THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

INTRODUCED BY WARD, D. WHITE, BRUBAKER, WAUGH, WASHINGTON AND ERICKSON, MARCH 24, 2010

REFERRED TO BANKING AND INSURANCE, MARCH 24, 2010  

AN ACT

Providing for the licensure of persons providing debt settlement

services, for powers and duties of the Department of Banking

and for enforcement; and making a related repeal.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

CHAPTER 1

PRELIMINARY PROVISIONS

Section 101.  Short title.

This act shall be known and may be cited as the Debt

Settlement Services Act.

Section 102.  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:

"Affiliate."  Any of the following:

(1)  A person that directly controls, is controlled by or

is under common control with the licensee.

(2)  An officer of or an individual performing similar

functions with respect to the licensee.

(3)  A director of or an individual performing similar

functions with respect to the licensee.

(4)  An officer or director of or an individual

performing similar functions with respect to a person

described in paragraph (1).

"Agreement."  An agreement between a licensee and an

individual for the performance of debt settlement services.

"Bank."  A financial institution, including a commercial

bank, savings bank, savings and loan association, credit union,

mortgage bank and trust company, engaged in the business of

banking, chartered under Federal or state law and regulated by a

Federal or state banking regulatory authority.

"Business address."  The physical location of a business,

including the name and number of a street.

"Concessions."  Assent to repayment of a debt on terms more

favorable to an individual than the terms of the contract

between the individual and a creditor.

"Debt settlement services."  Services as an intermediary

between an individual and one or more unsecured creditors of the

individual for the purpose of obtaining concessions through a

program designed under this act, without the intermediary

receiving money from the individual with the intent to

distribute such money to the individual's creditor, but does not

include:

(1)  Legal services provided in an attorney-client

relationship by an attorney licensed or otherwise authorized

to practice law in this Commonwealth.

(2)  Accounting services provided in an accountant-client

relationship by a certified public accountant licensed to

provide accounting services in this Commonwealth.

(3)  Financial planning services provided in a financial

planner-client relationship by a member of a financial

planning profession whose members the department, by

regulation, determines are:

(i)  Licensed by this Commonwealth.

(ii)  Subject to a disciplinary mechanism.

(iii)  Subject to a code of professional

responsibility.

(iv)  Subject to a continuing education requirement.

"Department."  The Department of Banking of the Commonwealth.

"Good faith."  Honesty in fact and the observance of

reasonable standards of fair dealing.

"Licensee."  A person licensed under the provisions of this

act.

"Person."  An individual, corporation, business trust,

estate, trust, partnership, limited liability company,

association, joint venture or any other legal or commercial

entity. The term does not include a public corporation,

government or governmental subdivision, agency or

instrumentality.

"Principal amount of the debt."  The amount of a debt at the

time of the execution of the agreement.

"Program."  A program or strategy in which a licensee

furnishes services, which contemplate that creditors will settle

debts for less than the full principal amount of debt owed by an

individual.

"Record."  Information that is inscribed on a tangible medium

or that is stored in an electronic or other medium and is

retrievable in perceivable form.

"Sign."  With present intent to authenticate or adopt a

record:

(1)  to execute or adopt a tangible symbol; or

(2)  to attach to or logically associate with the record

an electronic sound, symbol or process.

"State."  A state of the United States, the District of

Columbia, Puerto Rico, the United States Virgin Islands or any

territory or insular possession subject to the jurisdiction of

the United States.

Section 103.  Nonapplicability.

(a)  Exemption from act.--This act does not apply to the

following persons:

(1)  A banking institution or its agent 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 and who engage in 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

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).

CHAPTER 3

LICENSING

Section 301.  License required.

(a)  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 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 302.  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 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 settlement 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 settlement services.

(6)  A list of other states in which the applicant

engages in the business of providing debt settlement

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 settlement

services agreement.

(10)  Evidence that the applicant is accredited by an

independent accrediting organization acceptable to the

department.

(11)  A penal bond meeting the requirements of section

304. 

(12)  A nonrefundable fee of $2,000.

(13)  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.

(14)  Any other information that the department

reasonably requires.

Section 303.  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 settlement service 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 304.  Penal bond.

(a)  General rule.--The department shall issue a license

under this act if the applicant obtains and maintains a bond in

the amount of $50,000, 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.

(a.1)  Bond substitute.--As a substitute for the bond, a

licensee may file with the department, in the amount of the bond

requirement per subsection (a), one of the following:

(1)  An irrevocable letter of credit, issued or confirmed

by a bank approved by the department, payable upon

presentation of a certificate by the department stating that

the licensee or its agent has not complied with this act.

(2)  Bonds or other obligations of the United States or

guaranteed by the United States or bonds or other obligations

of the Commonwealth or a political subdivision of the

Commonwealth, to be deposited and maintained with a bank

approved by the department for this purpose.

(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 or bond substitute by filing a claim with the

surety company or maintaining an action on the bond or bond

substitute.

(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

or bond substitute that has already been forfeited by the

department or which the department is in the process of

forfeiting may recover payment on the bond or bond substitute

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 or bond substitute 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

or bond substitute.

(2)  The department, in its discretion, may consent to or

order pro rata or other recovery on the bond or bond

substitute for any aggrieved person if claims against the

bond or bond substitute may or do exceed its full monetary

amount.

(d)  Cancellation of bonds.--No bond or bond substitute 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 or bond substitute shall not

invalidate the bond or bond substitute regarding the period of

time it was in effect.

Section 305.  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 306.  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.

Section 307.  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 settlement services business.

(4)  Does not possess the financial responsibility,

character, reputation, integrity and general fitness

sufficient to warrant the belief that the debt settlement

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 settlement 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)  Has been convicted of a crime or suffered a civil

judgment involving dishonesty or the violation of Federal or

State securities laws.

(10)  Has an outstanding debt to the Commonwealth or any

Commonwealth agency.

(11)  Has failed to maintain the bond or bond substitute

required under section 304.

(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.

Section 308.  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 309.  Limitations on license.

(a)  Name or address.--A licensee shall not conduct business

under this act using 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 settlement 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.

Section 310.  Licensure in another state.

If an applicant holds a license or certificate of

registration in another state authorizing it to provide debt

settlement services, the applicant may submit a copy of that

license or certificate and the application for it instead of an

application in the form prescribed by this chapter. The

department shall accept the application and the license or

certificate from the other state as an application for

registration as a licensee or for renewal of registration as a

licensee, as appropriate, in this Commonwealth if:

(1)  The application in the other state contains

information substantially similar to or more comprehensive

than that required in an application submitted in this

Commonwealth.

(2)  The applicant provides the information required by

section 302(1), (2) and (9).

(3)  The applicant, under penalty of false statement,

certifies that the information contained in the application

is current or, to the extent it is not current, supplements

the application to make the information current.

CHAPTER 5

LICENSEE RESPONSIBILITIES

Section 501.  Requirement of good faith.

A licensee shall act in good faith in all matters under this

act.

Section 502.  Customer service.

A licensee shall maintain a toll-free communication system,

staffed at a level that reasonably permits an individual to

speak to a customer-service representative, as appropriate,

during ordinary business hours.

Section 503.  Prerequisites for providing debt settlement

services.

(a)  List of goods and services.--Before providing debt

settlement services, a licensee shall give the individual an

itemized list of goods and services and the charges for each.

The list must be clear and conspicuous.

(b)  Financial analysis.--A licensee may not furnish debt

settlement services unless the licensee has prepared a financial

analysis.

(c)  Copy of financial analysis and assistance option.--

Before an individual assents to an agreement to engage in a

program, a licensee shall:

(1)  Provide the individual with a copy of the analysis

required by subsection (b) in a record that identifies the

licensee and that the individual may keep whether or not the

individual assents to the agreement.

(2)  Inform the individual of the availability, at the

individual's option, of assistance by a toll-free

communication system or in person to discuss the financial

analysis required by subsection (b).

(d)  Disclosure.--Before an individual assents to an

agreement to engage in a program, the licensee shall inform the

individual of the following:

(1)  Programs are not suitable for all individuals.

(2)  Participation in a program may adversely affect the

individual's credit rating or credit scores.

(3)  Nonpayment of debt may lead creditors to increase

finance and other charges or undertake collection activity,

including litigation.

(4)  Unless the individual is insolvent, if a creditor

settles for less than the full amount of the debt, the

program may result in the creation of taxable income to the

individual, even though the individual does not receive any

money.

(5)  Specific results cannot be predicted or guaranteed

and the licensee cannot force negotiations or settlements

with creditors but will advocate solely on behalf of the

individual.

(6)  Programs require that individuals meet a certain

savings goal in order to maximize settlement results.

(7)  The licensee does not provide accounting or legal

advice to individuals, unless the licensee is professionally

licensed to provide such advice.

(8)  The licensee is the individual's advocate and does

not receive compensation from creditors, banks or third party

collection agencies.

(9)  The licensee does not make monthly payments to the

individual's creditors.

(10)  The name and business address of the licensee.

Section 504.  Communication by electronic or other means.

(a)  Compliance with Federal law.--A licensee may satisfy the

requirements of section 503, 505 or 512 by means of the Internet

or other electronic means if the licensee obtains a consumer's

consent in the manner provided by section 101(c)(1) of the

Electronic Signatures in Global and National Commerce Act

(Public Law 106-229, 15 U.S.C. § 7001 et seq.).

(b)  Form.--The disclosures and materials required by

sections 503, 505 and 512 shall be presented in a form that is

capable of being accurately reproduced for later reference.

(c)  Screen information.--With respect to disclosure by means

of an Internet website, the disclosure of the information

required by section 503(d) must appear on one or more screens

that:

(1)  Contain no other information.

(2)  The individual must see before proceeding to assent

to formation of a program.

(d)  Request for written copy.--At the time of providing the

materials and agreement required by sections 503(c) and (d), 505

and 512, a licensee shall inform the individual that upon

electronic, telephonic or written request, it will send the

individual a written copy of the materials and shall comply with

a request as provided in subsection (e).

(e)  Procedure.--If a licensee is requested, before the

expiration of 90 days after a program is completed or

terminated, to send a written copy of the materials required by

section 503(c) and (d), 505 or 512, the licensee shall send them

at no charge within three business days after the request, but

the licensee need not comply with a request more than once per

calendar month or if it reasonably believes the request is made

for purposes of harassment. If a request is made more than 90

days after a program is completed or terminated, the licensee

shall send, within a reasonable time, a written copy of the

materials requested.

(f)  Disclosure.--A licensee that maintains an Internet

website shall disclose on the home page of its website or on a

page that is clearly and conspicuously connected to the home

page by a link that clearly reveals its contents:

(1)  Its name and all names under which it does business. 

(2)  Its principal business address, telephone number and

electronic mail address, if any.

(g)  Termination of agreement.--Subject to subsection (h), if

a consumer who has consented to electronic communication in the

manner provided by section 101 of the Electronic Signatures in

Global and National Commerce Act withdraws consent as provided

in that act, a licensee may terminate its agreement with the

consumer.

(h)  Notification.--If a licensee wishes to terminate an

agreement with a consumer under subsection (g), it shall notify

the consumer that it will terminate the agreement unless the

consumer, within 30 days after receiving the notification,

consents to electronic communication in the manner provided in

section 101(c) of the Electronic Signatures in Global and

National Commerce Act.

(i)  Definition.--As used in this section, the term

"consumer" means an individual who seeks or obtains goods or

services that are used primarily for personal, family or

household purposes.

Section 505.  Form and contents of agreement.

(a)  Form and contents.--An agreement must:

(1)  Be in a record.

(2)  Be dated and signed by the individual.

(3)  Include the name of the individual and the address

where the individual resides.

(4)  Include the name, business address and telephone

number of the licensee.

(5)  Be delivered to the individual immediately upon

formation of the agreement.

(6)  Disclose:

(i)  The services to be provided.

(ii)  The amount, or method of determining the

amount, of all fees, individually itemized, to be paid by

the individual.

(iii)  How the licensee will comply with its

obligations under section 512(a).

(iv)  That the individual may cancel the agreement as

provided in section 506.

(v)  That the individual may contact the department

with any questions or complaints regarding the licensee.

(vi)  The address, telephone number and Internet

address or website of the department.

(b)  Delivery.--For purposes of subsection (a)(5), delivery

of an electronic record occurs when it is made available in a

format in which the individual may retrieve, save and print it,

and the individual is notified that it is available.

(c)  Limitation.--If the department supplies the licensee

with any information required under subsection (a)(6)(vi), the

licensee may comply with that requirement only by disclosing the

information supplied by the department.

(d)  Termination provision.--An agreement must provide that

the individual has a right to terminate the agreement at any

time by giving the licensee written or electronic notice, in

which event all powers of attorney granted by the individual to

the licensee are revoked and ineffective.

(e)  Amount of debt to be settled.--An agreement may confer

on a licensee a power of attorney to settle the individual's

debt for no more than 50% of the amount of the debt. An

agreement may not confer a power of attorney to settle a debt

for more than 50% of that amount, but may confer a power of

attorney to negotiate with creditors of the individual on behalf

of the individual. An agreement must provide that the licensee

will obtain the assent of the individual after a creditor has

assented to a settlement for more than 50% of the amount of the

debt.

(f)  Restrictions.--An agreement may not:

(1)  Provide for application of the law of any

jurisdiction other than the United States and this

Commonwealth.

(2)  Except as permitted by 9 United States Code § 2

(relating to validity, irrevocability, and enforcement of

agreements to arbitrate) and 42 Pa.C.S. Ch.73 (relating to

arbitration), contain a provision that modifies or limits

otherwise available forums or procedural rights, including

the right to trial by jury, that are generally available to

the individual under law other than this act.

(3)  Contain a provision that restricts the individual's

remedies under this act or law other than this act.

(4)  Contain a provision that:

(i)  Limits or releases the liability of any person

for not performing the agreement or for violating this

act.

(ii)  Indemnifies any person for liability arising

under the agreement or this act.

(g)  Other rights and obligations.--All rights and

obligations specified in subsection (d) and section 506 exist

even if not provided in the agreement.

Section 506.  Cancellation of agreement and waiver.

(a)  Cancellation.--An individual may cancel an agreement

before midnight of the third business day after the individual

assents to it, unless the agreement does not comply with

subsection (b) or section 505 or 701, in which event the

individual may cancel the agreement within 30 days after the

individual assents to it. To exercise the right of cancellation,

the individual must give notice in a record to the licensee.

Notice by mail is given when mailed.

(b)  Notice.--An agreement must be accompanied by the

following notice:

Notice of right of cancellation.

You may cancel this agreement, without any penalty or

obligation, at any time before midnight of the third business

day that begins the day after you agree to it by electronic

communication or by signing it.

To cancel this agreement during this period, send an e-

mail to (e-mail address of licensee) or mail or deliver a

signed, dated copy of this notice, or any other written

notice to (name of licensee) at (address of licensee) before

midnight on the third business day after you sign the

agreement.

If you cancel this agreement within the three-day period,

we will refund all money you already have paid us.

Section 507.  Required language.

Unless the department, by regulation, provides otherwise, the

disclosures and documents required by this act must be in

English. If a licensee communicates with an individual primarily

in a language other than English, the licensee must furnish a

translation into the other language of the disclosures and

documents required by this act.

Section 508.  Fees and other charges.

(a)  Prohibition.-- A licensee may not impose directly or

indirectly a fee or other charge on an individual or receive

money from or on behalf of an individual for debt settlement

services except as permitted by this section.

(b)  Agreement.--A licensee may not impose charges or receive

payment for debt settlement services until the licensee and the

individual have signed an agreement that complies with this act.

(c)  Authorized fees.--If an individual assents to an

agreement, a licensee may not impose a fee or other charge for

educational or counseling services, or the like, except as

otherwise provided in this subsection and except for educational

or counseling services required in connection with a government-

sponsored program. The department may authorize a licensee to

charge a fee based on the nature and extent of the educational

or counseling services furnished by the licensee.

(d)  Amount of fees for certain debt settlement services.--If

an individual assents to an agreement that contemplates that

creditors will settle debts for less than the principal amount

of the debt, a licensee may charge:

(1)  A fee for consultation, obtaining a credit report,

setting up an account, and the like, in an amount not

exceeding the lesser of $400 or 4% of the debt in the plan at

the inception of the plan.

(2)  A monthly service fee, not to exceed $10 times the

number of creditors remaining in a plan at the time the fee

is assessed, but not more than $50 in any month.

(3)  Fees as permitted in subsection (g).

(e)  Absence of agreement.--If an individual does not assent

to an agreement, a licensee may receive for educational and

counseling services it provides to the individual a fee not

exceeding $100 or, with the approval of the department, a larger

fee. The department may approve a fee larger than $100 if the

nature and extent of the educational and counseling services

warrant the larger fee.

(f)  Refund.--If, before the expiration of 90 days after the

completion or termination of educational or counseling services,

an individual assents to an agreement, the licensee shall refund

to the individual any fee paid pursuant to subsection (e).

(g)  Other fee calculation.--Except as otherwise provided in

subsection (d), if an agreement contemplates that creditors will

settle an individual's debts for less than the principal amount

of the debt, compensation for services may not exceed the

following applicable fee limits, the terms of which shall be

clearly disclosed in the agreement:

(1)  With respect to an agreement that provides for a

flat fee based on the overall amount of included debt, the

total aggregate amount of fees charged to any individual

under this act, including fees charged under subsection (d)

(1) and (2), may not exceed 17% of the principal amount of

debt included in the agreement at the inception of the

agreement. The flat fee authorized under this paragraph shall

be assessed in equal monthly payments over at least half the

length of the plan, as estimated at the plan's inception,

unless the payment of fees is voluntarily accelerated by the

individual in a separate record and at least half of the

overall amount of outstanding debt covered by the agreement

has been settled.

(2)  With respect to agreements in which fees are

calculated as a percentage of the amount saved by an

individual, a settlement fee may not exceed 30% of the excess

of the outstanding amount of each debt over the amount

actually paid to the creditor, as calculated at the time of

settlement. Settlement fees authorized under this paragraph

shall become billable only as debts are settled, and the

total aggregate amount of fees charged to any individual

under this part, including fees charged under subsection (d)

(1) and (2), may not exceed 20% of the principal amount of

debt included in the agreement at the agreement's inception.

(3)  A licensee may not impose or receive fees under both

paragraphs (1) and (2).

(h)  Payment dishonored.--If a payment to a licensee by an

individual under this act is dishonored, a licensee may impose a

reasonable charge on the individual, not to exceed the lesser of

$25 and the amount permitted by law other than this act.

Section 509.  Voluntary contributions.

A licensee may not solicit a voluntary contribution from an

individual or an affiliate of the individual for any service

provided to the individual.

Section 510.  Voidable agreements.

(a)  Unauthorized fees.--If a licensee imposes a fee or other

charge or receives money or other payments not authorized by

section 508, the individual may void the agreement and recover

as provided in section 904.

(b)  Nonregistered licensee.--If a licensee is not registered

as required by this act when an individual assents to an

agreement, the agreement is voidable by the individual.

(c)  Claim.--If an individual voids an agreement under this

section, the licensee does not have a claim against the

individual for breach of contract or for restitution.

Section 511.  Termination of agreement.

If an individual who has entered into a fee agreement fails

for 60 days to make payments required by the agreement, a

licensee may terminate the agreement.

Section 512.  Periodic reports and retention of records.

(a)  Reports required.--A licensee shall provide the

accounting required by subsection (b):

(1)  Upon cancellation or termination of an agreement.

(2)  Before cancellation or termination of any agreement:

(i)  After each settlement of a debt with a creditor

on behalf of the individual.

(ii)  Within five business days after a request by an

individual, but the licensee need not comply with more

than one request in any calendar month.

(b)  Accounting.--If a creditor has agreed to accept as

payment in full an amount less than the principal amount of the

debt owed by an individual, a licensee who has established a

program for the individual shall document, in a record, an

accounting of all of the following:

(1)  The amount the creditor accepts as settlement in

full of the debt.

(2)  Any other terms of the settlement.

(3)  The amount of the debt when the creditor agreed to

the settlement.

(4)  For licensees using fee agreements that calculate

any portion of the fee based on a percentage of savings the

individual realizes from a settled debt, the calculation of

that fee.

(c)  Retention.--A licensee shall maintain records for each

individual for whom it provides debt settlement services for

four years after the final payment made by the individual and

produce a copy of them to the individual within a reasonable

time after a request for them. The licensee may use electronic

or other means of storage of the records.

CHAPTER 7

VIOLATIONS

Section 701.  Prohibited acts and practices.

(a)  Prohibitions.--A licensee may not:

(1)  Settle a debt on behalf of an individual for more

than 50% of the amount of the debt owed a creditor, unless

the individual assents to the settlement after the creditor

has assented.

(2)  Take a power of attorney that authorizes it to

settle a debt, unless the power of attorney expressly limits

the licensee's authority to settle debts for not more than

50% of the amount of the debt owed a creditor.

(3)  Exercise or attempt to exercise a power of attorney

after an individual has terminated an agreement.

(4)  Initiate a transfer from an individual's account at

a bank or with another person unless the transfer is:

(i)  A return of money to the individual.

(ii)  Before termination of an agreement, properly

authorized by the agreement and this act, for payment of

a fee.

(iii)  In payment of a creditor to fund a negotiated

settlement authorized under paragraph (1) or (2).

(iv)  In payment of a creditor to fund a negotiated

settlement of which both the settlement and transfer of

money has been authorized by the debtor.

(5)  Structure a settlement in a manner that would result

in a negative amortization of any of an individual's debts.

(6)  Settle a debt or lead an individual to believe that

a payment to a creditor is in settlement of a debt to the

creditor unless, at the time of settlement, the individual

receives a certification or confirmation by the creditor that

the payment is in full settlement of the debt or is part of a

payment plan that is in full settlement of the debt.

(7)  Make a representation that:

(i)  The licensee will furnish money to pay bills or

prevent attachments.

(ii)  Payment of a certain amount will guarantee

satisfaction of a certain amount or range of

indebtedness.

(iii)  Participation in a program will or may prevent

litigation, garnishment, attachment, repossession,

foreclosure, eviction or loss of employment.

(8)  Represent that it is authorized or competent to

furnish legal advice or perform legal services unless the

advice or services are provided by a licensed attorney

working with the licensee.

(9)  Represent that it is a not-for-profit entity unless

it is organized and properly operating as a not-for-profit

under the law of the state in which it was formed or that it

is a tax-exempt entity unless it has received certification

of tax-exempt status from the Federal Internal Revenue

Service.

(10)  Take a confession of judgment or power of attorney

to confess judgment against an individual.

(11)  Employ an unfair, unconscionable or deceptive act

or practice, including the knowing omission of any material

information.

(b)  Debt settlement services.--If a licensee furnishes debt

settlement services to an individual, the licensee may not,

directly or indirectly:

(1)  Purchase a debt or obligation of the individual.

(2)  Receive from or on behalf of the individual:

(i)  A promissory note or other negotiable instrument

other than a check or a demand draft.

(ii)  A post-dated check or demand draft.

(3)  Lend money or provide credit to the individual,

except as a deferral of a fee payment at no additional

expense to the individual.

(4)  Obtain a mortgage or other security interest from

any person in connection with the services provided to the

individual.

(5)  Except as permitted by Federal law, disclose the

identity or identifying information of the individual or the

identity of the individual's creditors, except to:

(i)  The department, upon proper demand.

(ii)  A creditor of the individual, to the extent

necessary to secure the cooperation of the creditor in a

program.

(iii)  The extent necessary to administer the

program.

(6)  Except as otherwise provided in section 508, provide

the individual less than the full benefit of a compromise of

a debt arranged by the licensee.

(7)  Furnish legal advice or perform legal services,

unless the person furnishing that advice to or performing

those services for the individual is licensed to practice

law.

(8)  Advise individuals to stop payment on any of the

accounts being handled by the licensee.

(c)  Practice of law.--This act does not authorize any person

to engage in the practice of law.

Section 702.  Advertising.

A licensee that advertises debt settlement services shall not

make statements that are misleading or deceptive, and the

advertisements shall not conflict with the information specified

in section 503(d)(2), (3) and (5).

Section 703.  Internal complaint policy.

Each licensee shall establish an internal formal complaint

policy that creates a process for the licensee to receive,

review and address or resolve formal complaints internally. The

availability of this process shall be communicated in writing to

individuals enrolled in the licensee's program. This policy

shall include a provision that all consumers who file a formal

complaint shall receive a response from the licensee within a

reasonable time from the licensee's receipt of such complaint.

The licensee shall maintain a file for each such formal

complaint that documents the complaint, its handling and the

resolution of such complaint, and the licensee shall disclose

the file to the department upon request.

CHAPTER 9

ADMINISTRATION AND ENFORCEMENT

Section 901.  Powers of department.

(a)  Action by department.--The department may act on its own

initiative or in response to complaints and may receive

complaints, take action to obtain voluntary compliance with this

act and seek or provide remedies as provided in this act.

(b)  Investigation.--The department may investigate and

examine, in this Commonwealth or elsewhere, by subpoena or

otherwise, the activities, books, accounts and records of a

person that provides or offers to provide debt settlement

services, or a person to which a licensee has delegated its

obligations under an agreement or this act, to determine

compliance with this act. Information that identifies

individuals who have agreements with the licensee shall not be

disclosed to the public. In connection with the investigation,

the department may:

(1)  Charge the person the reasonable expenses

necessarily incurred to conduct the examination.

(2)  Require or permit a person to file a statement under

oath as to all the facts and circumstances of a matter to be

investigated.

(c)  Regulations.--The department may adopt regulations to

implement the provisions of this act.

(d)  Cooperative arrangements.--The department may enter into

cooperative arrangements with any other Federal or state agency

having authority over licensees and may exchange with any of

those agencies information about a licensee, including

information obtained during an examination of the licensee.

(e)  Adjustments.--The department, by regulation, shall adopt

dollar amounts instead of those specified in sections 902 and

904 to reflect inflation, as measured by the United States

Bureau of Labor Statistics Consumer Price Index for All Urban

Consumers or, if that index is not available, another index

adopted by regulation. The department shall adopt a base year

and adjust the dollar amounts, effective July 1 of each year, if

the change in the index from the base year, as of December 31 of

the preceding year, is at least 10%. The dollar amount must be

rounded to the nearest $10.

(f)  Notification.--The department shall notify registered

licensees of any change in dollar amounts made under subsection

(f) and make that information available to the public.

Section 902.  Administrative remedies.

(a)  Enforcement.--The department may enforce this act and

regulations adopted under this act by taking one or more of the

following actions:

(1)  Ordering a licensee or a director, employee or other

agent of a licensee to cease and desist from any violation.

(2)  Ordering a licensee or a person that has caused a

violation to correct the violation, including making

restitution of money or property to a person aggrieved by a

violation.

(3)  Imposing on a licensee or a person that has caused a

violation a civil penalty not exceeding $1,000 for each

violation.

(4)  Prosecuting a civil action to:

(i)  Enforce an order.

(ii)  Obtain restitution or an injunction or other

equitable relief, or both.

(5)  Intervening in an action brought under section 904.

(b)  Additional penalty.--If a person violates or knowingly

authorizes, directs or aids in the violation of a final order

issued under subsection (a)(1) or (2), the department may impose

an additional civil penalty not exceeding $1,000 for each

violation.

(c)  Action.--The department may maintain an action to

enforce this act in any county.

(d)  Attorney fees and costs.--The department may recover the

reasonable costs of enforcing this act under subsections (a),

(b) and (c), including attorney fees based on the hours

reasonably expended and the hourly rates for attorneys of

comparable experience in the community.

(e)  Factors.--In determining the amount of a civil penalty

to impose under subsection (a) or (b), the department shall

consider the seriousness of the violation, the good faith of the

violator, any previous violations by the violator, the

deleterious effect of the violation on the public, the net worth

of the violator and any other factor the department considers

relevant to the determination of the civil penalty.

Section 903.  Suspension, revocation or nonrenewal of

registration.

(a)  General rule.--The department may suspend, revoke or

deny renewal of a licensee's registration if:

(1)  A fact or condition exists that, if it had existed

when the registrant applied for registration as a licensee,

would have been a reason for denying registration.

(2)  The licensee has committed a material violation of

this act or a regulation or order of the department under

this act.

(3)  The licensee is insolvent.

(4)  The licensee or an employee or affiliate of the

licensee has refused to permit the department to make an

examination authorized by this act, failed to comply with

section 901(b)(2) within 30 days after request or made a

material misrepresentation or omission in complying with

section 901(b)(2).

(5)  The licensee has not responded within a reasonable

time and in an appropriate manner to communications from the

department.

(b)  Appeal.--If the department suspends or revokes a

licensee's registration, the licensee may appeal and request a

hearing under 2 Pa.C.S. (relating to administrative law and

procedure).

(c)  Definition.--As used in this section, the term

"insolvent" means:

(1)  Having generally ceased to pay debts in the ordinary

course of business other than as a result of good-faith

dispute.

(2)  Being unable to pay debts as they become due.

(3)  Being insolvent within the meaning of 11 United

States Code (relating to bankruptcy).

Section 904.  Private enforcement.

(a)  Agreement voided.--If an individual voids an agreement

under section 510, the individual may recover in a civil action

all money paid by or on behalf of the individual pursuant to the

agreement, in addition to the recovery under subsection (b)(3).

(b)  Violation.--Subject to subsection (c), an individual

with respect to whom a licensee violates this act may recover in

a civil action from the licensee and any person that caused the

violation:

(1)  Compensatory damages for economic injury caused by

the violation.

(2)  Except as otherwise provided in subsection (c) and

subject to adjustment of the dollar amount under section

901(f), with respect to a violation of section 503, 505, 506,

507, 508, 512 or 701(a) or (b), the greater of the amount

recoverable under paragraph (1) or $1,000.

(3)  Reasonable attorney fees and costs.

(c)  Class action.--In a class action, the minimum damages

provided in subsection (b)(2) do not apply.

(d)  Additional recovery.--In addition to the remedy

available under subsection (b), if a licensee violates an

individual's rights under section 506, the individual may

recover in a civil action all money paid by or on behalf of the

individual pursuant to the agreement, except for amounts paid to

creditors.

(e)  Nonliability.--A licensee is not liable under this

section for a violation of this act if the licensee proves that

the violation was not intentional and resulted from a good faith

error notwithstanding the maintenance of procedures reasonably

adapted to avoid the error. If, in connection with a violation,

the licensee has received more money than authorized by an

agreement or this act, the defense provided by this subsection

is not available unless the licensee refunds the excess within

three business days after learning of the violation.

Section 905.  Violation of unfair or deceptive practices

statute.

If an act or practice of a licensee violates both this act

and the act of December 17, 1968 (P.L.1224, No.387), known as

the Unfair Trade Practices and Consumer Protection Law, an

individual may not recover under both for the same act or

practice.

CHAPTER 21

MISCELLANEOUS PROVISIONS

Section 2101.  Relation to Electronic Signatures in Global and

National Commerce Act.

This act modifies, limits and supersedes the Electronic

Signatures in Global and National Commerce Act (Public Law

106-229, 15 U.S.C. § 7001 et seq.), but does not modify, limit

or supersede section 101(c) or authorize electronic delivery of

any of the notices described in section 103(b) of the Electronic

Signatures in Global and National Commerce Act.

Section 2102.  Transitional provisions.

Transactions entered into before this act takes effect and

the rights, duties and interests resulting from them may be

completed, terminated or enforced as required or permitted by a

law amended, repealed or modified by this act as though the

amendment, repeal or modification had not occurred.

Section 2103.  Repeal.

Repeals are as follows:

(1)  The General Assembly declares that the repeal under

paragraph (2) is necessary to effectuate this act.

(2)  The act of October 9, 2008 (P.L.1421, No.117), known

as the Debt Management Services Act, is repealed.

Section 2104.  Effective date.

This act shall take effect in 60 days.