H2294B4066A09563 JKL:CMM 10/01/08 #90 A09563
AMENDMENTS TO HOUSE BILL NO. 2294
Sponsor: SENATOR COSTA
Printer's No. 4066
1 Amend Sec. 2, page 1, by inserting between lines 14 and 15
2 "Applicant." A person who applies for a license under this
3 act.
4 "Banking institution." A State-chartered bank, bank and
5 trust company, savings bank or private bank, a national bank, a
6 federally chartered or State-chartered savings association or a
7 subsidiary of any of the foregoing.
8 Amend Sec. 2, page 1, lines 16 through 18; page 2, lines 1
9 through 3, by striking out "The term" in line 16 and all of
10 lines 17 and 18, page 1 and all of lines 1 through 3, page 2 and
11 inserting
12 "Consumer education program." A detailed and customized
13 education program that:
14 (1) Is provided to a consumer prior to offering a
15 consumer a debt management services agreement.
16 (2) Is designed to improve a consumer's ability to
17 manage the consumer's personal and household finances and to
18 otherwise improve the financial literacy of the consumer.
19 (3) Includes the following, tailored to the needs of the
20 consumer: budgeting, saving, investing, managing debt and
21 maintaining creditworthiness.
22 (4) Is not limited to determining whether a consumer
23 will benefit from debt management services, but includes
24 various options and strategies for addressing the consumer's
25 debt problems and may include the provision of services for
26 the purpose of improving a consumer's credit record, credit
27 history or credit rating, but only to the extent that such
28 services are incidental to providing the other elements of
29 the consumer education program.
30 "Credit counseling agency." A person that provides debt
31 management plan services to consumers, for a fee, contribution
32 or other consideration.
33 Amend Sec. 2, page 2, lines 5 and 6, by striking out "under a
34 debt management services agreement"
35 Amend Sec. 2, page 2, line 7, by inserting after "consumer's"
1 personal
2 Amend Sec. 2, page 2, line 8, by striking out all of said
3 line and inserting
4 "Debt settlement services." An action or negotiation made on
5 behalf of a consumer with that consumer's creditors for the
6 purpose of the creditor forgiving part or all of the principal
7 of the debt incurred or credit extended to that consumer. The
8 term shall not include any action taken to convince a creditor
9 to waive any fees or charges.
10 "Department." The Department of Banking of the Commonwealth.
11 "Licensee." A person licensed under the provisions of this
12 act.
13 Amend Sec. 2, page 2, line 11, by striking out "that provides
14 debt management services"
15 Amend Sec. 3, page 2, lines 14 and 15, by striking out all of
16 said lines and inserting
17 (a) Debt management services.--No person may advertise,
18 solicit, state or represent that it can offer, obtain or procure
19 debt management services to or for a consumer or provide debt
20 management services to a consumer unless the person is licensed
21 by the department under this act.
22 (b) Debt settlement services.--No person may advertise,
23 solicit, state or represent that it can offer, obtain or procure
24 debt settlement services to or for a consumer or provide debt
25 settlement services to a consumer for a fee unless the person is
26 licensed by the department under this act and is operating in
27 accordance with regulations promulgated by the department
28 regarding the conduct of debt settlement services.
29 Amend Sec. 4, page 2, lines 17 through 30; page 3, lines 1
30 through 7, by striking out all of said lines on said pages and
31 inserting
32 (a) Exemption from act.--This act does not apply to the
33 following persons:
34 (1) A banking institution or a federally chartered or
35 State-chartered credit union, if the primary regulator of the
36 banking institution of federally chartered or State-chartered
37 credit union supervises the banking institution or federally
38 chartered or State-chartered credit union.
39 (2) Judicial officers or persons acting under court
40 order.
41 (3) Agencies or instrumentalities of Federal, State or
42 local government.
43 (4) Employees of licensees or exempt persons under this
44 act.
45 (5) Attorneys who are admitted to the bar of this
46 Commonwealth and provide legal services within an attorney-
47 client relationship who engage in debt management services or
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1 debt settlement services within the normal course of legal
2 practice.
3 (b) Exemption from licensing.--The following persons are not
4 required to be licensed under this act, but must comply with the
5 provisions of this act if they offer, obtain or provide debt
6 management services or debt settlement services:
7 (1) Certified public accountants who are licensed by the
8 Commonwealth and provide accounting services within an
9 accountant-client relationship.
10 (2) Title insurance companies licensed under the act of
11 May 17, 1921 (P.L.682, No.284), known as The Insurance
12 Company Law of 1921, or their agents.
13 (3) Mortgage lenders, mortgage brokers and mortgage loan
14 correspondents licensed under the provisions of 7 Pa.C.S. Ch.
15 61 (relating to mortgage loan industry licensing and consumer
16 protection).
17 Amend Sec. 5, page 4, line 2, by inserting after "The"
18 audited
19 Amend Sec. 5, page 4, lines 15 through 21, by striking out
20 all of said lines and inserting
21 (11) Information regarding the number of the applicant's
22 credit counselors and supervisors or managers with direct
23 supervisory duties of credit counselors who perform the
24 consumer education program who are certified by an
25 independent certifying organization acceptable to the
26 department and a plan to ensure that any of the credit
27 counselors and supervisors or managers with direct
28 supervisory duties of credit counselors who perform the
29 consumer education program who are not certified become
30 certified within six months of the issuance date of the
31 license. A licensee shall notify the department of any change
32 in status regarding the licensee's certified credit
33 counselors, supervisor or managers with direct supervisory
34 duties of credit counselors within ten days of the change.
35 Amend Sec. 5, page 4, line 28, by striking out all of said
36 line and inserting
37 (15) A description of the consumer education program
38 that the applicant provides or intends to provide to
39 consumers along with copies of any written materials used or
40 to be used in the program.
41 (16) Any other information that the department requires.
42 Amend Sec. 6, page 5, line 6, by striking out "REGISTRATION"
43 and inserting
44 license
45 Amend Sec. 7, page 5, line 11, by striking out "the amount of
46 $100,000" and inserting
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1 an amount greater than the total amount of
2 Pennsylvania consumer funds that the licensee will
3 hold directly or in trust at any time
4 Amend Sec. 7, page 6, line 13, by striking out "advance"
5 Amend Sec. 8, page 7, line 14, by removing the period after
6 "year" and inserting
7 on a schedule determined by the department, provided that if a
8 license is issued prior to the beginning of a licensing year,
9 the license shall only be valid until the end of that licensing
10 year, at which time it may be renewed subject to the provisions
11 of this act. In the event that a license is denied, canceled,
12 surrendered, revoked or suspended, no part of the license fee or
13 license renewal fee is subject to rebate.
14 Amend Sec. 8, page 7, line 20, by striking out "location" and
15 inserting
16 locations
17 Amend Sec. 8, page 7, by inserting between lines 22 and 23
18 (h) Conditional licenses.--The department may impose
19 conditions on the issuance of any license under this act. If the
20 department determines that conditions imposed upon a license
21 have not been fulfilled, the department may take any action
22 authorized under this act against the licensee that the
23 department deems necessary. In the case of applicants, the
24 department may issue licenses effective immediately upon receipt
25 of an application, which licenses shall be conditional licenses
26 issued under this subsection.
27 Amend Sec. 9, page 8, line 8, by inserting after
28 "regulation."
29 The department shall delineate the requirements for
30 such continuing education by regulation within three
31 years after the effective date of this act.
32 Amend Sec. 10, page 9, by inserting between lines 10 and 11
33 (11) Has failed to maintain the bond required under
34 section 7.
35 (12) Becomes insolvent, meaning that the liabilities of
36 the applicant or licensee exceed the assets of the applicant
37 or licensee or that the applicant or licensee cannot meet the
38 obligations of the applicant or licensee as they mature or is
39 in such financial condition that the applicant or licensee
40 cannot continue in business with safety to the customers of
41 the applicant or licensee.
42 (13) Has failed to disburse a consumer's payments to
43 creditors in a timely manner as agreed to under a debt
44 management services agreement for any reason other than the
45 consumer's failure to make the agreed-to payments to the
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1 licensee or because such disbursement would constitute a
2 violation of applicable law or an order issued by a court or
3 administrative body of competent jurisdiction.
4 Amend Sec. 12, page 10, by inserting between lines 2 and 3
5 (c) Consumer funds.--A licensee may not hold money from
6 Pennsylvania consumers, either directly or in any trust, in an
7 amount in excess of the bond required under section 7.
8 Amend Sec. 13, page 10, lines 3 through 13, by striking out
9 all of said lines and inserting
10 Section 13. Reports to department.
11 (a) Annual report.--A licensee shall file an annual report
12 with the department on a date determined by the department
13 setting forth such information as the department shall require
14 concerning the debt management services business conducted by
15 the licensee during the preceding calendar year. The report
16 shall be on a form provided by the department.
17 (b) Report of enforcement action.--A licensee shall report
18 to the department any enforcement action taken against the
19 licensee by any Federal or State agency. The report shall be
20 filed no later than seven days after the licensee becomes aware
21 of the enforcement action. The licensee shall provide updates to
22 the department as to the status of any enforcement action as
23 required by the department.
24 (c) Report of failure to remit payments.--In the event that
25 a licensee believes that it may not be able to remit a
26 consumer's payment to a creditor for any reason other than the
27 consumer's failure to provide funds to the licensee, the
28 licensee shall notify the department. The notification shall be
29 filed within one business day of the licensee becoming aware of
30 its inability to make the payment. The notification shall
31 contain any pertinent facts including the reason the licensee
32 believes it may not be able to make the payment and what steps
33 the licensee will take to resolve the situation. The licensee
34 shall provide updates to the department as to the status of the
35 reported matter as required by the department.
36 (d) Penalty for noncompliance.--A licensee who fails to file
37 an annual report with the department as required by subsection
38 (a) may be subject to a penalty of $100 for each day after the
39 date that the annual report was required to be filed.
40 Amend Sec. 14, page 10, lines 20 and 21, by striking out "a
41 consumer who enters into a debt management services agreement"
42 and inserting
43 the consumer
44 Amend Sec. 14, page 10, line 22, by inserting after "(i)"
45 A licensee may only provide debt management services in
46 accordance with a written debt management services agreement
47 entered into between the licensee and the consumer.
48 Amend Sec. 14, page 10, lines 26 and 27, by striking out all
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1 of said lines and inserting
2 a good faith determination whether the consumer will benefit
3 from debt management services and an explanation of that
4 benefit. If the analysis determines that the consumer will not
5 benefit from debt management services, the licensee shall not
6 offer debt management services to the consumer.
7 Amend Sec. 14, page 10, line 30, by inserting after "unless"
8 a certified credit counselor employed by
9 Amend Sec. 14, page 11, lines 26 through 28, by striking out
10 "The schedule of payments shall include the" in line 26 and all
11 of lines 27 and 28
12 Amend Sec. 14, page 12, line 30, by inserting after "with"
13 at least
14 Amend Sec. 14, page 13, lines 4 through 7, by striking out
15 all of said lines and inserting
16 (5) Within two business days of receiving any payment,
17 the licensee shall deposit all payments received from
18 consumers under debt management services agreements into a
19 trust account established for the benefit of the consumers to
20 whom the licensee is furnishing debt management services. All
21 money paid to a licensee by or on behalf of a consumer for
22 distribution to creditors pursuant to a debt management
23 services agreement is held in trust. Any interest earned from
24 money held in trust on behalf of a consumer shall be used for
25 the benefit of the consumer. The trust account shall be in a
26 federally insured depository institution and is subject to
27 the following:
28 (i) Except as provided in subparagraph (iii), money
29 held in trust by a licensee is not property of the
30 licensee or any designee. The money shall not be
31 available to creditors of the licensee, except for a
32 consumer from whom or on whose behalf the licensee
33 received the money, to the extent the money has not been
34 disbursed to creditors on behalf of the consumer.
35 (ii) In connection with the trust account, a
36 licensee shall:
37 (A) maintain separate records of account for
38 each individual to whom the provider is furnishing
39 debt management services; and
40 (B) disburse money paid by or on behalf of the
41 individual to creditors of the individual as
42 disclosed in the debt management services agreement,
43 except that:
44 (I) The licensee may delay payment to the
45 extent that a payment by the consumer does not
46 comply with the terms of the debt management
47 services agreement because it is not sufficient
48 to pay designated creditors.
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1 (II) If the debt management services
2 agreement provides for regular periodic payments
3 to creditors, the licensee shall make payments to
4 comply with the due dates established by each
5 creditor.
6 (III) The licensee may promptly correct any
7 payments that are not made or that are
8 misdirected as result of an error by the licensee
9 or any person in control of the trust account and
10 reimburse the consumer for any costs or fees
11 imposed by a creditor as a result of the
12 licensee's failure to pay a creditor in a timely
13 manner.
14 (iii) A licensee may commingle money in a trust
15 account established for the benefit of the consumers who
16 have a debt management services agreement or debt
17 settlement services agreement with the licensee and to
18 whom the licensee is furnishing debt management services
19 or debt settlement services. In the event a licensee
20 deposits a consumer's entire payment to the licensee,
21 including both money for disbursement to creditors and
22 fees owed to the licensee, the licensee may accept
23 payment of fees owed to it from the trust. All money in
24 the trust account established for the benefit of
25 consumers however, shall be accounted for separately
26 including an accounting for fees owed to the licensee. No
27 other money shall be deposited into the trust account and
28 the money in the account may only be used for the
29 purposes expressed in this subparagraph.
30 (iv) A trust account shall at all times have a cash
31 balance equal to the total amount held in all consumer
32 accounts.
33 (v) The licensee shall reconcile the trust account
34 at least once a month, which shall include reconciling
35 the cash balance in the trust account with the sum of the
36 balances in each consumer account. If the licensee has
37 more than one trust account, each trust account must be
38 individually reconciled.
39 (vi) If a licensee discovers, or has reasonable
40 suspicion of, embezzlement or other unlawful
41 appropriation of money held in trust, the licensee shall
42 immediately notify the department.
43 (vii) If a consumer terminates a debt management
44 services agreement with a licensee, the licensee shall
45 promptly refund to the consumer all money paid by or on
46 behalf of the consumer which has not been paid to
47 creditors and interest accrued thereon, less fees that
48 are payable to the licensee as authorized by this act.
49 Amend Sec. 14, page 13, line 9, by inserting after "manner"
50 based on the availability of the funds
51 Amend Sec. 14, page 13, line 10, by inserting after
52 "agreement."
53 In the event that a consumer makes only a partial payment as
54 required by a debt management services agreement, the licensee
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1 shall disburse the available funds to creditors prior to the
2 licensee collecting its own fees from the consumer's partial
3 payment. In the event that a consumer fails to resolve any
4 scheduled payment deficiency within 45 days of the deficiency
5 occurring, a licensee may terminate the debt management services
6 agreement in accordance with the agreement.
7 Amend Sec. 14, page 13, lines 11 through 18, by striking out
8 all of said lines and inserting
9 (7) The licensee or any business entity in which any
10 director, owner, officer, employee or principal of the
11 licensee, or any member of such person's immediate family as
12 defined in 65 Pa.C.S. § 1102 (relating to definitions), has
13 an equitable, beneficial or other ownership interest shall
14 not purchase any debt or obligation of a consumer.
15 (8) The licensee or any business entity in which any
16 director, owner, officer, employee or principal of the
17 licensee, or any member of such person's immediate family as
18 defined in 65 Pa.C.S. § 1102, has an equitable, beneficial or
19 other ownership interest shall not lend money or provide
20 credit to a consumer.
21 (9) The licensee or any business entity in which any
22 director, owner, officer, employee or principal of the
23 licensee, or any member of such person's immediate family as
24 defined in 65 Pa.C.S. § 1102, has an equitable, beneficial or
25 other ownership interest shall not offer or provide credit
26 insurance to a consumer.
27 (10) The licensee or any business entity in which any
28 director, owner, officer, employee or principal of the
29 licensee, or any member of such person's immediate family as
30 that term is defined in 65 Pa.C.S. § 1102, has an equitable,
31 beneficial or other ownership interest shall not obtain a
32 mortgage or other security interest in the property of a
33 consumer.
34 Amend Sec. 14, page 14, line 3, by inserting after "licensee"
35 or any business entity in which any director, owner, officer,
36 employee or principal of the licensee, or any member of such
37 person's immediate family as defined in 65 Pa.C.S. § 1102, has
38 an equitable, beneficial or other ownership interest,
39 Amend Sec. 14, page 14, lines 6 through 8, by striking out
40 all of said lines and inserting
41 (17) The licensee shall not directly or indirectly
42 accept, offer, pay, provide, give or receive any gift, bonus,
43 premium, reward or any other compensation to or from any
44 person, including, but not limited to, any for-profit parent,
45 subsidiary or the affiliate of any licensee and any entity
46 whether or not legally recognized by the Commonwealth for
47 business purposes that provide debt management services for
48 referring a consumer to the licensee or to another licensee
49 or person.
50 Amend Sec. 14, page 14, line 9, by inserting after "licensee"
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1 , or any business entity in which any director, owner, officer,
2 employee or principal of the licensee, or any member of such
3 person's immediate family as that term is defined in 65 Pa.C.S.
4 § 1102, has an equitable, beneficial or other ownership
5 interest,
6 Amend Sec. 14, page 14, lines 13 through 19, by striking out
7 all of said lines and inserting
8 (19) A licensee shall not, except as provided in this
9 section, initiate a transfer to or from an individual's
10 account at a financial institution or with another person
11 unless the transfer is one of the following:
12 (i) a return of money to the individual's account;
13 or
14 (ii) before termination of debt management services,
15 properly authorized by the debt management services
16 agreement and this section and for either of the
17 following:
18 (A) payment to one or more creditors pursuant to
19 a debt management services agreement; or
20 (B) payment of a fee permitted by this act and
21 as part of a debt management services agreement.
22 Amend Sec. 14, page 15, line 7, by striking out "an
23 independent contractor" and inserting
24 any person who is not licensed pursuant to this act
25 and to whom this act is applicable
26 Amend Sec. 14, page 15, line 14, by removing the period after
27 "agreements" and inserting
28 or the amount of debt included in a debt management services
29 agreement.
30 (25) A licensee shall maintain a communications system,
31 staffed at a level that reasonably permits inquiring persons
32 and clients to individually speak and discuss with counselors
33 or a customer services representative of the licensee during
34 regular business hours.
35 Amend Sec. 15, page 15, line 17, by inserting after
36 "consumer"
37 , provided that the consultation includes a consumer
38 education program
39 Amend Sec. 15, page 15, line 21, by striking out "remaining"
40 and inserting
41 initially included
42 Amend Sec. 15, page 15, line 22, by striking out "for that
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1 month"
2 Amend Sec. 15, page 15, lines 24 through 30; page 16, lines 1
3 through 8, by striking out all of said lines on said pages and
4 inserting
5 (c) Insufficient funds fee.--A licensee may collect a fee
6 for a subsequent dishonored check or instrument taken in
7 payment, not to exceed the service charge permitted to be
8 imposed under 18 Pa.C.S. § 4105 (relating to bad checks).
9 (d) Actual costs.--A licensee may charge a consumer for the
10 actual cost in requesting the consumer's credit report.
11 (e) Contributions prohibited.--A licensee shall not require
12 or accept any contribution from a consumer on a debt management
13 plan for services regulated pursuant to this act unless
14 otherwise restricted by regulations promulgated by the
15 department pursuant to this act.
16 (f) Education or counseling fee.--A licensee may not charge
17 a consumer who enters into a debt management services agreement
18 any fee for providing education or counseling. In the event that
19 a consumer receives education or counseling from a licensee
20 subject to a fee or charge without entering into a debt
21 management services agreement and subsequently enters into a
22 debt management services agreement with the licensee within four
23 months of beginning the education or counseling, the licensee
24 shall refund the fee charged for the education or counseling.
25 (g) Fees subject to debt management plan agreement.--A
26 licensee may not impose charges or receive payment for debt
27 management services until the licensee and the consumer have
28 signed a debt management services agreement.
29 (h) No other fees permitted.--A licensee shall not charge a
30 consumer any fees other than those described in this section or
31 by regulation promulgated by the department for services
32 regulated pursuant to this act.
33 (i) Fee limits.--For the 12-month period beginning with the
34 effective date of this act, and annually thereafter, the fee
35 limits provided in this section shall be increased by the
36 percentage of change, if any, in the Consumer Price Index for
37 All Urban Consumers for the Pennsylvania, New Jersey, Delaware
38 and Maryland area for the most recent 12-month period for which
39 figures are officially reported by the United States Department
40 of Labor, Bureau of Labor Statistics, immediately prior to the
41 date the adjustment is due to take effect, but in no event shall
42 deflation result in a negative cost-of-living adjustment.
43 Amend Sec. 16, page 16, by inserting between lines 17 and 18
44 (c) Unfair trade practices.--A person who engages in the
45 business of offering, soliciting or providing debt management
46 services or debt settlement services without being licensed
47 under or exempt from the licensing provisions of this act, or is
48 otherwise in violation of this act in any way, shall be in
49 violation of the act of December 17, 1968 (P.L.1224, No.387),
50 known as the Unfair Trade Practices and Consumer Protection Law.
51 Amend Sec. 17, page 16, line 19, by inserting after "shall"
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1 have the authority to
2 Amend Sec. 17, page 16, lines 20 through 28, by striking out
3 all of said lines and inserting
4 (1) Examine any instrument, document, account, book,
5 record or file of a licensee or any person having a
6 connection to the licensee or make other investigation as may
7 be necessary to administer the provisions of this act. The
8 examination may include documents, accounts, books or records
9 that relate to the operation of the licensee that are in the
10 possession of an affiliate, subsidiary or other business
11 entity. Pursuant to this authority, the department may remove
12 any instrument, document, account, book, record or file of a
13 licensee or person to a location outside of the licensee's or
14 person's office location. The examination may be conducted
15 without prior notice to the licensee or person and the costs
16 of the examination shall be borne by the licensee or person
17 subject to the examination.
18 Amend Sec. 17, page 17, line 17, by inserting after "act"
19 and the proper conduct of licensees under this act
20 Amend Sec. 17, page 17, line 18, by inserting after "person"
21 or licensee
22 Amend Sec. 17, page 17, line 21, by inserting after "person"
23 or licensee
24 Amend Sec. 17, page 17, line 22, by inserting after "act"
25 or to refund fees collected in violation of this act
26 Amend Sec. 17, page 17, by inserting between lines 28 and 29
27 (9) Provide the following on its Internet website:
28 (i) Information for licensees on the provisions of
29 this act.
30 (ii) Information for consumers regarding the
31 protections of this act.
32 (iii) Information on filing consumer complaints,
33 including a toll-free telephone number.
34 (iv) A list of current licensees.
35 (10) Except for the information specified in section
36 5(7), make the information collected under section 5
37 available to the public upon request to the department
38 pursuant to the act of February 14, 2008 (P.L.6, No.3), known
39 as the Right-to-Know Law.
40 Amend Sec. 20, page 18, line 22, by striking out "and" and
41 inserting
42 , who is not then acting in violation of 18 Pa.C.S. §
43 7312 (relating to debt pooling) and who
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1 Amend Bill, page 18, by inserting between lines 27 and 28
2 Section 21. Exemption from other statutes.
3 A licensee under this act shall not be subject to the
4 provisions of the act of September 2, 1965 (P.L.490, No.249),
5 referred to as the Money Transmission Business Licensing Law, to
6 the extent that the licensee transmits money pursuant to the
7 terms of a debt management services or debt settlement services
8 agreement.
9 Section 48. Applicability.
10 The provisions of this act shall apply to:
11 (1) Any debt management services agreement or debt
12 settlement services agreement which is:
13 (i) negotiated, offered or otherwise transacted
14 within this Commonwealth, in whole or in part, whether by
15 the licensee or any other person;
16 (ii) made or executed within this Commonwealth after
17 the effective date of this act; or
18 (iii) notwithstanding the place of execution,
19 entered into with a resident of this Commonwealth.
20 (2) Any person who engages in debt management services
21 or debt settlement services in this Commonwealth.
22 Amend Sec. 50, page 19, line 3, by striking out "60" and
23 inserting
24 120
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