PRINTER'S NO.  1806

  

THE GENERAL ASSEMBLY OF PENNSYLVANIA

  

SENATE BILL

 

No.

1284

Session of

2010

  

  

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

  

  

REFERRED TO BANKING AND INSURANCE, MARCH 24, 2010  

  

  

  

AN ACT

  

1

Providing for the licensure of persons providing debt settlement

2

services, for powers and duties of the Department of Banking

3

and for enforcement; and making a related repeal.

4

The General Assembly of the Commonwealth of Pennsylvania

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hereby enacts as follows:

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CHAPTER 1

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PRELIMINARY PROVISIONS

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Section 101.  Short title.

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

10

Settlement Services Act.

11

Section 102.  Definitions.

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The following words and phrases when used in this act shall

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have the meanings given to them in this section unless the

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context clearly indicates otherwise:

15

"Affiliate."  Any of the following:

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

17

is under common control with the licensee.

18

(2)  An officer of or an individual performing similar

 


1

functions with respect to the licensee.

2

(3)  A director of or an individual performing similar

3

functions with respect to the licensee.

4

(4)  An officer or director of or an individual

5

performing similar functions with respect to a person

6

described in paragraph (1).

7

"Agreement."  An agreement between a licensee and an

8

individual for the performance of debt settlement services.

9

"Bank."  A financial institution, including a commercial

10

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

11

mortgage bank and trust company, engaged in the business of

12

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

13

Federal or state banking regulatory authority.

14

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

15

including the name and number of a street.

16

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

17

favorable to an individual than the terms of the contract

18

between the individual and a creditor.

19

"Debt settlement services."  Services as an intermediary

20

between an individual and one or more unsecured creditors of the

21

individual for the purpose of obtaining concessions through a

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program designed under this act, without the intermediary

23

receiving money from the individual with the intent to

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

25

include:

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(1)  Legal services provided in an attorney-client

27

relationship by an attorney licensed or otherwise authorized

28

to practice law in this Commonwealth.

29

(2)  Accounting services provided in an accountant-client

30

relationship by a certified public accountant licensed to

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provide accounting services in this Commonwealth.

2

(3)  Financial planning services provided in a financial

3

planner-client relationship by a member of a financial

4

planning profession whose members the department, by

5

regulation, determines are:

6

(i)  Licensed by this Commonwealth.

7

(ii)  Subject to a disciplinary mechanism.

8

(iii)  Subject to a code of professional

9

responsibility.

10

(iv)  Subject to a continuing education requirement.

11

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

12

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

13

reasonable standards of fair dealing.

14

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

15

act.

16

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

17

estate, trust, partnership, limited liability company,

18

association, joint venture or any other legal or commercial

19

entity. The term does not include a public corporation,

20

government or governmental subdivision, agency or

21

instrumentality.

22

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

23

time of the execution of the agreement.

24

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

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furnishes services, which contemplate that creditors will settle

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

27

individual.

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

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

30

retrievable in perceivable form.

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

2

record:

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

4

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

5

an electronic sound, symbol or process.

6

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

7

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

8

territory or insular possession subject to the jurisdiction of

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the United States.

10

Section 103.  Nonapplicability.

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

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following persons:

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(1)  A banking institution or its agent or a federally

14

chartered or State-chartered credit union, if the primary

15

regulator of the banking institution or federally chartered

16

or State-chartered credit union supervises the banking

17

institution or federally chartered or State-chartered credit

18

union.

19

(2)  Judicial officers or persons acting under court

20

order.

21

(3)  Agencies or instrumentalities of Federal, State or

22

local government.

23

(4)  Employees of licensees or exempt persons under this

24

act.

25

(5)  Attorneys who are admitted to the bar of this

26

Commonwealth and provide legal services within an attorney-

27

client relationship and who engage in debt settlement

28

services within the normal course of legal practice.

29

(b)  Exemption from licensing.--The following persons are not

30

required to be licensed under this act, but must comply with the

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provisions of this act if they offer, obtain or provide debt

2

settlement services:

3

(1)  Certified public accountants who are licensed by the

4

Commonwealth and provide accounting services within an

5

accountant-client relationship.

6

(2)  Title insurance companies licensed under the act of

7

May 17, 1921 (P.L.682, No.284), known as The Insurance

8

Company Law of 1921, or their agents.

9

(3)  Mortgage lenders, mortgage brokers and mortgage loan

10

correspondents licensed under the provisions of 7 Pa.C.S. Ch.

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61 (relating to mortgage loan industry licensing and consumer

12

protection).

13

CHAPTER 3

14

LICENSING

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Section 301.  License required.

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(a)  Debt settlement services.--No person may advertise,

17

solicit, state or represent that it can offer, obtain or procure

18

debt settlement services to or for a consumer or provide debt

19

settlement services to a consumer unless the person is licensed

20

by the department under this act.

21

(b)  Debt settlement services.--No person may advertise,

22

solicit, state or represent that it can offer, obtain or procure

23

debt settlement services to or for a consumer or provide debt

24

settlement services to a consumer for a fee unless the person is

25

licensed by the department under this act and is operating in

26

accordance with regulations promulgated by the department

27

regarding the conduct of debt settlement services.

28

Section 302.  Application for licensure.

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An application for a license under this act shall be

30

submitted to the department in the form required by the

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department and shall include following:

2

(1)  The applicant's name, address, telephone number,

3

electronic mail address and Internet website.

4

(2)  The address of each location in this Commonwealth

5

where the applicant will provide debt settlement services.

6

(3)  The name and address of each owner, officer,

7

director or principal of the applicant.

8

(4)  The name and address of the applicant's agent for

9

service of process in this Commonwealth.

10

(5)  A description of the ownership interest of any

11

officer, director, agent or employee of the applicant in an

12

affiliate or subsidiary of the applicant or in any other

13

business entity that will provide any service to the

14

applicant or to a consumer relating to the applicant's

15

provision of debt settlement services.

16

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

17

engages in the business of providing debt settlement

18

services, including any relevant license or registration

19

number and information regarding whether a license or

20

registration in another state has ever been suspended or

21

revoked.

22

(7)  The audited financial statement from the applicant's

23

most recent fiscal year, including an audit opinion from an

24

independent certified public accountant.

25

(8)  A copy of a liability or fidelity insurance policy

26

that insures against dishonesty, fraud, theft or other

27

malfeasance on the part of the applicant's employees,

28

officers, directors or principals.

29

(9)  A copy of the applicant's standard debt settlement

30

services agreement.

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(10)  Evidence that the applicant is accredited by an

2

independent accrediting organization acceptable to the

3

department.

4

(11)  A penal bond meeting the requirements of section

5

304. 

6

(12)  A nonrefundable fee of $2,000.

7

(13)  A description of the consumer education program

8

that the applicant provides or intends to provide to

9

consumers along with copies of any written materials used or

10

to be used in the program.

11

(14)  Any other information that the department

12

reasonably requires.

13

Section 303.  License fees for certain entities.

14

Notwithstanding any other provision of this act, a domestic

15

or foreign not-for-profit corporation or association registered

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as such under 15 Pa.C.S. Pt. II Subpt. C (relating to nonprofit

17

corporations) with the Secretary of the Commonwealth which has

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annual gross revenues from debt settlement service fees and

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charges of less than $3,000,000 annually shall only be required

20

to pay an initial license fee of $500 and an annual renewal fee

21

of $350.

22

Section 304.  Penal bond.

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

24

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

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the amount of $50,000, in a form acceptable to the department,

26

prior to the issuance of the license, from a surety company

27

authorized to do business in this Commonwealth. The bond shall

28

be a penal bond conditioned on compliance with this act and

29

subject to forfeiture by the department and shall run to the

30

Commonwealth for its use. The bond shall also be for the use of

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any person against the licensee for the benefit of any consumer

2

who is injured by a violation of this act or regulation

3

promulgated under this act.

4

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

5

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

6

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

7

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

8

by a bank approved by the department, payable upon

9

presentation of a certificate by the department stating that

10

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

11

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

12

guaranteed by the United States or bonds or other obligations

13

of the Commonwealth or a political subdivision of the

14

Commonwealth, to be deposited and maintained with a bank

15

approved by the department for this purpose.

16

(b)  Rights of aggrieved persons.--

17

(1)  If the person is aggrieved, the person may, with the

18

written consent of the department, recover fees and costs

19

from the bond or bond substitute by filing a claim with the

20

surety company or maintaining an action on the bond or bond

21

substitute.

22

(2)  In the alternative, an aggrieved person may recover

23

fees and costs by filing a formal complaint against the

24

licensee with the department, which shall adjudicate the

25

matter. The adjudication shall be binding upon the surety

26

company and enforceable by the department in Commonwealth

27

Court and by an aggrieved person in any court.

28

(3)  Any aggrieved person seeking to recover from a bond

29

or bond substitute that has already been forfeited by the

30

department or which the department is in the process of

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forfeiting may recover payment on the bond or bond substitute

2

if, after filing a petition with the department, the

3

department consents to the aggrieved person's requested

4

payment or portion thereof. The department may pay the

5

aggrieved person from the bond or bond substitute proceeds it

6

recovers.

7

(c)  Other relief.--

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(1)  Nothing in this section shall be construed to limit

9

the ability of any court or magisterial district judge to

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award to any aggrieved person other damages, court costs and

11

attorney fees as permitted by law, but those claims that are

12

not fees or related costs may not be recovered from the bond

13

or bond substitute.

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

15

order pro rata or other recovery on the bond or bond

16

substitute for any aggrieved person if claims against the

17

bond or bond substitute may or do exceed its full monetary

18

amount.

19

(d)  Cancellation of bonds.--No bond or bond substitute shall

20

comply with the requirements of this section unless it contains

21

a provision that it shall not be canceled for any cause unless

22

notice of intention to cancel is given to the department at

23

least 30 days before the day upon which cancellation shall take

24

effect. Cancellation of the bond or bond substitute shall not

25

invalidate the bond or bond substitute regarding the period of

26

time it was in effect.

27

Section 305.  Issuance of license.

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(a)  Time for issuance.--The department shall decide whether

29

to issue a license to an applicant within 60 days of receiving

30

the applicant's completed application. If the department needs

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longer than 60 days to make a decision, it may extend the time

2

period for 30 days. The department shall notify the applicant of

3

the extended time period, including a final decision date, in

4

writing.

5

(b)  Investigation.--Upon receipt of a completed application,

6

the department may conduct an investigation of the applicant,

7

including its owners, officers, directors, principals or agents,

8

in order to decide whether to issue the license.

9

(c)  Appeal of denial.--If the department refuses to issue a

10

license, it shall notify the applicant in writing that the

11

license has been denied, including the reason for the denial and

12

that the applicant has the right to appeal the denial to the

13

secretary within 30 days.

14

(d)  Duration.--A license shall be issued for a period of one

15

year on a schedule determined by the department, provided that

16

if a license is issued prior to the beginning of a licensing

17

year, the license shall only be valid until the end of that

18

licensing year, at which time it may be renewed subject to the

19

provisions of this act. In the event that a license is denied,

20

canceled, surrendered, revoked or suspended, no part of the

21

license fee or license renewal fee is subject to rebate.

22

(e)  Contents.--The license shall be on a form determined by

23

the department and shall contain, at a minimum, the name of the

24

licensee, the address at which the licensee is conducting

25

business and a license number.

26

(f)  Display.--The license shall be displayed prominently at

27

the licensee's business locations.

28

(g)  Transfer prohibited.--The license shall not be

29

transferred, assigned or pledged.

30

(h)  Conditional licenses.--The department may impose

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conditions on the issuance of any license under this act. If the

2

department determines that conditions imposed upon a license

3

have not been fulfilled, the department may take any action

4

authorized under this act against the licensee that the

5

department deems necessary. In the case of applicants, the

6

department may issue licenses effective immediately upon receipt

7

of an application, which licenses shall be conditional licenses

8

issued under this subsection.

9

Section 306.  Renewal of license.

10

(a)  General rule.--An application for renewal of a license

11

shall be submitted to the department on the form determined by

12

the department and in the time period determined by the

13

department. Each application for renewal shall be accompanied by

14

a fee of $1,250.

15

(b)  Required condition.--The department shall determine the

16

information and documentation that shall be provided in the

17

application for renewal of a license sufficient to establish

18

that the licensee continues to conduct its business in

19

accordance with this act.

20

Section 307.  Reasons for denial, suspension, revocation or

21

refusal.

22

The department may deny, suspend, revoke or refuse to renew a

23

license for the following reasons, if committed by the applicant

24

or one of its owners, officers, directors, principals or agents:

25

(1)  Made a material misstatement in the license

26

application or any other submission required by this act or

27

the department.

28

(2)  Failed to comply with or violated any provision of

29

this act or any regulation, order or statement of policy

30

issued by the department under this act.

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(3)  Engaged in unfair or unethical conduct in connection

2

with the debt settlement services business.

3

(4)  Does not possess the financial responsibility,

4

character, reputation, integrity and general fitness

5

sufficient to warrant the belief that the debt settlement

6

services business will be conducted lawfully, honestly and in

7

the public interest.

8

(5)  Been convicted of or pleaded guilty or nolo

9

contendere to a crime of moral turpitude or to an offense

10

graded as a felony.

11

(6)  Been enjoined by a court of competent jurisdiction

12

from engaging in the business of debt settlement services.

13

(7)  Has had a license issued by the department denied,

14

not renewed, suspended or revoked.

15

(8)  Became the subject of a United States Postal Service

16

fraud order.

17

(9)  Has been convicted of a crime or suffered a civil

18

judgment involving dishonesty or the violation of Federal or

19

State securities laws.

20

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

21

Commonwealth agency.

22

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

23

required under section 304.

24

(12)  Becomes insolvent, meaning that the liabilities of

25

the applicant or licensee exceed the assets of the applicant

26

or licensee or that the applicant or licensee cannot meet the

27

obligations of the applicant or licensee as they mature or is

28

in such financial condition that the applicant or licensee

29

cannot continue in business with safety to the customers of

30

the applicant or licensee.

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Section 308.  Reinstatement.

2

The department may reinstate a license that was previously

3

suspended, revoked or denied renewal, if all of the following

4

exist:

5

(1)  A condition that warranted the original action has

6

been corrected to the department's satisfaction.

7

(2)  The department has reason to believe that the

8

condition is not likely to occur again.

9

(3)  The licensee satisfies all other requirements of

10

this act.

11

Section 309.  Limitations on license.

12

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

13

under this act using a name or at an address different from that

14

contained on the licensee's license. When a licensee changes its

15

name or its business address, it shall notify the department

16

within ten days of the change and the department may issue a new

17

license specifying the licensee's new name or address.

18

(b)  Other businesses.--A licensee shall not conduct a

19

business other than the debt settlement service business

20

licensed by the department under this act unless it notifies the

21

department in writing at least 30 days before beginning to

22

conduct that business.

23

Section 310.  Licensure in another state.

24

If an applicant holds a license or certificate of

25

registration in another state authorizing it to provide debt

26

settlement services, the applicant may submit a copy of that

27

license or certificate and the application for it instead of an

28

application in the form prescribed by this chapter. The

29

department shall accept the application and the license or

30

certificate from the other state as an application for

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registration as a licensee or for renewal of registration as a

2

licensee, as appropriate, in this Commonwealth if:

3

(1)  The application in the other state contains

4

information substantially similar to or more comprehensive

5

than that required in an application submitted in this

6

Commonwealth.

7

(2)  The applicant provides the information required by

8

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

9

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

10

certifies that the information contained in the application

11

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

12

the application to make the information current.

13

CHAPTER 5

14

LICENSEE RESPONSIBILITIES

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Section 501.  Requirement of good faith.

16

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

17

act.

18

Section 502.  Customer service.

19

A licensee shall maintain a toll-free communication system,

20

staffed at a level that reasonably permits an individual to

21

speak to a customer-service representative, as appropriate,

22

during ordinary business hours.

23

Section 503.  Prerequisites for providing debt settlement

24

services.

25

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

26

settlement services, a licensee shall give the individual an

27

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

28

The list must be clear and conspicuous.

29

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

30

settlement services unless the licensee has prepared a financial

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analysis.

2

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

3

Before an individual assents to an agreement to engage in a

4

program, a licensee shall:

5

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

6

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

7

licensee and that the individual may keep whether or not the

8

individual assents to the agreement.

9

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

10

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

11

communication system or in person to discuss the financial

12

analysis required by subsection (b).

13

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

14

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

15

individual of the following:

16

(1)  Programs are not suitable for all individuals.

17

(2)  Participation in a program may adversely affect the

18

individual's credit rating or credit scores.

19

(3)  Nonpayment of debt may lead creditors to increase

20

finance and other charges or undertake collection activity,

21

including litigation.

22

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

23

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

24

program may result in the creation of taxable income to the

25

individual, even though the individual does not receive any

26

money.

27

(5)  Specific results cannot be predicted or guaranteed

28

and the licensee cannot force negotiations or settlements

29

with creditors but will advocate solely on behalf of the

30

individual.

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(6)  Programs require that individuals meet a certain

2

savings goal in order to maximize settlement results.

3

(7)  The licensee does not provide accounting or legal

4

advice to individuals, unless the licensee is professionally

5

licensed to provide such advice.

6

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

7

not receive compensation from creditors, banks or third party

8

collection agencies.

9

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

10

individual's creditors.

11

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

12

Section 504.  Communication by electronic or other means.

13

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

14

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

15

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

16

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

17

Electronic Signatures in Global and National Commerce Act

18

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

19

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

20

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

21

capable of being accurately reproduced for later reference.

22

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

23

of an Internet website, the disclosure of the information

24

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

25

that:

26

(1)  Contain no other information.

27

(2)  The individual must see before proceeding to assent

28

to formation of a program.

29

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

30

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

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1

and 512, a licensee shall inform the individual that upon

2

electronic, telephonic or written request, it will send the

3

individual a written copy of the materials and shall comply with

4

a request as provided in subsection (e).

5

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

6

expiration of 90 days after a program is completed or

7

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

8

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

9

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

10

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

11

calendar month or if it reasonably believes the request is made

12

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

13

days after a program is completed or terminated, the licensee

14

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

15

materials requested.

16

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

17

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

18

page that is clearly and conspicuously connected to the home

19

page by a link that clearly reveals its contents:

20

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

21

(2)  Its principal business address, telephone number and

22

electronic mail address, if any.

23

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

24

a consumer who has consented to electronic communication in the

25

manner provided by section 101 of the Electronic Signatures in

26

Global and National Commerce Act withdraws consent as provided

27

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

28

consumer.

29

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

30

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

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the consumer that it will terminate the agreement unless the

2

consumer, within 30 days after receiving the notification,

3

consents to electronic communication in the manner provided in

4

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

5

National Commerce Act.

6

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

7

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

8

services that are used primarily for personal, family or

9

household purposes.

10

Section 505.  Form and contents of agreement.

11

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

12

(1)  Be in a record.

13

(2)  Be dated and signed by the individual.

14

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

15

where the individual resides.

16

(4)  Include the name, business address and telephone

17

number of the licensee.

18

(5)  Be delivered to the individual immediately upon

19

formation of the agreement.

20

(6)  Disclose:

21

(i)  The services to be provided.

22

(ii)  The amount, or method of determining the

23

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

24

the individual.

25

(iii)  How the licensee will comply with its

26

obligations under section 512(a).

27

(iv)  That the individual may cancel the agreement as

28

provided in section 506.

29

(v)  That the individual may contact the department

30

with any questions or complaints regarding the licensee.

- 18 -

 


1

(vi)  The address, telephone number and Internet

2

address or website of the department.

3

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

4

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

5

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

6

and the individual is notified that it is available.

7

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

8

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

9

licensee may comply with that requirement only by disclosing the

10

information supplied by the department.

11

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

12

the individual has a right to terminate the agreement at any

13

time by giving the licensee written or electronic notice, in

14

which event all powers of attorney granted by the individual to

15

the licensee are revoked and ineffective.

16

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

17

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

18

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

19

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

20

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

21

attorney to negotiate with creditors of the individual on behalf

22

of the individual. An agreement must provide that the licensee

23

will obtain the assent of the individual after a creditor has

24

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

25

debt.

26

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

27

(1)  Provide for application of the law of any

28

jurisdiction other than the United States and this

29

Commonwealth.

30

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

- 19 -

 


1

(relating to validity, irrevocability, and enforcement of

2

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

3

arbitration), contain a provision that modifies or limits

4

otherwise available forums or procedural rights, including

5

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

6

the individual under law other than this act.

7

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

8

remedies under this act or law other than this act.

9

(4)  Contain a provision that:

10

(i)  Limits or releases the liability of any person

11

for not performing the agreement or for violating this

12

act.

13

(ii)  Indemnifies any person for liability arising

14

under the agreement or this act.

15

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

16

obligations specified in subsection (d) and section 506 exist

17

even if not provided in the agreement.

18

Section 506.  Cancellation of agreement and waiver.

19

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

20

before midnight of the third business day after the individual

21

assents to it, unless the agreement does not comply with

22

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

23

individual may cancel the agreement within 30 days after the

24

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

25

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

26

Notice by mail is given when mailed.

27

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

28

following notice:

29

Notice of right of cancellation.

30

You may cancel this agreement, without any penalty or

- 20 -

 


1

obligation, at any time before midnight of the third business

2

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

3

communication or by signing it.

4

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

5

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

6

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

7

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

8

midnight on the third business day after you sign the

9

agreement.

10

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

11

we will refund all money you already have paid us.

12

Section 507.  Required language.

13

Unless the department, by regulation, provides otherwise, the

14

disclosures and documents required by this act must be in

15

English. If a licensee communicates with an individual primarily

16

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

17

translation into the other language of the disclosures and

18

documents required by this act.

19

Section 508.  Fees and other charges.

20

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

21

indirectly a fee or other charge on an individual or receive

22

money from or on behalf of an individual for debt settlement

23

services except as permitted by this section.

24

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

25

payment for debt settlement services until the licensee and the

26

individual have signed an agreement that complies with this act.

27

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

28

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

29

educational or counseling services, or the like, except as

30

otherwise provided in this subsection and except for educational

- 21 -

 


1

or counseling services required in connection with a government-

2

sponsored program. The department may authorize a licensee to

3

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

4

or counseling services furnished by the licensee.

5

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

6

an individual assents to an agreement that contemplates that

7

creditors will settle debts for less than the principal amount

8

of the debt, a licensee may charge:

9

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

10

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

11

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

12

the inception of the plan.

13

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

14

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

15

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

16

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

17

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

18

to an agreement, a licensee may receive for educational and

19

counseling services it provides to the individual a fee not

20

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

21

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

22

nature and extent of the educational and counseling services

23

warrant the larger fee.

24

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

25

completion or termination of educational or counseling services,

26

an individual assents to an agreement, the licensee shall refund

27

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

28

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

29

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

30

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

- 22 -

 


1

of the debt, compensation for services may not exceed the

2

following applicable fee limits, the terms of which shall be

3

clearly disclosed in the agreement:

4

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

5

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

6

total aggregate amount of fees charged to any individual

7

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

8

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

9

debt included in the agreement at the inception of the

10

agreement. The flat fee authorized under this paragraph shall

11

be assessed in equal monthly payments over at least half the

12

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

13

unless the payment of fees is voluntarily accelerated by the

14

individual in a separate record and at least half of the

15

overall amount of outstanding debt covered by the agreement

16

has been settled.

17

(2)  With respect to agreements in which fees are

18

calculated as a percentage of the amount saved by an

19

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

20

of the outstanding amount of each debt over the amount

21

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

22

settlement. Settlement fees authorized under this paragraph

23

shall become billable only as debts are settled, and the

24

total aggregate amount of fees charged to any individual

25

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

26

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

27

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

28

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

29

paragraphs (1) and (2).

30

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

- 23 -

 


1

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

2

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

3

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

4

Section 509.  Voluntary contributions.

5

A licensee may not solicit a voluntary contribution from an

6

individual or an affiliate of the individual for any service

7

provided to the individual.

8

Section 510.  Voidable agreements.

9

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

10

charge or receives money or other payments not authorized by

11

section 508, the individual may void the agreement and recover

12

as provided in section 904.

13

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

14

as required by this act when an individual assents to an

15

agreement, the agreement is voidable by the individual.

16

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

17

section, the licensee does not have a claim against the

18

individual for breach of contract or for restitution.

19

Section 511.  Termination of agreement.

20

If an individual who has entered into a fee agreement fails

21

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

22

licensee may terminate the agreement.

23

Section 512.  Periodic reports and retention of records.

24

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

25

accounting required by subsection (b):

26

(1)  Upon cancellation or termination of an agreement.

27

(2)  Before cancellation or termination of any agreement:

28

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

29

on behalf of the individual.

30

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

- 24 -

 


1

individual, but the licensee need not comply with more

2

than one request in any calendar month.

3

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

4

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

5

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

6

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

7

accounting of all of the following:

8

(1)  The amount the creditor accepts as settlement in

9

full of the debt.

10

(2)  Any other terms of the settlement.

11

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

12

the settlement.

13

(4)  For licensees using fee agreements that calculate

14

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

15

individual realizes from a settled debt, the calculation of

16

that fee.

17

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

18

individual for whom it provides debt settlement services for

19

four years after the final payment made by the individual and

20

produce a copy of them to the individual within a reasonable

21

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

22

or other means of storage of the records.

23

CHAPTER 7

24

VIOLATIONS

25

Section 701.  Prohibited acts and practices.

26

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

27

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

28

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

29

the individual assents to the settlement after the creditor

30

has assented.

- 25 -

 


1

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

2

settle a debt, unless the power of attorney expressly limits

3

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

4

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

5

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

6

after an individual has terminated an agreement.

7

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

8

a bank or with another person unless the transfer is:

9

(i)  A return of money to the individual.

10

(ii)  Before termination of an agreement, properly

11

authorized by the agreement and this act, for payment of

12

a fee.

13

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

14

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

15

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

16

settlement of which both the settlement and transfer of

17

money has been authorized by the debtor.

18

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

19

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

20

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

21

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

22

creditor unless, at the time of settlement, the individual

23

receives a certification or confirmation by the creditor that

24

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

25

payment plan that is in full settlement of the debt.

26

(7)  Make a representation that:

27

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

28

prevent attachments.

29

(ii)  Payment of a certain amount will guarantee

30

satisfaction of a certain amount or range of

- 26 -

 


1

indebtedness.

2

(iii)  Participation in a program will or may prevent

3

litigation, garnishment, attachment, repossession,

4

foreclosure, eviction or loss of employment.

5

(8)  Represent that it is authorized or competent to

6

furnish legal advice or perform legal services unless the

7

advice or services are provided by a licensed attorney

8

working with the licensee.

9

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

10

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

11

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

12

is a tax-exempt entity unless it has received certification

13

of tax-exempt status from the Federal Internal Revenue

14

Service.

15

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

16

to confess judgment against an individual.

17

(11)  Employ an unfair, unconscionable or deceptive act

18

or practice, including the knowing omission of any material

19

information.

20

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

21

settlement services to an individual, the licensee may not,

22

directly or indirectly:

23

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

24

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

25

(i)  A promissory note or other negotiable instrument

26

other than a check or a demand draft.

27

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

28

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

29

except as a deferral of a fee payment at no additional

30

expense to the individual.

- 27 -

 


1

(4)  Obtain a mortgage or other security interest from

2

any person in connection with the services provided to the

3

individual.

4

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

5

identity or identifying information of the individual or the

6

identity of the individual's creditors, except to:

7

(i)  The department, upon proper demand.

8

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

9

necessary to secure the cooperation of the creditor in a

10

program.

11

(iii)  The extent necessary to administer the

12

program.

13

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

14

the individual less than the full benefit of a compromise of

15

a debt arranged by the licensee.

16

(7)  Furnish legal advice or perform legal services,

17

unless the person furnishing that advice to or performing

18

those services for the individual is licensed to practice

19

law.

20

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

21

accounts being handled by the licensee.

22

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

23

to engage in the practice of law.

24

Section 702.  Advertising.

25

A licensee that advertises debt settlement services shall not

26

make statements that are misleading or deceptive, and the

27

advertisements shall not conflict with the information specified

28

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

29

Section 703.  Internal complaint policy.

30

Each licensee shall establish an internal formal complaint

- 28 -

 


1

policy that creates a process for the licensee to receive,

2

review and address or resolve formal complaints internally. The

3

availability of this process shall be communicated in writing to

4

individuals enrolled in the licensee's program. This policy

5

shall include a provision that all consumers who file a formal

6

complaint shall receive a response from the licensee within a

7

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

8

The licensee shall maintain a file for each such formal

9

complaint that documents the complaint, its handling and the

10

resolution of such complaint, and the licensee shall disclose

11

the file to the department upon request.

12

CHAPTER 9

13

ADMINISTRATION AND ENFORCEMENT

14

Section 901.  Powers of department.

15

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

16

initiative or in response to complaints and may receive

17

complaints, take action to obtain voluntary compliance with this

18

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

19

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

20

examine, in this Commonwealth or elsewhere, by subpoena or

21

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

22

person that provides or offers to provide debt settlement

23

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

24

obligations under an agreement or this act, to determine

25

compliance with this act. Information that identifies

26

individuals who have agreements with the licensee shall not be

27

disclosed to the public. In connection with the investigation,

28

the department may:

29

(1)  Charge the person the reasonable expenses

30

necessarily incurred to conduct the examination.

- 29 -

 


1

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

2

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

3

investigated.

4

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

5

implement the provisions of this act.

6

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

7

cooperative arrangements with any other Federal or state agency

8

having authority over licensees and may exchange with any of

9

those agencies information about a licensee, including

10

information obtained during an examination of the licensee.

11

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

12

dollar amounts instead of those specified in sections 902 and

13

904 to reflect inflation, as measured by the United States

14

Bureau of Labor Statistics Consumer Price Index for All Urban

15

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

16

adopted by regulation. The department shall adopt a base year

17

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

18

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

19

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

20

rounded to the nearest $10.

21

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

22

licensees of any change in dollar amounts made under subsection

23

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

24

Section 902.  Administrative remedies.

25

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

26

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

27

following actions:

28

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

29

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

30

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

- 30 -

 


1

violation to correct the violation, including making

2

restitution of money or property to a person aggrieved by a

3

violation.

4

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

5

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

6

violation.

7

(4)  Prosecuting a civil action to:

8

(i)  Enforce an order.

9

(ii)  Obtain restitution or an injunction or other

10

equitable relief, or both.

11

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

12

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

13

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

14

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

15

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

16

violation.

17

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

18

enforce this act in any county.

19

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

20

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

21

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

22

reasonably expended and the hourly rates for attorneys of

23

comparable experience in the community.

24

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

25

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

26

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

27

violator, any previous violations by the violator, the

28

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

29

of the violator and any other factor the department considers

30

relevant to the determination of the civil penalty.

- 31 -

 


1

Section 903.  Suspension, revocation or nonrenewal of

2

registration.

3

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

4

deny renewal of a licensee's registration if:

5

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

6

when the registrant applied for registration as a licensee,

7

would have been a reason for denying registration.

8

(2)  The licensee has committed a material violation of

9

this act or a regulation or order of the department under

10

this act.

11

(3)  The licensee is insolvent.

12

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

13

licensee has refused to permit the department to make an

14

examination authorized by this act, failed to comply with

15

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

16

material misrepresentation or omission in complying with

17

section 901(b)(2).

18

(5)  The licensee has not responded within a reasonable

19

time and in an appropriate manner to communications from the

20

department.

21

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

22

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

23

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

24

procedure).

25

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

26

"insolvent" means:

27

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

28

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

29

dispute.

30

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

- 32 -

 


1

(3)  Being insolvent within the meaning of 11 United

2

States Code (relating to bankruptcy).

3

Section 904.  Private enforcement.

4

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

5

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

6

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

7

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

8

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

9

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

10

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

11

violation:

12

(1)  Compensatory damages for economic injury caused by

13

the violation.

14

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

15

subject to adjustment of the dollar amount under section

16

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

17

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

18

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

19

(3)  Reasonable attorney fees and costs.

20

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

21

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

22

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

23

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

24

individual's rights under section 506, the individual may

25

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

26

individual pursuant to the agreement, except for amounts paid to

27

creditors.

28

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

29

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

30

the violation was not intentional and resulted from a good faith

- 33 -

 


1

error notwithstanding the maintenance of procedures reasonably

2

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

3

the licensee has received more money than authorized by an

4

agreement or this act, the defense provided by this subsection

5

is not available unless the licensee refunds the excess within

6

three business days after learning of the violation.

7

Section 905.  Violation of unfair or deceptive practices

8

statute.

9

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

10

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

11

the Unfair Trade Practices and Consumer Protection Law, an

12

individual may not recover under both for the same act or

13

practice.

14

CHAPTER 21

15

MISCELLANEOUS PROVISIONS

16

Section 2101.  Relation to Electronic Signatures in Global and

17

National Commerce Act.

18

This act modifies, limits and supersedes the Electronic

19

Signatures in Global and National Commerce Act (Public Law

20

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

21

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

22

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

23

Signatures in Global and National Commerce Act.

24

Section 2102.  Transitional provisions.

25

Transactions entered into before this act takes effect and

26

the rights, duties and interests resulting from them may be

27

completed, terminated or enforced as required or permitted by a

28

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

29

amendment, repeal or modification had not occurred.

30

Section 2103.  Repeal.

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1

Repeals are as follows:

2

(1)  The General Assembly declares that the repeal under

3

paragraph (2) is necessary to effectuate this act.

4

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

5

as the Debt Management Services Act, is repealed.

6

Section 2104.  Effective date.

7

This act shall take effect in 60 days.

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