act-2008-0-117•Pennsylvania Act 2008-117 — DEBT MANAGEMENT SERVICES ACT - ENACTMENT
Pennsylvania Act 2008-117 — DEBT MANAGEMENT SERVICES ACT - ENACTMENT
act-2008-0-1172008 Pa. Act 117Law
Act text
DEBT MANAGEMENT SERVICES ACT - ENACTMENT
Act of Oct. 9, 2008, P.L. 1421, No. 117 Cl. 12
AN ACT
Providing for the licensure of persons providing debt management
services and for the powers and duties of the Department of
Banking; requiring surety bonds; prohibiting certain fees and
costs; providing for debt management plans; and prohibiting
certain acts by persons providing debt management services.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Short title.
This act shall be known and may be cited as the Debt
Management Services Act.
Section 2. Definitions.
The following words and phrases when used in this act shall
have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Applicant." A person who applies for a license under this
act.
"Banking institution." A State-chartered bank, bank and
trust company, savings bank or private bank, a national bank, a
federally chartered or State-chartered savings association or a
subsidiary of any of the foregoing.
"Consumer." An individual who owes money for personal,
family or household expenses to at least one creditor.
"Consumer education program." A detailed and customized
education program that:
(1) Is provided to a consumer prior to offering a
consumer a debt management services agreement.
(2) Is designed to improve a consumer's ability to
manage the consumer's personal and household finances and to
otherwise improve the financial literacy of the consumer.
(3) Includes the following, tailored to the needs of the
consumer: budgeting, saving, investing, managing debt and
maintaining creditworthiness.
(4) Is not limited to determining whether a consumer
will benefit from debt management services, but includes
various options and strategies for addressing the consumer's
debt problems and may include the provision of services for
the purpose of improving a consumer's credit record, credit
history or credit rating, but only to the extent that such
services are incidental to providing the other elements of
the consumer education program.
"Credit counseling agency." A person that provides debt
management plan services to consumers for a fee, contribution or
other consideration.
"Debt management services." The service of receiving funds
periodically from a consumer and then distributing those funds
to creditors of the consumer in partial or full payment of the
consumer's personal debts.
"Debt settlement services." An action or negotiation made on
behalf of a consumer with that consumer's creditors for the
purpose of the creditor forgiving part or all of the principal
of the debt incurred or credit extended to that consumer. The
term shall not include any action taken to convince a creditor
to waive any fees or charges.
"Department." The Department of Banking of the Commonwealth.
"Licensee." A person licensed under the provisions of this
act.
"Payday loan." A short-term cash advance of $3,000 or less
that is secured or facilitated by a consumer's personal check
that is held for future deposit or by electronic access to the
consumer's bank account. The term includes any form of this
lending, notwithstanding the presence of some other element
introduced to disguise the true nature of the transaction, such
as the sale or provision of a good, service or commodity
incidental to the advance of funds and notwithstanding the fact
that the transaction is conducted in person, by mail, Internet
or telephone, or through any other means.
"Person." An individual, corporation, partnership or other
entity legally recognized by the Commonwealth for business
purposes.
"Secretary." The Secretary of Banking of the Commonwealth.
Section 3. License required.
(a) Debt management services.--No person may advertise,
solicit, state or represent that it can offer, obtain or procure
debt management services to or for a consumer or provide debt
management services to a consumer unless the person is licensed
by the department under this act.
(b) Debt settlement services.--No person may advertise,
solicit, state or represent that it can offer, obtain or procure
debt settlement services to or for a consumer or provide debt
settlement services to a consumer for a fee unless the person is
licensed by the department under this act and is operating in
accordance with regulations promulgated by the department
regarding the conduct of debt settlement services.
Section 4. Nonapplicability.
(a) Exemption from act.--This act does not apply to the
following persons:
(1) A banking institution or a federally chartered or
State-chartered credit union, if the primary regulator of the
banking institution or federally chartered or State-chartered
credit union supervises the banking institution or federally
chartered or State-chartered credit union.
(2) Judicial officers or persons acting under court
order.
(3) Agencies or instrumentalities of Federal, State or
local government.
(4) Employees of licensees or exempt persons under this
act.
(5) Attorneys who are admitted to the bar of this
Commonwealth and provide legal services within an attorney-
client relationship who engage in debt management services or
debt settlement services within the normal course of legal
practice.
(b) Exemption from licensing.--The following persons are not
required to be licensed under this act, but must comply with the
provisions of this act if they offer, obtain or provide debt
management services or debt settlement services:
(1) Certified public accountants who are licensed by the
Commonwealth and provide accounting services within an
accountant-client relationship.
(2) Title insurance companies licensed under the act of
May 17, 1921 (P.L.682, No.284), known as The Insurance
Company Law of 1921, or their agents.
(3) Mortgage lenders, mortgage brokers and mortgage loan
correspondents licensed under the provisions of 7 Pa.C.S. Ch.
61 (relating to mortgage loan industry licensing and consumer
protection).
Section 5. Application for licensure.
An application for a license under this act shall be
submitted to the department in the form required by the
department and shall include the following:
(1) The applicant's name, address, telephone number,
electronic mail address and Internet website.
(2) The address of each location in this Commonwealth
where the applicant will provide debt management services.
(3) The name and address of each owner, officer,
director or principal of the applicant.
(4) The name and address of the applicant's agent for
service of process in this Commonwealth.
(5) A description of the ownership interest of any
officer, director, agent or employee of the applicant in an
affiliate or subsidiary of the applicant or in any other
business entity that will provide any service to the
applicant or to a consumer relating to the applicant's
provision of debt management services.
(6) A list of other states in which the applicant
engages in the business of providing debt management
services, including any relevant license or registration
number and information regarding whether a license or
registration in another state has ever been suspended or
revoked.
(7) The audited financial statement from the applicant's
most recent fiscal year, including an audit opinion from an
independent certified public accountant.
(8) A copy of a liability or fidelity insurance policy
that insures against dishonesty, fraud, theft or other
malfeasance on the part of the applicant's employees,
officers, directors or principals.
(9) A copy of the applicant's standard debt management
services agreement.
(10) Information regarding the applicant's trust
account, including the name and address of the FDIC-insured
depository institution where the account is located and the
number of the account.
(11) Information regarding the number of the applicant's
credit counselors and supervisors or managers with direct
supervisory duties of credit counselors who perform the
consumer education program who are certified by an
independent certifying organization acceptable to the
department and a plan to ensure that any of the credit
counselors and supervisors or managers with direct
supervisory duties of credit counselors who perform the
consumer education program who are not certified become
certified within six months of the issuance date of the
license. A licensee shall notify the department of any change
in status regarding the licensee's certified credit
counselors, supervisor or managers with direct supervisory
duties of credit counselors within ten days of the change.
(12) Evidence that the applicant is accredited by an
independent accrediting organization acceptable to the
department.
(13) A penal bond meeting the requirements of section 7.
(14) A nonrefundable fee of $2,000.
(15) A description of the consumer education program
that the applicant provides or intends to provide to
consumers along with copies of any written materials used or
to be used in the program.
(16) Any other information that the department requires.
Section 6. License fees for certain entities.
Notwithstanding any other provision of this act, a domestic
or foreign not-for-profit corporation or association registered
as such under 15 Pa.C.S. Pt. II Subpt. C (relating to nonprofit
corporations) with the Secretary of the Commonwealth which has
annual gross revenues from debt management services fees and
charges of less than $3,000,000 annually shall only be required
to pay an initial license fee of $500 and an annual renewal fee
of $350.
Section 7. Penal bond.
(a) General rule.--The department shall issue a license
under this act if the applicant obtains and maintains a bond in
an amount greater than the total amount of Pennsylvania consumer
funds that the licensee will hold directly or in trust at any
time, in a form acceptable to the department, prior to the
issuance of the license, from a surety company authorized to do
business in this Commonwealth. The bond shall be a penal bond
conditioned on compliance with this act and subject to
forfeiture by the department and shall run to the Commonwealth
for its use. The bond shall also be for the use of any person
against the licensee for the benefit of any consumer who is
injured by a violation of this act or regulation promulgated
under this act.
(b) Rights of aggrieved persons.--
(1) If the person is aggrieved, the person may, with the
written consent of the department, recover fees and costs
from the bond by filing a claim with the surety company or
maintaining an action on the bond.
(2) In the alternative, an aggrieved person may recover
fees and costs by filing a formal complaint against the
licensee with the department which shall adjudicate the
matter. The adjudication shall be binding upon the surety
company and enforceable by the department in Commonwealth
Court and by an aggrieved person in any court.
(3) Any aggrieved person seeking to recover from a bond
that has already been forfeited by the department or which
the department is in the process of forfeiting may recover
payment on the bond if, after filing a petition with the
department, the department consents to the aggrieved person's
requested payment or portion thereof. The department may pay
the aggrieved person from the bond proceeds it recovers.
(c) Other relief.--
(1) Nothing in this section shall be construed to limit
the ability of any court or magisterial district judge to
award to any aggrieved person other damages, court costs and
attorney fees as permitted by law, but those claims that are
not fees or related costs may not be recovered from the bond.
(2) The department, in its discretion, may consent to or
order pro rata or other recovery on the bond for any
aggrieved person if claims against the bond may or do exceed
its full monetary amount.
(d) Cancellation of bonds.--No bond shall comply with the
requirements of this section unless it contains a provision that
it shall not be canceled for any cause unless notice of
intention to cancel is given to the department at least 30 days
before the day upon which cancellation shall take effect.
Cancellation of the bond shall not invalidate the bond regarding
the period of time it was in effect.
Section 8. Issuance of license.
(a) Time for issuance.--The department shall decide whether
to issue a license to an applicant within 60 days of receiving
the applicant's completed application. If the department needs
longer than 60 days to make a decision, it may extend the time
period for 30 days. The department shall notify the applicant of
the extended time period, including a final decision date, in
writing.
(b) Investigation.--Upon receipt of a completed application,
the department may conduct an investigation of the applicant,
including its owners, officers, directors, principals or agents
in order to decide whether to issue the license.
(c) Appeal of denial.--If the department refuses to issue a
license, it shall notify the applicant in writing that the
license has been denied, including the reason for the denial and
that the applicant has the right to appeal the denial to the
secretary within 30 days.
(d) Duration.--A license shall be issued for a period of one
year on a schedule determined by the department, provided that
if a license is issued prior to the beginning of a licensing
year, the license shall only be valid until the end of that
licensing year, at which time it may be renewed subject to the
provisions of this act. In the event that a license is denied,
canceled, surrendered, revoked or suspended, no part of the
license fee or license renewal fee is subject to rebate.
(e) Contents.--The license shall be on a form determined by
the department and shall contain, at a minimum, the name of the
licensee, the address at which the licensee is conducting
business and a license number.
(f) Display.--The license shall be displayed prominently at
the licensee's business locations.
(g) Transfer prohibited.--The license shall not be
transferred, assigned or pledged.
(h) Conditional licenses.--The department may impose
conditions on the issuance of any license under this act. If the
department determines that conditions imposed upon a license
have not been fulfilled, the department may take any action
authorized under this act against the licensee that the
department deems necessary. In the case of applicants, the
department may issue licenses effective immediately upon receipt
of an application, which licenses shall be conditional licenses
issued under this subsection.
Section 9. Renewal of license.
(a) General rule.--An application for renewal of a license
shall be submitted to the department on the form determined by
the department and in the time period determined by the
department. Each application for renewal shall be accompanied by
a fee of $1,250.
(b) Required condition.--The department shall determine the
information and documentation that shall be provided in the
application for renewal of a license sufficient to establish
that the licensee continues to conduct its business in
accordance with this act.
(c) Continuing education.--In order to maintain its license,
a licensee shall demonstrate to the satisfaction of the
department that its credit counselors, supervisors and managers
participate in continuing education as required by the
department by regulation. The department shall delineate the
requirements for such continuing education by regulation within
three years after the effective date of this act.
Section 10. Reasons for denial, suspension, revocation or
refusal.
The department may deny, suspend, revoke or refuse to renew a
license for the following reasons, if committed by the applicant
or one of its owners, officers, directors, principals or agents:
(1) Made a material misstatement in the license
application or any other submission required by this act or
the department.
(2) Failed to comply with or violated any provision of
this act or any regulation, order or statement of policy
issued by the department under this act.
(3) Engaged in unfair or unethical conduct in connection
with the debt management services business.
(4) Does not possess the financial responsibility,
character, reputation, integrity and general fitness
sufficient to warrant the belief that the debt management
services business will be conducted lawfully, honestly and in
the public interest.
(5) Been convicted of or pleaded guilty or nolo
contendere to a crime of moral turpitude or to an offense
graded as a felony.
(6) Been enjoined by a court of competent jurisdiction
from engaging in the business of debt management services.
(7) Has had a license issued by the department denied,
not renewed, suspended or revoked.
(8) Became the subject of a United States Postal Service
fraud order.
(9) Demonstrated negligence or incompetence in
performing an act for which the applicant is required to hold
a license under this act.
(10) Has an outstanding debt to the Commonwealth or any
Commonwealth agency.
(11) Has failed to maintain the bond required under
section 7.
(12) Becomes insolvent, meaning that the liabilities of
the applicant or licensee exceed the assets of the applicant
or licensee or that the applicant or licensee cannot meet the
obligations of the applicant or licensee as they mature or is
in such financial condition that the applicant or licensee
cannot continue in business with safety to the customers of
the applicant or licensee.
(13) Has failed to disburse a consumer's payments to
creditors in a timely manner as agreed to under a debt
management services agreement for any reason other than the
consumer's failure to make the agreed-to payments to the
licensee or because such disbursement would constitute a
violation of applicable law or an order issued by a court or
administrative body of competent jurisdiction.
Section 10.1. Payday loans.
The department shall deny a license under this act to an
applicant that offers payday loans.
Section 11. Reinstatement.
The department may reinstate a license that was previously
suspended, revoked or denied renewal, if all of the following
exist:
(1) A condition that warranted the original action has
been corrected to the department's satisfaction.
(2) The department has reason to believe that the
condition is not likely to occur again.
(3) The licensee satisfies all other requirements of
this act.
Section 12. Limitations on license.
(a) Name or address.--A licensee shall not conduct business
under this act under a name or at an address different from that
contained on the licensee's license. When a licensee changes its
name or its business address, it shall notify the department
within ten days of the change and the department may issue a new
license specifying the licensee's new name or address.
(b) Other businesses.--A licensee shall not conduct a
business other than the debt management service business
licensed by the department under this act unless it notifies the
department in writing at least 30 days before beginning to
conduct that business.
(c) Consumer funds.--A licensee may not hold money from
Pennsylvania consumers, either directly or in any trust, in an
amount in excess of the bond required under section 7.
Section 13. Reports to department.
(a) Annual report.--A licensee shall file an annual report
with the department on a date determined by the department
setting forth such information as the department shall require
concerning the debt management services business conducted by
the licensee during the preceding calendar year. The report
shall be on a form provided by the department.
(b) Report of enforcement action.--A licensee shall report
to the department any enforcement action taken against the
licensee by any Federal or State agency. The report shall be
filed no later than seven days after the licensee becomes aware
of the enforcement action. The licensee shall provide updates to
the department as to the status of any enforcement action as
required by the department.
(c) Report of failure to remit payments.--In the event that
a licensee believes that it may not be able to remit a
consumer's payment to a creditor for any reason other than the
consumer's failure to provide funds to the licensee, the
licensee shall notify the department. The notification shall be
filed within one business day of the licensee becoming aware of
its inability to make the payment. The notification shall
contain any pertinent facts, including the reason the licensee
believes it may not be able to make the payment and what steps
the licensee will take to resolve the situation. The licensee
shall provide updates to the department as to the status of the
reported matter as required by the department.
(d) Penalty for noncompliance.--A licensee who fails to file
an annual report with the department as required by subsection
(a) may be subject to a penalty of $100 for each day after the
date that the annual report was required to be filed.
Section 14. Requirements for providing debt management
services.
A licensee shall provide debt management services in
accordance with the following requirements:
(1) The licensee shall provide each consumer for whom it
provides debt management services with a consumer education
program at no cost to the consumer.
(2) (i) A licensee may only provide debt management
services in accordance with a written debt management
services agreement entered into between the licensee and
the consumer. Before the licensee and consumer enter into
a debt management services agreement, the licensee shall
prepare an analysis of the consumer's financial situation
and a budget for the consumer. The analysis shall include
a good faith determination whether the consumer will
benefit from debt management services and an explanation
of that benefit. If the analysis determines that the
consumer will not benefit from debt management services,
the licensee shall not offer debt management services to
the consumer.
(ii) The licensee may communicate with the consumer
by electronic mail or the Internet, but shall not enter
into a debt management services agreement unless a
certified credit counselor employed by the licensee and
the consumer have orally reviewed the analysis, the
budget and the debt management services agreement through
a person-to-person discussion. The licensee shall provide
copies of the analysis, budget and debt management
services agreement to the consumer.
(3) A debt management services agreement shall be in
writing, signed by the licensee and the consumer, in plain
English and printed in at least 12-point type. It shall
contain at least the following information:
(i) The name, address and telephone number of the
consumer and of the licensee.
(ii) The license number of the licensee.
(iii) A description of the debt management services
to be provided to the consumer.
(iv) A description of the fees that will be charged
to the consumer.
(v) The name and address of the depository
institution where the trust account into which the
consumer's funds, paid to the licensee for disbursement
to the consumer's creditors, is located.
(vi) A list of each of the consumer's creditors that
the licensee in good faith reasonably expects to
participate in the licensee's management of the
consumer's debt, including the amount owed to each
creditor and the schedule of payments to be made to each
creditor.
(vii) A list of each of the consumer's creditors
that the licensee in good faith reasonably expects not to
participate in the licensee's management of the
consumer's debt.
(viii) A schedule of the payments that the consumer
must make to the licensee, including the amount of each
payment, the date it is due and the form in which it must
be made.
(ix) Disclosure of any fees that either the consumer
must make to the licensee or that the licensee will
retain from each of the consumer's payments to the
licensee.
(x) A notice, in bold print, that the consumer's
participation in the debt management services agreement
may negatively impact the consumer's credit rating or
credit score.
(xi) Disclosure that the licensee may receive
compensation from the consumer's creditors for providing
debt management services to the consumer.
(xii) Notice that either party may terminate the
debt management services agreement upon ten days' written
notice to the other party.
(xiii) Notice that if the debt management services
agreement is terminated, the consumer is entitled to a
prompt refund of any payments made that have not yet been
disbursed to the consumer's creditors.
(xiv) An explanation of the way in which disputes
that arise under the debt management services agreement
will be resolved.
(xv) An explanation of applicable privacy laws.
(4) The licensee shall provide each consumer
participating in a debt management services agreement with at
least quarterly statements setting forth the payments
received from the consumer and the disbursements made to the
consumer's creditors.
(5) Within two business days of receiving any payment,
the licensee shall deposit all payments received from
consumers under debt management services agreements into a
trust account established for the benefit of the consumers to
whom the licensee is furnishing debt management services. All
money paid to a licensee by or on behalf of a consumer for
distribution to creditors pursuant to a debt management
services agreement is held in trust. Any interest earned from
money held in trust on behalf of a consumer shall be used for
the benefit of the consumer. The trust account shall be in a
federally insured depository institution and is subject to
the following:
(i) Except as provided in subparagraph (iii), money
held in trust by a licensee is not property of the
licensee or any designee. The money shall not be
available to creditors of the licensee, except for a
consumer from whom or on whose behalf the licensee
received the money, to the extent the money has not been
disbursed to creditors on behalf of the consumer.
(ii) In connection with the trust account, a
licensee shall:
(A) maintain separate records of accounts for
each individual to whom the provider is furnishing
debt management services; and
(B) disburse money paid by or on behalf of the
individual to creditors of the individual as
disclosed in the debt management services agreement,
except that:
(I) The licensee may delay payment to the
extent that a payment by the consumer does not
comply with the terms of the debt management
services agreement because it is not sufficient
to pay designated creditors.
(II) If the debt management services
agreement provides for regular periodic payments
to creditors, the licensee shall make payments to
comply with the due dates established by each
creditor.
(III) The licensee may promptly correct any
payments that are not made or that are
misdirected as a result of an error by the
licensee or any person in control of the trust
account and reimburse the consumer for any costs
or fees imposed by a creditor as a result of the
licensee's failure to pay a creditor in a timely
manner.
(iii) A licensee may commingle money in a trust
account established for the benefit of the consumers who
have a debt management services agreement or debt
settlement services agreement with the licensee and to
whom the licensee is furnishing debt management services
or debt settlement services. In the event a licensee
deposits a consumer's entire payment to the licensee,
including both money for disbursement to creditors and
fees owed to the licensee, the licensee may accept
payment of fees owed to it from the trust. All money in
the trust account established for the benefit of
consumers however, shall be accounted for separately,
including an accounting for fees owed to the licensee. No
other money shall be deposited into the trust account and
the money in the account may only be used for the
purposes expressed in this subparagraph.
(iv) A trust account shall at all times have a cash
balance equal to the total amount held in all consumer
accounts.
(v) The licensee shall reconcile the trust account
at least once a month, which shall include reconciling
the cash balance in the trust account with the sum of the
balances in each consumer account. If the licensee has
more than one trust account, each trust account must be
individually reconciled.
(vi) If a licensee discovers, or has reasonable
suspicion of, embezzlement or other unlawful
appropriation of money held in trust, the licensee shall
immediately notify the department.
(vii) If a consumer terminates a debt management
services agreement with a licensee, the licensee shall
promptly refund to the consumer all money paid by or on
behalf of the consumer which has not been paid to
creditors and interest accrued thereon, less fees that
are payable to the licensee as authorized by this act.
(6) The licensee shall disburse a consumer's funds to
the consumer's creditors in a timely manner based on the
availability of the funds pursuant to the consumer's debt
management services agreement. In the event that a consumer
makes only a partial payment as required by a debt management
services agreement, the licensee shall disburse the available
funds to creditors prior to the licensee collecting its own
fees from the consumer's partial payment. In the event that a
consumer fails to resolve any scheduled payment deficiency
within 45 days of the deficiency occurring, a licensee may
terminate the debt management services agreement in
accordance with the agreement.
(7) The licensee or any business entity in which any
director, owner, officer, employee or principal of the
licensee, or any member of such person's immediate family as
defined in 65 Pa.C.S. § 1102 (relating to definitions), has
an equitable, beneficial or other ownership interest shall
not purchase any debt or obligation of a consumer.
(8) The licensee or any business entity in which any
director, owner, officer, employee or principal of the
licensee, or any member of such person's immediate family as
defined in 65 Pa.C.S. § 1102, has an equitable, beneficial or
other ownership interest shall not lend money or provide
credit to a consumer.
(9) The licensee or any business entity in which any
director, owner, officer, employee or principal of the
licensee, or any member of such person's immediate family as
defined in 65 Pa.C.S. § 1102, has an equitable, beneficial or
other ownership interest shall not offer or provide credit
insurance to a consumer.
(10) The licensee or any business entity in which any
director, owner, officer, employee or principal of the
licensee, or any member of such person's immediate family as
defined in 65 Pa.C.S. § 1102, has an equitable, beneficial or
other ownership interest shall not obtain a mortgage or other
security interest in the property of a consumer.
(11) The licensee shall not operate as a collection
agency or debt collector.
(12) The licensee shall not structure a consumer's debt
management services agreement in a way that results in the
negative amortization of any of the consumer's debts.
(13) The licensee shall not compromise any debt of a
consumer unless the compromise benefits the consumer and the
consumer has approved the proposed compromise in writing.
(14) The licensee shall have written policies describing
its safeguards against conflicts of interest in the
conducting of its business.
(15) The licensee shall not disseminate information,
including by advertising, regarding its debt management
services in any way that is false, misleading or deceptive.
(16) The licensee or any business entity in which any
director, owner, officer, employee or principal of the
licensee, or any member of such person's immediate family as
defined in 65 Pa.C.S. § 1102, has an equitable, beneficial or
other ownership interest, shall not offer, pay or give a
gift, bonus, premium, reward or any other compensation to a
person for referring a consumer to the licensee.
(17) The licensee shall not directly or indirectly
accept, offer, pay, provide, give or receive any gift, bonus,
premium, reward or any other compensation to or from any
person, including, but not limited to, any for-profit parent,
subsidiary or the affiliate of any licensee and any entity
whether or not legally recognized by the Commonwealth for
business purposes that provide debt management services for
referring a consumer to the licensee or to another licensee
or person.
(18) The licensee or any business entity in which any
director, owner, officer, employee or principal of the
licensee, or any member of such person's immediate family as
defined in 65 Pa.C.S. § 1102, has an equitable, beneficial or
other ownership interest, shall not offer or pay an
incentive, including a gift, bonus, premium, reward or any
other compensation to a consumer for executing a debt
management services agreement with the licensee.
(19) A licensee shall not, except as provided in this
section, initiate a transfer to or from an individual's
account at a financial institution or with another person
unless the transfer is one of the following:
(i) a return of money to the individual's account;
or
(ii) before termination of debt management services,
properly authorized by the debt management services
agreement and this section and for either of the
following:
(A) payment to one or more creditors pursuant to
a debt management services agreement; or
(B) payment of a fee permitted by this act and
as part of a debt management services agreement.
(20) The licensee shall not disclose the identity or
identifying information of a consumer or the identity of the
consumer's creditors except as permitted by Federal law.
Disclosure may be made:
(i) to the department;
(ii) to a creditor of the consumer, to the extent
necessary to secure the cooperation of the creditor in
the debt management services agreement; or
(iii) as is necessary to administer the debt
management services agreement.
(21) The licensee that primarily communicates with a
consumer in a language other than English shall provide the
debt management services agreement and any other documents or
disclosures required by this act to the consumer in that
other language.
(22) The licensee shall not delegate any of its duties
or obligations under this act or a debt management services
agreement to any person who is not licensed pursuant to this
act and to whom this act is applicable.
(23) The licensee shall have a toll-free telephone
number that shall be prominently displayed on the licensee's
literature and advertising.
(24) The licensee shall not compensate its employees on
the basis of a formula that incorporates the number of
consumers the employee induces to enter into debt management
services agreements or the amount of debt included in a debt
management services agreement.
(25) A licensee shall maintain a communications system,
staffed at a level that reasonably permits inquiring persons
and clients to individually speak and discuss with counselors
or a customer services representative of the licensee during
regular business hours.
Section 15. Fees.
(a) Limitation.--A licensee may charge a fee of not more
than $50 for an initial consultation with a consumer, provided
that the consultation includes a consumer education program.
(b) Monthly maintenance fee.--When a consumer and a licensee
have entered into a debt management services agreement, the
licensee may charge the consumer a monthly maintenance fee not
to exceed $10 times the number of accounts initially included
under the agreement, provided that the total monthly fee may not
exceed $50.
(c) Insufficient funds fee.--A licensee may collect a fee
for a subsequent dishonored check or instrument taken in
payment, not to exceed the service charge permitted to be
imposed under 18 Pa.C.S. § 4105 (relating to bad checks).
(d) Actual cost.--A licensee may charge a consumer for the
actual cost in requesting the consumer's credit report.
(e) Contributions prohibited.--A licensee shall not require
or accept any contribution from a consumer on a debt management
plan for services regulated pursuant to this act unless
otherwise restricted by regulations promulgated by the
department pursuant to this act.
(f) Education or counseling fee.--A licensee may not charge
a consumer who enters into a debt management services agreement
any fee for providing education or counseling. In the event that
a consumer receives education or counseling from a licensee
subject to a fee or charge without entering into a debt
management services agreement and subsequently enters into a
debt management services agreement with the licensee within four
months of beginning the education or counseling, the licensee
shall refund the fee charged for the education or counseling.
(g) Fees subject to debt management plan agreement.--A
licensee may not impose charges or receive payment for debt
management services until the licensee and the consumer have
signed a debt management services agreement.
(h) No other fees permitted.--A licensee shall not charge a
consumer any fees other than those described in this section or
by regulation promulgated by the department for services
regulated pursuant to this act.
(i) Fee limits.--For the 12-month period beginning with the
effective date of this act, and annually thereafter, the fee
limits provided in this section shall be increased by the
percentage of change, if any, in the Consumer Price Index for
All Urban Consumers for the Pennsylvania, New Jersey, Delaware
and Maryland area for the most recent 12-month period for which
figures are officially reported by the United States Department
of Labor, Bureau of Labor Statistics, immediately prior to the
date the adjustment is due to take effect, but in no event shall
deflation result in a negative cost-of-living adjustment.
Section 16. Violations.
(a) General rule.--The department may impose a civil penalty
up to $10,000 for each violation of this act.
(b) Criminal liability.--A licensee who acts in accordance
with the provisions of this act does not engage in "debt
pooling" for purposes of 18 Pa.C.S. § 7312 (relating to debt
pooling) and shall not be subject to criminal liability under 18
Pa.C.S. § 7312 unless the license is denied, suspended or
revoked or its renewal is refused.
(c) Unfair trade practices.--A person who engages in the
business of offering, soliciting or providing debt management
services or debt settlement services without being licensed
under or exempt from the licensing provisions of this act, or is
otherwise in violation of this act in any way, shall be in
violation of the act of December 17, 1968 (P.L.1224, No.387),
known as the Unfair Trade Practices and Consumer Protection Law.
Section 17. Powers and duties of department.
The department shall have the authority to:
(1) Examine any instrument, document, account, book,
record or file of a licensee or any person having a
connection to the licensee or make other investigations as
may be necessary to administer the provisions of this act.
The examination may include documents, accounts, books or
records that relate to the operation of the licensee that are
in the possession of an affiliate, subsidiary or other
business entity. Pursuant to this authority, the department
may remove any instrument, document, account, book, record or
file of a licensee or person to a location outside of the
licensee's or person's office location. The examination may
be conducted without prior notice to the licensee or person
and the costs of the examination shall be borne by the
licensee or person subject to the examination.
(2) Conduct administrative hearings on any matter
pertaining to this act, issue subpoenas to compel the
attendance of witnesses or the production of documents,
accounts, books or records at a hearing. A document, account,
book or record subject to subpoena may be retained by the
department until the proceeding in connection with which it
was subpoenaed is completed. A department official may
administer oaths or affirmations to a person whose testimony
is required.
(3) Request and receive information or records of any
kind, including reports of criminal history record
information, from any Federal, State, local or foreign
government entity regarding an applicant, a licensee or a
person related to the business of debt management services.
The cost associated with the request shall be paid by the
applicant or licensee.
(4) Promulgate regulations or issue statements of policy
or orders to ensure the proper administration or enforcement
of this act and the proper conduct of licensees under this
act.
(5) Prohibit a person or licensee that violates this act
from working in any capacity related to activities regulated
by the department.
(6) Order a person or licensee to make restitution for
actual damages to consumers caused by a violation of this act
or to refund fees collected in violation of this act.
(7) Issue a cease and desist order that takes effect
immediately, but that is subject to a hearing within 14 days
of the issuance of the order.
(8) Impose other conditions or take other actions as the
department deems appropriate to administer or enforce this
act.
(9) Provide the following on its Internet website:
(i) Information for licensees on the provisions of
this act.
(ii) Information for consumers regarding the
protections of this act.
(iii) Information on filing consumer complaints,
including a toll-free telephone number.
(iv) A list of current licensees.
(10) Except for the information specified in section
5(7), make the information collected under section 5
available to the public upon request to the department
pursuant to the act of February 14, 2008 (P.L.6, No.3), known
as the Right-to-Know Law.
Section 18. Administrative proceedings.
(a) Hearings.--A person aggrieved by a decision of the
department may appeal the decision to the secretary. The appeal
shall be conducted under 2 Pa.C.S. Ch. 5 Subch. A (relating to
practice and procedure of Commonwealth agencies).
(b) Injunctions.--The department may maintain an action for
an injunction or other process against a person to restrain or
prevent the person from violating this act.
(c) Final orders.--
(1) A decision of the secretary shall be a final order
of the department and shall be enforceable in a court of
competent jurisdiction.
(2) The department may publish final adjudications
issued under this section, subject to redaction or
modification to preserve confidentiality.
(d) Appeals.--A person aggrieved by a decision of the
secretary may appeal the decision under 2 Pa.C.S. Ch. 7 Subch. A
(relating to judicial review of Commonwealth agency action).
Section 19. Banking Department Fund.
All fees or penalties collected by the department under this
act shall be deposited into the Banking Department Fund.
Section 20. Transition.
A person that provides debt management services before the
effective date of this section, that is not then acting in
violation of 18 Pa.C.S. § 7312 (relating to debt pooling) and
that seeks to continue providing such services must submit an
application for a license under this act within 45 days of the
effective date of this section. The applicant may continue to
provide debt management services provisionally, according to the
requirements of this act, while the department processes the
application for licensure.
Section 21. Exemption from other statutes.
A licensee under this act shall not be subject to the
provisions of the act of September 2, 1965 (P.L.490, No.249),
referred to as the Money Transmission Business Licensing Law, to
the extent that the licensee transmits money pursuant to the
terms of a debt management services or debt settlement services
agreement.
Section 48. Applicability.
The provisions of this act shall apply to:
(1) Any debt management services agreement or debt
settlement services agreement which is:
(i) negotiated, offered or otherwise transacted
within this Commonwealth, in whole or in part, whether by
the licensee or any other person;
(ii) made or executed within this Commonwealth after
the effective date of this act; or
(iii) notwithstanding the place of execution,
entered into with a resident of this Commonwealth.
(2) Any person who engages in debt management services
or debt settlement services in this Commonwealth.
Section 49. Repeal.
The act of December 16, 1992 (P.L.1144, No.150), known as the
Credit Services Act, is repealed insofar as it is inconsistent
with this act.
Section 50. Effective date.
This act shall take effect in 120 days.
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