SB-0664, As Passed Senate, December 4, 2014

 

 

 

 

 

 

 

 

 

 

 

HOUSE SUBSTITUTE FOR

 

SENATE BILL NO. 664

 

 

 

 

 

 

 

 

 

 

 

     A bill to amend 1975 PA 148, entitled

 

"Debt management act,"

 

by amending the title and sections 2, 4, 5, 6, 8, 11, 12, 13, 14,

 

15, 16, 17, 18, 19, 20, and 26 (MCL 451.412, 451.414, 451.415,

 

451.416, 451.418, 451.421, 451.422, 451.423, 451.424, 451.425,

 

451.426, 451.427, 451.428, 451.429, 451.430, and 451.436), sections

 

2, 4, 5, 6, 8, 11, 12, 13, 14, 15, 16, 17, 18, and 19 as amended by

 

2000 PA 255, and by adding section 8a.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

TITLE

 

     An act to regulate the business of debt management; to require

 

licenses and to fix fees therefor; establish license fees; to

 

prescribe the powers and duties of the department of commerce and

 

its director; certain state agencies and officials; to prescribe

 


conditions establish requirements for debt management contracts; to

 

provide for the disposition of revenues; to provide penalties; and

 

to repeal certain acts and parts of acts.

 

     Sec. 2. As used in this act:

 

     (a) "Business of debt management" means providing or offering

 

to provide debt management to 1 or more residents of this state.

 

     (b) "Certified counselor" means an individual who is certified

 

by a training program or certifying organization, approved by the

 

director, that authenticates the competence of individuals who

 

provide education and assistance to other individuals in connection

 

with debt counseling and financial counseling functions.

 

     (c) (b) "Counselor" means a certified counselor who is an

 

employee or agent of a licensee who engages in financial counseling

 

and budget analysis debt counseling functions. and scheduling of

 

debtor's funds.

 

     (d) (c) "Creditor" means a person for whose benefit a licensee

 

collects and disperses money. is being collected and disbursed by a

 

licensee. A licensee is not a creditor for purposes of this act.The

 

term does not include a licensee.

 

     (e) (d) "Debt management" means the planning and management of

 

the financial affairs of a debtor and the receipt of money from the

 

debtor for distribution to a creditor 1 or more of the debtor's

 

creditors in payment or partial payment of the debtor's

 

obligations.

 

     (f) (e) "Debtor" means a person from whom which money is being

 

collected for the benefit of a creditor of the debtor.

 

     (g) "Debtor's obligation" means any current or past-due

 


monetary obligation of the debtor, including, but not limited to,

 

amounts owed for payment of credit cards, utilities, mortgages,

 

student loans, home equity loans, personal loans, judgments,

 

garnishments, property taxes, rent, or vehicle loans or leases or

 

any other obligation whether secured or unsecured or whether or not

 

the obligation has a principal and interest component.

 

     (h) (f) "Department" means the office of financial and

 

insurance services.department of insurance and financial services.

 

     (i) (g) "Director" means the commissioner director of the

 

department or his or her authorized representative.

 

     (j) "Fair share program" means a program in which voluntary

 

contributions are made by some creditors to a licensee based on a

 

percentage of the amount disbursed by the licensee on behalf of a

 

debtor.

 

     (k) (h) "Fees and charges of the licensee" means the total

 

amount of money to be charged a debtor by the a licensee, including

 

the $25.00 $50.00 initial payment and any charges for advice,

 

materials, credit reports, educational materials and resources, or

 

referrals.

 

     (l) (i) "License" means a written certificate or exemption

 

order issued by the director under this act.

 

     (m) (j) "Licensee" means a person that is licensed, or is

 

required to be licensed, under this act to perform debt management

 

services and is located inside or outside the boundaries of this

 

state.

 

     (n) "Locator service" means a telephone service that

 

automatically connects callers to a network of member service

 


providers, based on geographic location or another parameter.

 

     (o) (k) "Office" means each location, described by street

 

name, building number, city, and state, where a person engages in

 

the business of debt management.

 

     (l) "Office manager" means an employee or owner charged with

 

the supervision, oversight, or approval of the functions of budget

 

analysis, counseling, or scheduling.

 

     (p) (m) "Person" means an individual, corporation,

 

partnership, association, joint stock company, trust where if the

 

interests of the beneficiaries are evidenced by a security, limited

 

liability company, or other legal entity.

 

     (q) (n) "Sweep arrangement" means an arrangement that provides

 

for a temporary or permanent transfer of funds from 1 trust account

 

to another trust account when a predetermined time, account

 

balance, or other condition occurs or is fulfilled.

 

     Sec. 4. (1) After January 1, 1976, a A person located within

 

or outside of the boundaries of this state shall not engage in the

 

business of debt management without first obtaining a license as

 

required in under this act. A contract of to provide debt

 

management as defined by this act made by a person without a

 

license is null and void.

 

     (2) A person who is performing a The department may grant a

 

person that provides debt management service services and receiving

 

receives compensation primarily from governmental organizations,

 

governmentally sponsored organizations, charitable trusts, or

 

foundations tax exempt pursuant to that have tax-exempt status

 

under section 501(c) of the internal revenue code of 1986, upon a

 


showing of safeguards in the handling of debtor funds, may be

 

granted 26 USC 501, an exemption from any provision of this act if

 

the person demonstrates that the person has safeguards in the

 

handling of debtor funds and the department finds that the

 

exemption is found to be in the public interest.

 

     Sec. 5. (1) An applicant for a license to engage in the

 

business of debt management shall file an application with the

 

director in writing and under oath that includes all of the

 

following:

 

     (a) The name and exact address of the applicant and the name

 

and address of each of the following, as applicable:

 

     (i) If the applicant is a corporation, its officers and

 

directors.

 

     (ii) If the applicant is an association, its officers and

 

directors.

 

     (iii) If the applicant is a partnership, its partners.

 

     (iv) If the applicant is a limited liability company, its

 

manager or managers.

 

     (v) If the applicant is any other legal entity, its manager or

 

other person designated to control the operation of that legal

 

entity.

 

     (b) A copy of a certificate of an assumed name, if applicable.

 

     (c) One or more of the following, as applicable:

 

     (i) If the applicant is a corporation, a copy of the articles

 

of incorporation.

 

     (ii) If the applicant is an association, a copy of the

 

organizational documents of the association.

 


     (iii) If the applicant is a partnership, a copy of the

 

partnership agreement.

 

     (iv) If the applicant is a limited liability company, a copy of

 

the articles of organization.

 

     (2) Upon filing the application, At the time an applicant

 

files an application under this section, the applicant shall do all

 

of the following:

 

     (a) Pay to the department a license fee of $50.00 for each

 

office.

 

     (b) Pay to the department an investigation fee of $50.00.

 

     (c) Furnish a surety bond, to approved by the director, for

 

the benefit of the people of the state of Michigan. The amount of

 

the surety bond must equal or exceed the total amount of Michigan

 

clients' funds in the applicant's or licensee's trust account at

 

the time of application for license or renewal, as determined by

 

the department, but in no event shall a except that the amount of

 

the surety bond shall not be less than $25,000.00 or be greater

 

than $100,000.00. The surety bond shall be conditioned upon on the

 

faithful accounting of all money collected upon on accounts

 

entrusted to a licensee engaged in the business of debt management

 

or the licensee's employees and agents. The surety bond shall be

 

approved by the department. In lieu of a surety bond, the

 

department may by rule provide for an appropriate deposit of cash

 

or securities, a letter of credit, or the assignment of coverage of

 

other bonds if the department is satisfied that comparable or more

 

extensive coverage results.

 

     (d) File an appointment of the director as the agent of the

 


applicant for service of process in this state.

 

     (3) Service of process upon on the director shall be is

 

considered service upon on an applicant or licensee, including an

 

applicant who that complies with or fails to comply with subsection

 

(2)(d).

 

     (4) Unless surrendered, revoked, or suspended, a license

 

issued under this act expires on December 31 of the year for which

 

it is issued. A licensee may renew a license before the expiration

 

date as provided under this act.

 

     (5) A licensee shall create, maintain, and preserve accurate

 

and complete books and records relating to the licensee's business.

 

The books and records shall be maintained according to generally

 

accepted accounting principles. A licensee or an applicant shall

 

notify the department in writing of the address where the books and

 

records are kept. If a licensee changes the location of the books

 

and records, the licensee shall notify the department in writing

 

within 10 business days after the change. The director may

 

prescribe by rule or order the form and contents of books and

 

records relating to a licensee's business.

 

     (6) An applicant shall file a financial statement with an

 

application for a debt management license. The director may require

 

that the financial statement be audited or reviewed by an

 

independent certified public accountant.

 

     (7) If a licensee has a board of directors or the equivalent,

 

the director shall not require that the licensee provide

 

information concerning a member of the board of directors or

 

equivalent, nor or require that the member satisfy the examination

 


provisions of this act, if that member does not receive a salary,

 

stock dividend, or other financial benefit from that corporation

 

other than reimbursement of the actual expenses incurred in

 

carrying out the duties of a director of that corporation.

 

     Sec. 6. (1) Upon receiving the If it receives a license

 

application and approving under this act and approves the fees and

 

surety bond, the department shall investigate the applicant's

 

responsibility, experience, character, and general fitness. If the

 

result of the investigation warrants a belief that the business

 

will be operated applicant will operate the business fairly, and

 

honestly, within the provisions of and as required under this act,

 

the department shall issue a license. The investigation of the

 

applicant shall at least include investigation of the following as

 

applicable:

 

     (a) If the applicant is a corporation, its officers and

 

directors.

 

     (b) If the applicant is a partnership, its partners.

 

     (c) If the applicant is an association, its officers.

 

     (d) If the applicant is a limited liability company, its

 

manager or managers.

 

     (e) If the applicant is any other legal entity, its manager or

 

other person designated to control the operation of that legal

 

entity.

 

     (2) A The department shall not issue a license shall not be

 

issued if the investigation reveals 1 or more of the following:

 

     (a) That an individual investigated under subsection (1) meets

 

any of the following:

 


     (i) Was ever convicted of a crime involving moral turpitude

 

including forgery, embezzlement, obtaining money under false

 

pretenses, larceny, extortion, conspiracy to defraud, or any other

 

similar offense.

 

     (ii) Violated or failed to comply with this act or a rule

 

promulgated under this act.

 

     (iii) Had a license to engage in the business of debt management

 

revoked or suspended for any reason other than failure to pay

 

licensing fees in this state or another state.

 

     (iv) Defaulted in the payment of money collected for others,

 

including the discharge of debts through bankruptcy proceedings.

 

The director may, at in his or her discretion, waive this

 

restriction if provided with evidence of justifiable cause for the

 

bankruptcy, plus convincing evidence of the fitness of the bankrupt

 

party to carry out his or her functions under this act.

 

     (b) An individual applicant is not at least 18 years of age

 

and a citizen of the United States.

 

     (c) An applicant that is a partnership, corporation, limited

 

liability company, association, or other legal entity required by

 

statute to obtain authority to do business in this state has not

 

been granted authority to do business in this state.

 

     (d) The applicant is an employee or owner of a collection

 

agency as defined in section 901 of the occupational code, 1980 PA

 

299, MCL 339.901, or process serving business or in any manner is

 

affiliated with a collection agency or process serving business.

 

The director may, in his or her discretion, waive this restriction

 

on a showing of sufficient safeguards in the operation of the

 


collection agency.

 

     (3) An If an applicant is an individual, the applicant shall

 

pass an examination administered by the director or his or her

 

designee must provide evidence to the director that the applicant

 

is certified as a certified counselor before the director grants a

 

license to the applicant under this act. A If an applicant is a

 

person that is not an individual, each counselor shall pass an

 

examination who is employed by that person shall become a certified

 

counselor within the first 180 days of his or her employment.

 

administered by the director or his or her designee. The

 

examination may be oral or written, or partly oral and partly

 

written, and shall be practical in nature and sufficiently thorough

 

to ascertain the applicant's fitness. Questions on bookkeeping,

 

credit adjusting, business ethics, agency, contracts, debtor and

 

creditor relationships, trust funds, and the provisions of this act

 

and rules promulgated under this act may be included in the

 

examination. The director may charge an examination fee of $25.00

 

for administering this examination.

 

     Sec. 8. (1) Before December 1 of each year, a licensee shall

 

file an application with the department for renewal of its license.

 

The application shall be on the form prescribed by the department.

 

and shall be accompanied by a fee The licensee shall include with

 

the application a renewal fee of $50.00 for each office together

 

with and a surety bond in the same manner as an original

 

application. The application shall cover each branch office that is

 

under the ownership and control of the applying entity. Financial

 

     (2) A licensee shall file statements shall be filed with the

 


an application for renewal of a license under this section. The

 

director may require that the financial statements be audited or

 

reviewed by an independent certified public accountant.

 

     (3) If a debt management license renewal fee described in

 

subsection (1) is not received by the department on or before

 

December 31, the licensee is subject to a penalty of $25.00 for

 

each day the fee is delinquent, or $1,000.00, whichever is less.

 

     (4) If a licensee does not pay a fee or penalty that the

 

licensee is required to pay under this act, or does not pay that

 

fee or penalty within any time period established under this act

 

for payment of that fee or penalty, the director may maintain an

 

action against the delinquent licensee for the recovery of the fees

 

or penalties together with interest and costs.

 

     Sec. 8a. (1) If in the opinion of the director an individual

 

has engaged in fraud, the director may serve on that individual a

 

written notice of intention to prohibit that individual from being

 

licensed under this act, licensed or registered under any of the

 

financial licensing acts, or employed by, an agent of, or a control

 

person of a licensee.

 

     (2) A notice issued under subsection (1) shall contain a

 

statement of the facts supporting the prohibition and shall set a

 

hearing on a date within 60 days after the date of the notice. if

 

the individual does not appear at the hearing, he or she is

 

considered to have consented to the issuance of an order in

 

accordance with the notice.

 

     (3) If the director finds after a hearing held under

 

subsection (2) that any of the grounds specified in the notice have

 


been established, the director may issue an order of suspension or

 

prohibition from being licensed under this act or employed by, an

 

agent of, or a control person of a licensee.

 

     (4) An order issued under subsection (2) or (3) is effective

 

when served on an individual. The director shall also serve a copy

 

of the order on the licensee of which the individual is an employee

 

or agent. An order issued under subsection (2) or (3) remains in

 

effect until it is stayed, modified, terminated, or set aside by

 

the director or a reviewing court.

 

     (5) After 5 years from the date of an order issued under

 

subsection (2) or (3), the individual subject to the order may

 

apply to the director to terminate the order.

 

     (6) If the director considers that an individual served a

 

notice under subsection (1) poses an imminent threat of financial

 

loss to customers, the director may serve on that individual an

 

order of suspension from being employed by, an agent of, or a

 

control person of a licensee. A suspension is effective on the date

 

the order is issued and, unless stayed by a court, remains in

 

effect until the director completes the review required under this

 

section and the director has dismissed the charges specified in the

 

order.

 

     (7) Unless otherwise agreed to by the director and the

 

individual served with an order issued under subsection (6), the

 

director shall hold a hearing required under subsection (2) to

 

review a suspension not earlier than 5 days or later than 20 days

 

after the date of the notice.

 

     (8) If an individual is convicted of a felony involving fraud,

 


dishonesty, or breach of trust, the director may issue an order

 

suspending or prohibiting him or her from being licensed under this

 

act or employed by, an agent of, or a control person of a licensee.

 

After 5 years from the date of the order, the individual subject to

 

the order may apply to the director to terminate the order.

 

     (9) The director shall mail a copy of any notice or order

 

issued under this section to the employer or principal of the

 

individual who is subject to the notice or order.

 

     (10) Within 30 days after the director has notified the

 

parties that a matter described in this section has been submitted

 

to him or her, the director shall render a decision that includes

 

findings of fact supporting the decision and serve on each party to

 

the proceeding a copy of the decision and an order consistent with

 

the decision.

 

     (11) Except for a consent order, a party to the proceeding or

 

a person affected by an order issued under this section may obtain

 

a judicial review of the order. A consent order may be reviewed as

 

provided under the administrative procedures act of 1969, 1969 PA

 

306, MCL 24.201 to 24.328. Except for an order under judicial

 

review, the director may terminate or set aside any order. The

 

director may terminate or set aside an order under judicial review

 

with the permission of the court.

 

     (12) Unless ordered by the court, the commencement of

 

proceedings for judicial review under subsection (11) does not stay

 

the director's order.

 

     (13) The director may apply to the circuit court of Ingham

 

county for the enforcement of any outstanding order issued under

 


this section.

 

     (14) Any individual who violates a final order issued under

 

this section is guilty of a misdemeanor punishable by a fine of not

 

more than $5,000.00 or imprisonment for not more than 1 year, or

 

both.

 

     (15) as used in this section:

 

     (a) "Financial licensing act" means the consumer financial

 

services act, 1988 PA 161, MCL 487.2051 to 487.2072; any of the

 

acts listed in section 2 of the consumer financial services act,

 

1988 PA 161, MCL 487.2052; the deferred presentment service

 

transactions act, 2005 PA 244, MCL 487.2121 to 487.2173; and the

 

mortgage loan originator licensing act, 2009 PA 75, MCL 493.131 to

 

493.171.

 

     (b) "Fraud" includes actionable fraud, actual or constructive

 

fraud, criminal fraud, or extrinsic or intrinsic fraud, or fraud in

 

the execution, in the inducement, in fact, or in law, or any other

 

form of fraud.

 

     Sec. 11. All of the following apply to a license:

 

     (a) The director shall prescribe the form and size of a

 

license.

 

     (b) A license shall show the name of the licensee and the

 

address at which the business of debt management is to be

 

conducted.

 

     (c) A license shall show the date of expiration of the license

 

as December 31, and show any other information prescribed by the

 

director.

 

     (d) While the license is in force, the license licensee shall

 


at all times be conspicuously displayed display the license in the

 

outer office of the licensee or branch office of the licensee, if

 

that office offers in-person services to consumers, and state on an

 

internet website that is available to the public that the licensee

 

is licensed in this state.

 

     (e) A license is not transferable or assignable.

 

     (f) A licensee shall surrender a license shall be surrendered

 

to the department within 5 business days after the date that the

 

licensee either ceases to engage in the business of debt management

 

or has its the date the license is revoked.

 

     Sec. 12. (1) Before a contract is formed between a licensee

 

and a debtor, a thorough and written budget analysis shall be

 

compiled and a copy delivered to the debtor. A licensee shall not

 

accept an account unless a written and thorough budget analysis

 

indicates that the debtor can reasonably meet the requirements

 

required by the budget analysis. The A licensee may enter into a

 

contract or agreement to provide debt management services to a

 

debtor only if the licensee has conducted a written and thorough

 

budget analysis of the debtor and made a determination, based on

 

the analysis of the information provided by the debtor or otherwise

 

available to the licensee, that a debt management plan is a

 

suitable solution for the debtor and that the debtor will be able

 

to meet the payment obligations under the plan. If the licensee

 

determines that a plan is suitable for a debtor whose current

 

monthly expense and debt payments exceed the debtor's net income,

 

the licensee must establish a written plan outlining how the debtor

 

will meet the payment obligations under the plan before entering

 


into a contract or agreement to provide debt management services to

 

the debtor.

 

     (2) A budget analysis described in subsection (1) shall

 

contain all of the following information about the debtor:

 

     (a) Name and address.

 

     (b) Marital status and number Number of dependents.

 

     (c) Amount and source of all employment compensation, payments

 

from government programs, child support and alimony payments, and

 

other income and the debtor's net monthly income. Except as

 

provided in this subdivision, a debtor is only required to provide

 

information to a licensee about the amount of his or her income and

 

is not required to provide any information about the source of that

 

income.

 

     (d) Number of exemptions claimed on the debtor's most recent

 

federal income tax return.

 

     (e) Gross income per pay period, type and amount of all

 

payroll deductions, and net income per pay period.

 

     (d) (f) Monthly home mortgage or rental payment, if any. If

 

the home mortgage payment does not include an escrow for real

 

estate taxes, the budget analysis shall contain the amount and due

 

dates of the an estimate of the annual amount of the real estate

 

taxes on the property, if the amount is available from the debtor

 

or public source.

 

     (e) (g) Type and amount of all other fixed periodic

 

payments.of the debtor's obligations included in the debt

 

management plan, including, but not limited to, a description of

 

and amount owed for any outstanding garnishments and judgments, and

 


the type and amount of the debtor's obligations that are known to

 

the debtor and are not included in the debt management plan.

 

     (h) Type and amount of food, clothing, utility, vehicle,

 

insurance, and all other living expenses.

 

     (f) Amount of household expenses, including, but not limited

 

to, expenses for food, utilities, vehicles, insurance, and other

 

living expenses.

 

     (g) (i) List A list of the creditors included in to which

 

payments will be made under the plan.

 

     (j) A description of and amount owed for any outstanding

 

garnishments and judgments.

 

     (k) Periodic amount available for payment toward a debt

 

management plan.

 

     Sec. 13. (1) Upon establishing When a licensee establishes a

 

debt management plan for a debtor, a the licensee may charge and

 

receive an initial fee of $25.00. However, unless $50.00.

 

     (2) A licensee shall attempt to obtain consent to participate

 

in a debt management plan from at least 51%, or more in number and

 

or dollar amount, of all the debtor's creditors consent to the debt

 

management program within 45 90 days of after establishing the debt

 

management plan. , the fee shall be returned to the debtor and the

 

debtor's account closed.If the required consent is not actually

 

received by the licensee, the licensee shall provide notice to the

 

debtor of the lack of required consent and the debtor may, at its

 

option, close the account. If the debtor decides to close the

 

account, any unexpended funds shall be returned to the debtor or

 

disbursed as directed by the debtor.

 


     (2) Consent from a creditor shall be recorded on a separate

 

form. The form shall contain all of the following:

 

     (a) A list of all the creditors.

 

     (b) The manner in which consent was sought.

 

     (c) The date of each contact.

 

     (d) The name of the person contacted, if applicable.

 

     (e) The response obtained from the person contacted.

 

     (f) Any revised or special conditions or arrangements that

 

condition the consent.

 

     (g) The date on which the required consent was secured.

 

     (3) The For purposes of subsection (2), a licensee may seek

 

the consent of a creditor may be sought to participate in a debt

 

management plan by sending a notice of a debt management plan to a

 

the creditor by an appropriate means including by telephone,

 

facsimile, electronic mail, means, or first-class mail. If the

 

creditor does not respond within 14 days after the sending of the

 

notice is sent, it may be presumed the licensee may presume that

 

the creditor has given consent. However, this subsection does not

 

require that a licensee send notice of a debt management plan to

 

all of a debtor's creditors.

 

     (4) If a payment under the debt management plan is sent to a

 

the creditor, the licensee may presume acceptance of the payment or

 

and plan may be presumed by the creditor 7 days after sending the

 

payment. As an alternative to sending notice under subsection (3),

 

a licensee may seek the consent of a creditor for purposes of

 

subsection (2) by sending a payment to the creditor under the terms

 

of the debt management plan.

 


     Sec. 14. (1) A contract between a licensee and debtor shall

 

include all of the following:

 

     (a) Each creditor to whom which payments will be made and the

 

amount owed each creditor. A licensee may rely on records of the

 

debtor and other information available to it to determine the

 

amount owed to a creditor.

 

     (b) The total amount of the licensee's charges.

 

     (c) The beginning and ending termination dates of the

 

contract.

 

     (d) The number of months and the total principal amount plus

 

and approximate interest charges required to liquidate in full the

 

debts, except mortgage or land contract interest payments,

 

described in the contract.of the debtor's obligations to be paid

 

under the debt management plan.

 

     (e) The name and address of the licensee and of the debtor.

 

     (f) Other Any other provisions or disclosures that the

 

director determines are necessary for the protection of the debtor

 

and the proper conduct of business by a licensee.

 

     (2) Unless otherwise approved by the department and except for

 

an amount due for 1 or more monthly fees, or a closeout fee, credit

 

reports, or educational products or materials, a licensee shall

 

distribute to the creditors of the debtor, at least monthly, all

 

money received from a debtor or on behalf of a debtor unless

 

otherwise directed by the debtor.

 

     (3) By submitting a written request to the licensee, a debtor

 

may add or remove 1 or more debt obligations from a contract at any

 

time. If the licensee determines after preparing an updated budget

 


analysis that the debtor can reasonably fulfill the requirements of

 

the debt management plan, the licensee may amend the contract as

 

requested by the debtor.

 

     (4) If a debtor's contract with a licensee expires and 1 or

 

more debt obligations included in that contract are not yet

 

liquidated, the licensee may extend or enter into an additional

 

contract with the debtor if the licensee determines that the debt

 

management plan is suitable for the debtor.

 

     Sec. 15. (1) Subject to subsection (5), (6), payments received

 

by a licensee from or on behalf of a debtor for the benefit of a

 

creditor shall be held in a trust in a separate account maintained

 

for the benefit of the licensee's Michigan clients at a financial

 

institution whose deposits are insured by an agency of the United

 

States government. Disbursements whether Each licensee shall ensure

 

that it maintains records of all debtor funds it holds in trust for

 

residents of this state and all funds disbursed on behalf of those

 

debtors and shall provide the department with a full accounting of

 

those funds and the disbursement of those funds on request of the

 

department.

 

     (2) Any disbursements by a licensee to the debtor or to the

 

creditors of the debtor shall be made from the a trust account

 

established under this section. A licensee shall deposit a payment

 

from a debtor or on behalf of a debtor shall be deposited in the

 

account not later than 2 business days after receipt of receiving

 

the payment. A licensee may utilize a sweep arrangement may be

 

utilized if the trust account is insured for 100% or more of the

 

balance in the trust account.

 


     (3) (2) The A licensee shall reconcile a trust account shall

 

be reconciled not less than once a month. established under this

 

section at least every month. The reconciliation shall ascertain

 

the actual cash balance in the account and compare it with the sum

 

of the escrow balances in each debtor's attributable to the debtor

 

or debtors whose funds are included in the account. The

 

reconciliation may be done The licensee may reconcile the account

 

electronically or by any other appropriate method and shall be done

 

not more than complete the reconciliation within 45 business days

 

after receipt of receiving the bank statement for the account. An

 

The licensee shall keep an electronic or other appropriate notation

 

of the reconciliation shall be kept as a permanent record of the

 

licensee. and shall be considered as in compliance with this

 

section. Each The licensee shall individually schedule each

 

debtor's trust account shall be individually scheduled balance in a

 

the licensee's reconciliation records. On request, the licensee

 

shall make the reconciliation of the total account, including the

 

balance for each debtor whose funds are included in the account,

 

available to the department.

 

     (4) (3) The A trust account established under this section

 

shall at all times have an actual cash balance equal to or greater

 

than the sum of the escrow balances of each debtor's account, and

 

failure to maintain that amount is cause for a summary suspension

 

of the a license unless the failure is the result of an inadvertent

 

clerical or human error.

 

     (5) (4) If a trust account fails to established under this

 

section does not contain sufficient funds to cover the debtor

 


escrow balances, the licensee shall immediately upon on discovery

 

notify the director by telephone, facsimile, electronic mail, or

 

other method approved by the department. The licensee shall also

 

provide written notice including to the director that includes a

 

description of the remedial action taken by the licensee.

 

     (6) (5) If the a trust account described in subsection (1) is

 

maintained at a financial institution described in subsection (1)

 

that is located outside of this state, the licensee shall furnish a

 

surety bond or irrevocable letter of credit to for the benefit of

 

the people of the state of Michigan, in an amount that is equal to

 

or exceeding exceeds 100% of the average amount of deposits held in

 

the trust account from month to month and is in a form approved by

 

the department. This requirement is in addition to an applicant's

 

obligation under section 5(2)(c).

 

     Sec. 16. (1) A licensee shall do all of the following:

 

     (a) Create and maintain records of the accounts, contracts,

 

correspondence, memoranda, papers, books, and other records of the

 

debt management business. If the licensee elects not to retain

 

original records, the licensee may utilize electronic, photocopy,

 

or computerized methods of record keeping. The licensee shall

 

preserve the records created under this subdivision for at least 6

 

years after they are created.

 

     (b) Make all the records created and maintained under

 

subdivision (a) available for examination by examiners of the

 

department.

 

     (c) Upon contracting When it enters into a contract with a

 

debtor, give a copy of the contract to the debtor.

 


     (d) Deliver a receipt to a debtor upon receiving when it

 

receives cash from a debtor, or within 3 business days after

 

receiving a noncash payment from a debtor, and at least monthly

 

beginning with the first month after contracting with a debtor

 

deliver a statement that includes the dates and amounts received

 

and disbursed on behalf of the debtor and the fees collected by the

 

licensee on those amounts.

 

     (e) Within 5 business days after a request from a debtor,

 

provide a written statement that includes all of the following:

 

     (i) All transactions concerning the money received from or on

 

behalf of the debtor.

 

     (ii) The total amount paid to each creditor.

 

     (iii) The total amount of charges deducted from the payments

 

received.fees collected by the licensee on the amounts described in

 

subparagraph (ii).

 

     (iv) The amount held in reserve.

 

     (f) At least every 90 days after contracting with a debtor,

 

provide a written statement to the debtor that includes all of the

 

following:

 

     (i) The total amount received from and on behalf of the debtor.

 

     (ii) The total amount paid to each creditor.

 

     (iii) The total amount deducted from the payments received.of

 

fees collected by the licensee on the amounts described in

 

subparagraph (ii).

 

     (iv) The amount held in reserve.

 

     (g) At Subject to subsection (2), at least annually, verify or

 

cause the verification of payments to selected creditor accounts

 


and do, or designate or direct 1 or more persons to do, all of the

 

following:

 

     (i) Review each debtor's account file.

 

     (ii) Review checks paid by the licensee.

 

     (i) (iii) Review procedures used by the licensee for processing

 

checks and handling cash.

 

     (iv) Review the complaint file maintained by the licensee.

 

     (v) Verify payments to selected creditor accounts.

 

     (vi) Review selected counselor records and work papers.

 

     (ii) Verify that payments to selected creditor accounts are

 

properly disbursed.

 

     (iii) Verify that consumer complaints are properly handled.

 

     (iv) Review selected client files to confirm that they contain

 

the proper documentation.

 

     (h) If a contract with a debtor is lawfully sold, transferred,

 

or assigned to a licensee from by another licensee, furnish to the

 

debtor a written notice of the sale, transfer, or assignment. The

 

notice shall contain the name, and address, and contact telephone

 

number of the licensee. and the name of the counselor authorized by

 

the licensee to manage the contract.

 

     (2) A licensee that has proper controls in place to ensure

 

that the actions described in subsection (1)(g)(i) to (iv) are done

 

meets the requirements of subsection (1)(g).

 

     (3) Annually, on or before a date established by the director,

 

each licensee shall file with the director a report, on a form

 

provided by the director, stating the licensee's volume and type of

 

business activities for the immediately preceding calendar year.

 


     Sec. 17. The department may examine, without notice, the

 

condition and affairs of a licensee. In connection with an

 

examination, the department may examine on under oath a licensee

 

and any director, officer, employee, customer, creditor, manager,

 

member, partner, or stockholder of the a licensee concerning the

 

affairs and business of the licensee. The department shall

 

ascertain whether the licensee transacts its business in the manner

 

prescribed by required under this act and the rules promulgated

 

under this act. The licensee shall pay an examination fee, in an

 

amount equal to the actual cost of the examination as determined by

 

the department, which fee shall be deposited and the department

 

shall deposit that fee in the state treasury to the credit of the

 

department. Failure to pay the examination fee within 30 days after

 

receipt of receiving a demand for payment from the department shall

 

automatically suspend the license of the licensee until the fee is

 

paid.

 

     Sec. 18. (1) A In addition to the fee described in section

 

13(1), a licensee may charge a reasonable fee for providing debt

 

management services under a debt management services contract.

 

plan. The fees and charges of the licensee fee under this

 

subsection shall not exceed 15% of the amount of the debt to be

 

liquidated during the express term of the contract. The licensee

 

may require the debtor to make an initial payment of not more than

 

$25.00, which is part of the fees and charges of the licensee. The

 

initial payment may be deducted from the amount of a subsequent fee

 

that is amortized, if any.plan.

 

     (2) A licensee may offer a debtor the option to purchase

 


credit reports or educational materials and products, and charge a

 

fee to the debtor if the debtor elects to purchase any of those

 

items from the licensee. Fees charged under this subsection are not

 

subject to the 15% limitation on fees described in subsection (1).

 

     (3) (2) Except for a cancellation described in subsection (3),

 

for which a licensee may not collect the additional fee described

 

in this subsection, (4), in the event of cancellation of or default

 

on in the performance of the contract by the debtor before its

 

successful completion, the a licensee may collect $25.00 in

 

addition to any fees and charges of the licensee previously

 

received by the licensee. This $25.00 fee is not subject to the 15%

 

limitation on fees and charges of the licensee in under subsection

 

(1).

 

     (4) (3) A contract is in effect when it is signed by the

 

licensee and the debtor and the debtor has made a payment of any

 

amount to the licensee. The debtor has the right to cancel the

 

contract until 12 midnight of the third business day after the

 

first day the contract is in effect by delivering written notice of

 

cancellation to the licensee. A cancellation described in this

 

section is not subject to, and a licensee shall not collect, the

 

fee described in subsection (3).

 

     (5) (4) If a debtor fails to make a payment of any amount to a

 

licensee within 60 days after the date a payment is due under a

 

contract, the contract is considered canceled by the debtor. A

 

debtor may file a letter of continuation of a contract even if the

 

debtor did not make a payment within 60 days after a payment was

 

due. All of the following apply to a letter of continuation of a

 


contract:licensee may, in its discretion, cancel the debt

 

management contract if it determines that the plan is no longer

 

suitable for the debtor, the debtor fails to affirmatively

 

communicate to the licensee the debtor's desire to continue the

 

plan, or the creditors of the debtor refuse to continue accepting

 

payments under the plan.

 

     (a) A debtor may file only 1 letter of continuation with a

 

licensee for any contract.

 

     (b) A letter of continuation must contain a detailed

 

explanation of the reason or reasons for the missed payment or

 

payments.

 

     (c) A contract for which a letter of continuation that meets

 

the requirements of this subsection is filed remains in effect and

 

subject to cancellation for any future failure to make a payment or

 

payments as described in this subsection.

 

     (d) A contract between a licensee and a debtor shall clearly

 

provide for 1 letter of continuation by a debtor.

 

     (e) A debtor may not file a letter of continuation with a

 

licensee at the beginning of a contract.

 

     (6) (5) A licensee shall not contract for, receive, or charge

 

a debtor an amount greater than authorized by this act. A person

 

who that violates this subsection, except as the result of an

 

inadvertent clerical or computer error, shall return to the debtor

 

the amount of the payments received from or on behalf of the debtor

 

and not distributed to creditors, and, as a penalty, an amount

 

equal to the amount overcharged.

 

     Sec. 19. A licensee shall not do any of the following:

 


     (a) Purchase from a creditor any obligation of a debtor.

 

     (b) Execute a contract or agreement to be signed by the debtor

 

unless the contract or agreement is fully and completely filled in

 

and finished.

 

     (c) Lend money or credit except under a plan approved by the

 

department.

 

     (d) Take a confession of judgment or power of attorney to

 

confess judgment against the debtor or appear as the debtor in a

 

judicial proceeding.

 

     (e) Receive or charge a fee in the form of a promissory note

 

or other promise to pay, or receive or accept a mortgage or other

 

security in real or personal property for a fee, or both.

 

     (f) Take, concurrent Concurrently with the signing of the

 

contract or as a part of the contract or as part of the application

 

for the contract, take a release of an obligation to be performed

 

on the part of the licensee is or was to perform.

 

     (g) Offer, pay, or give any cash, fee, gift, bonus, premiums,

 

reward, or other compensation to a person for referring a

 

prospective customer to the licensee. However, any of the following

 

payments are not subject to this subdivision:

 

     (i) A payment by the licensee for the lawful sale, transfer, or

 

assignment of a contract to the licensee from another licensee. is

 

not subject to this subdivision.

 

     (ii) A payment by the licensee to credit counseling

 

associations such as the national foundation for credit counseling

 

or the association of independent consumer credit counseling

 

agencies to participate in a locator service.

 


     (h) Receive any cash, fee, gift, bonus, premium, reward, or

 

other compensation from a person other than the debtor or a person

 

in the debtor's behalf in connection with the licensee's business

 

of debt management, except under a plan approved by order of the

 

department. However, a payment received by a licensee from a

 

creditor, financial institution, or other third party as part of a

 

fair share program, grant program, or another similar program is

 

not subject to this subdivision.

 

     (i) Disclose the identity of debtors who have contracted with

 

the licensee, other than except to the director or his or her

 

authorized representative, or disclose the identity of creditors of

 

a debtor to anyone other than the debtor, or the director or his or

 

her authorized representative, or another creditor of the debtor

 

and then only to the extent necessary to secure the cooperation of

 

the creditor in a debt management plan. However, this subdivision

 

does not prohibit a licensee from sharing information about a

 

debtor's debt management plan or the creditors of the debtor with

 

any person with which the debtor has specifically authorized the

 

licensee in writing to share that information.

 

     (j) Use or permit the use of a false, misleading, or deceptive

 

statement or representation with regard to the services or charges

 

of the licensee in any advertisement, display, broadcast, or offer

 

of the licensee's services.

 

     (k) In any manner, advertise, print, display, publish,

 

distribute, or broadcast any statement or representation with

 

regard to providing services under this act that is false,

 

misleading, or deceptive or permit another person to violate this

 


subdivision.

 

     (l) (k) Use an advertisement that gives a telephone number or

 

post office box without identifying the licensee and the licensee's

 

office address.

 

     (m) (l) Use advertisements containing an advertisement that

 

contains any of the following representations:

 

     (i) That the licensee will provide funds to pay bills or

 

prevent attachments.

 

     (ii) That a certain payment schedule will handle a certain

 

amount or range of indebtedness.

 

     (iii) That garnishment, attachment, repossession, or loss of job

 

will be prevented.

 

     (n) (m) Fail to provide to the debtor the full benefit of a

 

compromise of a debt arranged by the licensee with a creditor.

 

     (o) (n) In Do any of the following in connection with the

 

making of a debt management contract or with operation of the

 

debtor's account:

 

     (i) Employ any device, scheme, or artifice to defraud.

 

     (ii) Make any untrue statement of a material fact or omit to

 

state a material fact necessary in order to make the statements

 

made, in the light of the circumstances under which they are made,

 

not misleading.

 

     (iii) Engage in any act, practice, or course of business that

 

operates or would operate as a fraud or deceit upon on any person.

 

     (p) (o) Conduct the business of debt management without a

 

surety bond, or a deposit or assignment satisfactory to the

 

department in lieu of a surety bond, as described in under section

 


5(2) , in place.

 

     Sec. 20. (1) A person shall not publish or circulate a

 

pamphlet, circular, form letter, advertisement, or other sales

 

literature or advertising communication addressed to or intended

 

for distribution to prospective debtors unless a true copy has been

 

filed with the department at least 10 business days prior to the

 

first publication, and the department has given its approval for

 

use, or unless the advertisement or class of advertising has been

 

exempted by rule of the department. The department may allow a

 

shorter filing period.

 

     (1) (2) Nothing in this act shall This act does not impose any

 

liability, civil or criminal, upon on a person or publisher that is

 

regularly engaged in the business of publishing a bona fide

 

newspaper or operating a radio or television station and that, and

 

acting solely in his official capacity, who the course of that

 

business, publishes an advertisement in good faith and without

 

knowledge that the advertisement or publication constitutes a

 

violation of this act.section 19(k), (l), or (m).

 

     (2) (3) A person shall not publish an advertisement concerning

 

the offer of debt management services in this state after the

 

department by order finds that the advertisement contains a

 

statement that is false or misleading or omits to make any

 

necessary statement in order to make the statements made, in light

 

of the circumstances under which they were made, not misleading and

 

so notifies the person of that finding in writing. The department

 

may give this notification may be given summarily, without notice

 

of hearing. At any time after the issuance of a notification under

 


this section, the person desiring that desires to use the

 

advertisement may request in writing that the department rescind

 

the order. be rescinded. Upon the receipt of If it receives a

 

written request , the matter will be set for under this subsection,

 

the department shall schedule a hearing on the matter to commence

 

within 45 days unless the person making that made the request

 

consents to a later date. After the hearing the department shall

 

determine whether to affirm and continue or to rescind the order.

 

     Sec. 26. The fees collected under this act shall be paid

 

promptly into the state treasury to the credit of the general

 

fund.department.

 

     Enacting section 1. This amendatory act takes effect 90 days

 

after the date it is enacted into law.