, provide the individual with a list of:
             184          (i) creditors that the provider expects to participate in the plan and grant concessions;
             185          (ii) creditors that the provider expects to participate in the plan but not grant
             186      concessions;
             187          (iii) creditors that the provider expects not to participate in the plan; and
             188          (iv) all other creditors.
             189          (4) Before an individual assents to an agreement [to engage in a plan], the provider
             190      shall inform the individual, in a record that contains nothing else, that is given separately, and
             191      that the individual may keep whether or not the individual assents to the agreement:
             192          (a) of the name and business address of the provider;
             193          (b) that plans are not suitable for all individuals and the individual may ask the
             194      provider about other ways, including bankruptcy, to deal with indebtedness;
             195          (c) that establishment of a plan may adversely affect the individual's credit rating or
             196      credit scores;
             197          (d) that nonpayment of debt may lead creditors to increase finance and other charges or
             198      undertake collection activity, including litigation;
             199          (e) unless it is not true, that the provider may receive compensation from the creditors
             200      of the individual; and
             201          (f) that, unless the individual is insolvent, if a creditor settles for less than the full
             202      amount of the debt, the plan may result in the creation of taxable income to the individual, even
             203      though the individual does not receive any money.
             204          (5) If a provider may receive payments from an individual's creditors and the plan
             205      contemplates that the individual's creditors will reduce finance charges or fees for late payment,
             206      default, or delinquency, the provider may comply with Subsection (4) by providing the
             207      following disclosure, surrounded by black lines:
             208     
IMPORTANT INFORMATION FOR YOU TO CONSIDER

             209          (1) Debt-management plans are not right for all individuals, and you may ask us to
             210      provide information about other ways, including bankruptcy, to deal with your debts.
             211          (2) Using a debt-management plan may [hurt your credit rating or credit scores] make
             212      it harder for you to obtain credit.
             213          (3) We may receive compensation for our services from your creditors.


             214     
_______________________________________

             215     
Name and business address of provider

             216          (6) If a provider will not receive payments from an individual's creditors and the plan
             217      contemplates that the individual's creditors will reduce finance charges or fees for late payment,
             218      default, or delinquency, a provider may comply with Subsection (4) by providing the following
             219      disclosure, surrounded by black lines:
             220     
IMPORTANT INFORMATION FOR YOU TO CONSIDER

             221          (1) Debt-management plans are not right for all individuals, and you may ask us to
             222      provide information about other ways, including bankruptcy, to deal with your debts.
             223          (2) Using a debt-management plan may [hurt your credit rating or credit scores] make
             224      it harder for you to obtain credit.
             225     
______________________________________

             226     
Name and business address of provider

             227          (7) If [a plan] an agreement contemplates that creditors will settle debts for less than
             228      the full principal amount of debt owed, a provider may comply with Subsection (4) by
             229      providing the following disclosure, surrounded by black lines:
             230     
IMPORTANT INFORMATION FOR YOU TO CONSIDER

             231          (1) Our program is not right for all individuals, and you may ask us to provide
             232      information about bankruptcy and other ways to deal with your debts.
             233          (2) Nonpayment of your debts under our program may
             234          hurt your credit rating or credit scores;
             235          lead your creditors to increase finance and other charges; and
             236          lead your creditors to undertake activity, including lawsuits, to collect the debts.
             237          (3) Reduction of debt under our program may result in taxable income to you, even
             238      though you will not actually receive any money.
             239     
_________________________________________

             240     
Name and business address of provider

             241          Section 5. Section 13-42-118 is amended to read:
             242           13-42-118. Communication by electronic or other means.
             243          (1) In this section:
             244          (a) "Consumer" means an individual who seeks or obtains goods or services that are


             245      used primarily for personal, family, or household purposes.
             246          (b) "Federal act" means the Electronic Signatures in Global and National Commerce
             247      Act, 15 U.S.C. Section 7001 et seq.
             248          (2) A provider may satisfy the requirements of Section 13-42-117 , 13-42-119 , or
             249      13-42-127 by means of the Internet or other electronic means if the provider obtains a
             250      consumer's consent in the manner provided by Section 101(c)(1) of the federal act.
             251          (3) The disclosures and materials required by Sections 13-42-117 , 13-42-119 , and
             252      13-42-127 shall be presented in a form that is capable of being accurately reproduced for later
             253      reference.
             254          (4) With respect to disclosure by means of an Internet website, the disclosure of the
             255      information required by Subsection 13-42-117 (4) must appear on one or more screens that:
             256          (a) contain no other information; and
             257          (b) the individual must see before proceeding to assent to formation of [a plan] an
             258      agreement.
             259          (5) At the time of providing the materials and agreement required by Subsections
             260      13-42-117 (3) and (4), Section 13-42-119 , and Section 13-42-127 , a provider shall inform the
             261      individual that upon electronic, telephonic, or written request, it will send the individual a
             262      written copy of the materials, and shall comply with a request as provided in Subsection (6).
             263          (6) If a provider is requested, before the expiration of 90 days after [a plan] an
             264      agreement is completed or terminated, to send a written copy of the materials required by
             265      Subsections 13-42-117 (3) and (4), Section 13-42-119 , or Section 13-42-127 , the provider shall
             266      send them at no charge within three business days after the request, but the provider need not
             267      comply with a request more than once per calendar month or if it reasonably believes the
             268      request is made for purposes of harassment. If a request is made more than 90 days after [a
             269      plan] an agreement is completed or terminated, the provider shall send within a reasonable time
             270      a written copy of the materials requested.
             271          (7) A provider that maintains an Internet website shall disclose on the home page of its
             272      website or on a page that is clearly and conspicuously connected to the home page by a link
             273      that clearly reveals its contents:
             274          (a) its name and all names under which it does business;
             275          (b) its principal business address, telephone number, and electronic-mail address, if


             276      any; and
             277          (c) the names of its principal officers.
             278          (8) Subject to Subsection (9), if a consumer who has consented to electronic
             279      communication in the manner provided by Section 101 of the federal act withdraws consent as
             280      provided in the federal act, a provider may terminate its agreement with the consumer.
             281          (9) If a provider wishes to terminate an agreement with a consumer pursuant to
             282      Subsection (8), it shall notify the consumer that it will terminate the agreement unless the
             283      consumer, within 30 days after receiving the notification, consents to electronic communication
             284      in the manner provided in Section 101(c) of the federal act. If the consumer consents, the
             285      provider may terminate the agreement only as permitted by Subsection 13-42-119 (1)(f)(vii).
             286          Section 6. Section 13-42-119 is amended to read:
             287           13-42-119. Form and contents of agreement.
             288          (1) An agreement must:
             289          (a) be in a record;
             290          (b) be dated and signed by the provider and the individual;
             291          (c) include the name of the individual and the address where the individual resides;
             292          (d) include the name, business address, and telephone number of the provider;
             293          (e) be delivered to the individual immediately upon formation of the agreement; and
             294          (f) disclose:
             295          (i) the services to be provided;
             296          (ii) the amount, or method of determining the amount, of all fees, individually
             297      itemized, to be paid by the individual;
             298          (iii) the schedule of payments to be made by or on behalf of the individual, including
             299      the amount of each payment, the date on which each payment is due, and an estimate of the
             300      date of the final payment;
             301          (iv) if a plan provides for regular periodic payments to creditors:
             302          (A) each creditor of the individual to which payment will be made, the amount owed to
             303      each creditor, and any concessions the provider reasonably believes each creditor will offer;
             304      and
             305          (B) the schedule of expected payments to each creditor, including the amount of each
             306      payment and the date on which it will be made;


             307          (v) each creditor that the provider believes will not participate in the plan and to which
             308      the provider will not direct payment;
             309          (vi) how the provider will comply with its obligations under Subsection 13-42-127 (1);
             310          (vii) that the provider may terminate the agreement for good cause, upon return of
             311      unexpended money of the individual;
             312          (viii) that the individual may cancel the agreement as provided in Section 13-42-120 ;
             313          (ix) that the individual may contact the administrator with any questions or complaints
             314      regarding the provider; and
             315          (x) the address, telephone number, and Internet address or website of the administrator.
             316          (2) For purposes of Subsection (1)(e), delivery of an electronic record occurs when it is
             317      made available in a format in which the individual may retrieve, save, and print it and the
             318      individual is notified that it is available.
             319          (3) If the administrator supplies the provider with any information required under
             320      Subsection (1)(f)(x), the provider may comply with that requirement only by disclosing the
             321      information supplied by the administrator.
             322          (4) An agreement must provide that:
             323          (a) the individual has a right to terminate the agreement at any time, without penalty or
             324      obligation, by giving the provider written or electronic notice, in which event:
             325          (i) the provider will refund all unexpended money that the provider or its agent has
             326      received from or on behalf of the individual for the reduction or satisfaction of the individual's
             327      debt;
             328          (ii) with respect to an agreement that contemplates that creditors will settle debts for
             329      less than the principal amount of debt, the provider will refund 65% of any portion of the
             330      set-up fee that has not been credited against the settlement fee; and
             331          (iii) all powers of attorney granted by the individual to the provider are revoked and
             332      ineffective;
             333          (b) the individual authorizes any bank in which the provider or its agent has established
             334      a trust account to disclose to the administrator any financial records relating to the trust
             335      account; and
             336          (c) the provider will notify the individual within five days after learning of a creditor's
             337      final decision to reject or withdraw from a plan and that this notice will include:


             338          (i) the identity of the creditor; and
             339          (ii) the right of the individual to modify or terminate the agreement.
             340          (5) An agreement may confer on a provider a power of attorney to settle the
             341      individual's debt for no more than 50% of the principal amount of the debt. An agreement may
             342      not confer a power of attorney to settle a debt for more than 50% of that amount, but may
             343      confer a power of attorney to negotiate with creditors of the individual on behalf of the
             344      individual. An agreement must provide that the provider will obtain the assent of the
             345      individual after a creditor has assented to a settlement for more than 50% of the principal
             346      amount of the debt.
             347          (6) An agreement may not:
             348          (a) provide for application of the law of any jurisdiction other than the United States
             349      and this state;
             350          (b) except as permitted by Section 2 of the Federal Arbitration Act, 9 U.S.C. Section 2,
             351      or Title 78B, Chapter 11, Utah Uniform Arbitration Act, contain a provision that modifies or
             352      limits otherwise available forums or procedural rights, including the right to trial by jury, that
             353      are generally available to the individual under law other than this chapter;
             354          (c) contain a provision that restricts the individual's remedies under this chapter or law
             355      other than this chapter; or
             356          (d) contain a provision that:
             357          (i) limits or releases the liability of any person for not performing the agreement or for
             358      violating this chapter; or
             359          (ii) indemnifies any person for liability arising under the agreement or this chapter.
             360          (7) All rights and obligations specified in Subsection (4) and Section 13-42-120 exist
             361      even if not provided in the agreement. A provision in an agreement which violates Subsection
             362      (4), (5), or (6) is void.
             363          Section 7. Section 13-42-120 is amended to read:
             364           13-42-120. Cancellation of agreement -- Waiver.
             365          (1) An individual may cancel an agreement before midnight of the third business day
             366      after the individual assents to it, unless the agreement does not comply with Subsection (2) or
             367      Section 13-42-119 or Section 13-42-128 , in which event the individual may cancel the
             368      agreement within 30 days after the individual assents to it. To exercise the right to cancel, the


             369      individual must give notice in a record to the provider. Notice by mail is given when mailed.
             370          (2) An agreement must be accompanied by a form that contains in bold-face type,
             371      surrounded by bold black lines:
             372     
Notice of Right to Cancel

             373          You may cancel this agreement, without any penalty or obligation, at any time before
             374      midnight of the third business day that begins the day after you agree to it by electronic
             375      communication or by signing it.
             376          To cancel this agreement during this period, send an e-mail to
             377          ____________________________ or mail or deliver a signed, dated copy of this
             378          E-mail address of provider
             379          notice, or any other written notice to ___________________________________
             380                                  Name of provider
             381          at _______________________________ before midnight on ___________________.
             382              Address of provider                         Date
             383          If you cancel this agreement within the 3-day period, we will refund all money you
             384      already have paid us.
             385          You also may terminate this agreement at any later time, but we [are] may not be
             386      required to refund fees you have paid us.
             387          I cancel this agreement,
             388          __________________________________
             389                  Print your name
             390          __________________________________
             391                  Signature
             392          __________________________________
             393                   Date
             394          (3) If a personal financial emergency necessitates the disbursement of an individual's
             395      money to one or more of the individual's creditors before the expiration of three days after an
             396      agreement is signed, an individual may waive the right to cancel. To waive the right, the
             397      individual must send or deliver a signed, dated statement in the individual's own words
             398      describing the circumstances that necessitate a waiver. The waiver must explicitly waive the
             399      right to cancel. A waiver by means of a standard form record is void.


             400          Section 8. Section 13-42-122 is amended to read:
             401           13-42-122. Trust account.
             402          (1) All money paid to a provider by or on behalf of an individual [pursuant to a plan]
             403      for distribution to creditors pursuant to a plan is held in trust. Within two business days after
             404      receipt, the provider shall deposit the money in a trust account established for the benefit of
             405      individuals to whom the provider is furnishing debt-management services.
             406          (2) Money held in trust by a provider is not property of the provider or its designee.
             407      The money is not available to creditors of the provider or designee, except an individual from
             408      whom or on whose behalf the provider received money, to the extent that the money has not
             409      been disbursed to creditors of the individual.
             410          (3) A provider shall:
             411          (a) maintain separate records of account for each individual to whom the provider is
             412      furnishing debt-management services;
             413          (b) disburse money paid by or on behalf of the individual to creditors of the individual
             414      as disclosed in the agreement, except that:
             415          (i) the provider may delay payment to the extent that a payment by the individual is not
             416      final; and
             417          (ii) if a plan provides for regular periodic payments to creditors, the disbursement must
             418      comply with the due dates established by each creditor; and
             419          (c) promptly correct any payments that are not made or that are misdirected as a result
             420      of an error by the provider or other person in control of the trust account and reimburse the
             421      individual for any costs or fees imposed by a creditor as a result of the failure to pay or
             422      misdirection.
             423          (4) A provider may not commingle money in a trust account established for the benefit
             424      of individuals to whom the provider is furnishing debt-management services with money of
             425      other persons.
             426          (5) A trust account must at all times have a cash balance equal to the sum of the
             427      balances of each individual's account.
             428          (6) If a provider has established a trust account pursuant to Subsection (1), the provider
             429      shall reconcile the trust account at least once a month. The reconciliation must compare the
             430      cash balance in the trust account with the sum of the balances in each individual's account. If


             431      the provider or its designee has more than one trust account, each trust account must be
             432      individually reconciled.
             433          (7) If a provider discovers, or has a reasonable suspicion of, embezzlement or other
             434      unlawful appropriation of money held in trust, the provider immediately shall notify the
             435      administrator by a method approved by the administrator. Unless the administrator by rule
             436      provides otherwise, within five days thereafter, the provider shall give notice to the
             437      administrator describing the remedial action taken or to be taken.
             438          (8) If an individual terminates an agreement or it becomes reasonably apparent to a
             439      provider that a plan has failed, the provider shall promptly refund to the individual all money
             440      paid by or on behalf of the individual which has not been paid to creditors, less fees that are
             441      payable to the provider under Section 13-42-123 .
             442          (9) Before relocating a trust account from one bank to another, a provider shall inform
             443      the administrator of the name, business address, and telephone number of the new bank. As
             444      soon as practicable, the provider shall inform the administrator of the account number of the
             445      trust account at the new bank.
             446          Section 9. Section 13-42-123 is amended to read:
             447           13-42-123. Fees and other charges.
             448          (1) A provider may not impose directly or indirectly a fee or other charge on an
             449      individual or receive money from or on behalf of an individual for debt-management services
             450      except as permitted by this section.
             451          (2) A provider may not impose charges or receive payment for debt-management
             452      services until the provider and the individual have signed an agreement that complies with
             453      Sections 13-42-119 and 13-42-128 .
             454          (3) If an individual assents to an agreement, a provider may not impose a fee or other
             455      charge for educational or counseling services, or the like, except as otherwise provided in this
             456      Subsection (3) and Subsection 13-42-128 (4). The administrator may authorize a provider to
             457      charge a fee based on the nature and extent of the educational or counseling services furnished
             458      by the provider.
             459          (4) Subject to adjustment of dollar amounts pursuant to Subsection 13-42-132 (6), the
             460      following rules apply:
             461          (a) If an individual assents to a plan that contemplates that creditors will reduce finance


             462      charges or fees for late payment, default, or delinquency, the provider may charge:
             463          (i) a fee not exceeding $50 for consultation, obtaining a credit report, setting up an
             464      account, and the like; and
             465          (ii) a monthly service fee, not to exceed $10 times the number of [creditors] accounts
             466      remaining in a plan at the time the fee is assessed, but not more than $50 in any month.
             467          (b) If an individual assents to [a plan] an agreement that contemplates that creditors
             468      will settle debts for less than the principal amount of the debt, a provider may charge:
             469          (i) subject to Subsection 13-42-119 (4), a fee for consultation, obtaining a credit report,
             470      setting up an account, and the like, in an amount not exceeding the lesser of $400 and 4% of
             471      the debt in the plan at the inception of the plan; and
             472          (ii) a monthly service fee, not to exceed $10 times the number of creditors remaining in
             473      a plan at the time the fee is assessed, but not more than $50 in any month.
             474          (c) A provider may not impose or receive fees under both Subsections (4)(a) and (b).
             475          (d) Except as otherwise provided in Subsection 13-42-128 (4), if an individual does not
             476      assent to an agreement, a provider may receive for educational and counseling services it
             477      provides to the individual a fee not exceeding $100 or, with the approval of the administrator, a
             478      larger fee. The administrator may approve a fee larger than $100 if the nature and extent of the
             479      educational and counseling services warrant the larger fee.
             480          (5) If, before the expiration of 90 days after the completion or termination of
             481      educational or counseling services, an individual assents to an agreement, the provider shall
             482      refund to the individual any fee paid pursuant to Subsection (4)(d).
             483          (6) Except as otherwise provided in Subsections (3) and (4), if [a plan] an agreement
             484      contemplates that creditors will settle an individual's debts for less than the principal amount of
             485      the debt, compensation for services in connection with settling a debt may not exceed, with
             486      respect to each debt, 30% of the excess of the principal amount of the debt over the amount
             487      paid the creditor pursuant to the [plan] agreement, less to the extent it has not been credited
             488      against an earlier settlement fee:
             489          (a) the fee charged pursuant to Subsection (4)(b)(i); and
             490          (b) the aggregate of fees charged pursuant to Subsection (4)(b)(ii).
             491          (7) Subject to adjustment of the dollar amount pursuant to Subsection 13-42-132 (6), if
             492      a payment to a provider by an individual under this chapter is dishonored, a provider may


             493      impose a reasonable charge on the individual, not to exceed the lesser of $25 and the amount
             494      permitted by law other than this chapter.
             495          Section 10. Section 13-42-128 is amended to read:
             496           13-42-128. Prohibited acts and practices.
             497          (1) A provider may not, directly or indirectly:
             498          (a) misappropriate or misapply money held in trust;
             499          (b) settle a debt on behalf of an individual for more than 50% of the principal amount
             500      of the debt owed a creditor, unless the individual assents to the settlement after the creditor has
             501      assented;
             502          (c) take a power of attorney that authorizes it to settle a debt, unless the power of
             503      attorney expressly limits the provider's authority to settle debts for not more than 50% of the
             504      principal amount of the debt owed a creditor;
             505          (d) exercise or attempt to exercise a power of attorney after an individual has
             506      terminated an agreement;
             507          (e) initiate a transfer from an individual's account at a bank or with another person
             508      unless the transfer is:
             509          (i) a return of money to the individual; or
             510          (ii) before termination of an agreement, properly authorized by the agreement and this
             511      chapter, and for:
             512          (A) payment to one or more creditors pursuant to [a plan] an agreement; or
             513          (B) payment of a fee;
             514          (f) offer a gift or bonus, premium, reward, or other compensation to an individual for
             515      executing an agreement;
             516          (g) offer, pay, or give a gift or bonus, premium, reward, or other compensation to a
             517      person for referring a prospective customer, if the person making the referral has a financial
             518      interest in the outcome of debt-management services provided to the customer, unless neither
             519      the provider nor the person making the referral communicates to the prospective customer the
             520      identity of the source of the referral;
             521          (h) receive a bonus, commission, or other benefit for referring an individual to a
             522      person;
             523          (i) structure a plan in a manner that would result in a negative amortization of any of an


             524      individual's debts, unless a creditor that is owed a negatively amortizing debt agrees to refund
             525      or waive the finance charge upon payment of the principal amount of the debt;
             526          (j) compensate its employees on the basis of a formula that incorporates the number of
             527      individuals the employee induces to enter into agreements;
             528          (k) settle a debt or lead an individual to believe that a payment to a creditor is in
             529      settlement of a debt to the creditor unless, at the time of settlement, the individual receives a
             530      certification by the creditor that the payment is in full settlement of the debt;
             531          (l) make a representation that:
             532          (i) the provider will furnish money to pay bills or prevent attachments;
             533          (ii) payment of a certain amount will permit satisfaction of a certain amount or range of
             534      indebtedness; or
             535          (iii) participation in a plan will or may prevent litigation, garnishment, attachment,
             536      repossession, foreclosure, eviction, or loss of employment;
             537          (m) misrepresent that it is authorized or competent to furnish legal advice or perform
             538      legal services;
             539          (n) represent in its agreements, disclosures required by this chapter, advertisements, or
             540      Internet website that it is:
             541          (i) a not-for-profit entity unless it is organized and properly operating as a
             542      not-for-profit entity under the law of the state in which it was formed [or that it is]; or
             543          (ii) a tax-exempt entity unless it has received certification of tax-exempt status from
             544      the Internal Revenue Service and is properly operating as a not-for-profit entity under the law
             545      of the state in which it was formed;
             546          (o) take a confession of judgment or power of attorney to confess judgment against an
             547      individual;
             548          (p) employ an unfair, unconscionable, or deceptive act or practice, including the
             549      knowing omission of any material information; or
             550          (q) make or use any untrue or misleading statement:
             551          (i) to the administrator; or
             552          (ii) in the provision of services subject to this chapter.
             553          (2) If a provider furnishes debt-management services to an individual, the provider may
             554      not, directly or indirectly:


             555          (a) purchase a debt or obligation of the individual;
             556          (b) receive from or on behalf of the individual:
             557          (i) a promissory note or other negotiable instrument other than a check or a demand
             558      draft; or
             559          (ii) a post-dated check or demand draft;
             560          (c) lend money or provide credit to the individual, except as a deferral of a settlement
             561      fee at no additional expense to the individual;
             562          (d) obtain a mortgage or other security interest from any person in connection with the
             563      services provided to the individual;
             564          (e) except as permitted by federal law, disclose the identity or identifying information
             565      of the individual or the identity of the individual's creditors, except to:
             566          (i) the administrator, upon proper demand;
             567          (ii) a creditor of the individual, to the extent necessary to secure the cooperation of the
             568      creditor in a plan; or
             569          (iii) the extent necessary to administer the plan;
             570          (f) except as otherwise provided in Subsection 13-42-123 (6), provide the individual
             571      less than the full benefit of a compromise of a debt arranged by the provider;
             572          (g) charge the individual for or provide credit or other insurance, coupons for goods or
             573      services, membership in a club, access to computers or the Internet, or any other matter not
             574      directly related to debt-management services or educational services concerning personal
             575      finance, except to the extent such services are expressly authorized by the administrator; or
             576          (h) furnish legal advice or perform legal services, unless the person furnishing that
             577      advice to or performing those services for the individual is licensed to practice law.
             578          (3) This chapter does not authorize any person to engage in the practice of law.
             579          (4) A provider may not receive a gift or bonus, premium, reward, or other
             580      compensation, directly or indirectly, for advising, arranging, or assisting an individual in
             581      connection with obtaining, an extension of credit or other service from a lender or service
             582      provider, except for educational or counseling services required in connection with a
             583      government-sponsored program.
             584          (5) Unless a person supplies goods, services, or facilities generally and supplies them
             585      to the provider at a cost no greater than the cost the person generally charges to others, a


             586      provider may not purchase goods, services, or facilities from the person if an employee or a
             587      person that the provider should reasonably know is an affiliate of the provider:
             588          (a) owns more than 10% of the person; or
             589          (b) is an employee or affiliate of the person.
             590          Section 11. Section 13-42-130 is amended to read:
             591           13-42-130. Advertising.
             592          [A provider] (1) If a provider whose agreements contemplate that creditors will reduce
             593      finance charges or fees for late payment, default, or delinquency advertises debt-management
             594      services, it shall disclose, in an easily comprehensible manner, that using a debt-management
             595      plan may make it harder for the individual to obtain credit.
             596          (2) If a provider whose agreements contemplate that creditors will settle for less than
             597      the full principal amount of debt that advertises debt-management services, it shall disclose, in
             598      an easily comprehensible manner, the information specified in Subsections 13-42-117 (4)(c)
             599      and (d).




Legislative Review Note
    as of 2-2-09 2:00 PM


Office of Legislative Research and General Counsel


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