SENATE BILL No. 664

 

 

November 6, 2013, Introduced by Senators KOWALL and ANANICH and referred to the Committee on Banking and Financial Institutions.

 

 

 

     A bill to amend 1975 PA 148, entitled

 

"Debt management act,"

 

by amending the title and sections 2, 4, 5, 6, 11, 12, 13, 14, 15,

 

16, 17, 18, 19, and 20 (MCL 451.412, 451.414, 451.415, 451.416,

 

451.421, 451.422, 451.423, 451.424, 451.425, 451.426, 451.427,

 

451.428, 451.429, and 451.430), sections 2, 4, 5, 6, 11, 12, 13,

 

14, 15, 16, 17, 18, and 19 as amended by 2000 PA 255.

 

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; payment of 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) "Counselor" means an employee or agent of a licensee who

 

engages in financial counseling and budget analysis debt counseling

 

functions. and scheduling of debtor's funds.

 

     (c) "Creditor" means a person, other than the licensee, 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.

 

     (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.

 

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

 

collected for the benefit of a creditor of the debtor.

 

     (f) "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.

 

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

 


insurance services.department of insurance and financial services.

 

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

 

department or his or her authorized representative.

 

     (i) (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.

 

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

 

order issued by the director under this act.

 

     (k) (j) "Licensee" means a person that is licensed under this

 

act to perform debt management services and is located inside or

 

outside the boundaries of this state.

 

     (l) (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.

 

     (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.

 

     (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 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

 

must pass an examination administered by the director or his or her

 

designee 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 employed by that person shall pass an

 

examination within the first 180 days of employment administered by

 

the director or his or her designee. All of the following apply to

 

the examination:

 

     (a) The examination may be oral or written, or partly oral and

 

partly written. , and

 

     (b) The examination shall be practical in nature and

 

sufficiently thorough to ascertain the applicant's fitness.

 

understanding of the job duties of a counselor under this act.

 

     (c) Questions on bookkeeping, credit adjusting, business

 


ethics, agency, contracts, debtor and creditor relationships, trust

 

funds, and the relevant provisions of this act and relevant rules

 

promulgated under this act may be included in the examination.

 

     (d) The director may charge an examination fee of $25.00 for

 

administering this examination.

 

     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.

 

     (e) A license is not transferable or assignable.

 

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

 

to the department within 5 15 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.

 

     (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.The debtor's monthly income. For purposes of 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 debtor knows that amount.

 

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

 

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

 

management plan and of those obligations that are not included in

 

the debt management plan.

 

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

 

insurance, and all other living expenses.

 

     (f) (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. The fee

 

is nonrefundable.

 

     (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 obtained,

 


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, 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 dates termination date 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 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.

 

     (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 enter into 1 or more additional

 

contracts 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 account. 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 45 business days. 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.

 

     (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 a

 

licensee's repeated and advertent failure to maintain that amount

 

is cause for a summary suspension of the a license.

 

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

 

section does not contain sufficient funds to cover the debtor

 

escrow balances on more than 1 occasion, 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,

 

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).

 

     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 licensee may charge a reasonable fee under a

 

debt management services contract. The fees and charges of the

 

licensee 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.debtor 1 or more of the following fees

 

for providing debt management services, as determined by the

 

licensee:

 

     (a) A monthly fee in an amount equal to 15% of any amount paid

 

by or on behalf of the debtor in that month for distribution to a

 

creditor or creditors of the debtor, or in the amount of $30.00,

 

whichever is greater.

 

     (b) An initial fee of not more than $50.00 for creating the

 

debtor's account.

 


     (c) A fee for the purchase of credit reports and educational

 

materials and products in an amount that does not exceed $100.00,

 

or with the approval of the director, a larger fee if the director

 

determines that based on the nature and extent of the educational

 

material and products provided a larger fee is reasonable.

 

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

 

which a licensee may not collect the additional fee described in

 

this subsection, 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).(1)(a).

 

     (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 (2).

 

     (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.

 

     (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 certain national locator lines.

 


     (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, grant, or other 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 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.