PRINTER'S NO. 598
THE GENERAL ASSEMBLY OF PENNSYLVANIA
INTRODUCED BY WARD, WHITE, BOSCOLA, BROWNE, RAFFERTY, BREWSTER, MENSCH, ERICKSON, SCHWANK, FERLO, HUGHES, SOLOBAY AND WAUGH, MARCH 6, 2013
REFERRED TO BANKING AND INSURANCE, MARCH 6, 2013
1Providing for the licensure of persons providing debt settlement
2services, for powers and duties of the Department of Banking
3and for enforcement; imposing civil penalties; and making a
5TABLE OF CONTENTS
6Chapter 1. Preliminary Provisions
7Section 101. Short title.
8Section 102 Definitions.
9Section 103. Nonapplicability.
10Chapter 3. Licensure
11Section 301. Requirements.
12Section 302. Application and required documentation.
13Section 303. Required information for application.
14Section 304. Not-for-profit license fees.
15Section 305. Penal bond.
16Section 306. Application information.
17Section 307. Public availability of application information.
18Section 308. Certificate of licensure.
1Section 309. Renewal of license.
2Section 310. Grounds for denial.
3Section 311. Payday loans.
4Section 312. Reinstatement.
5Section 313. Limitations.
6Chapter 5. Provider Responsibilities
7Section 501. Good faith.
10Chapter 7. Administration and Enforcement
11Section 701. Powers and duties.
12Section 702. Administrative proceedings.
13Section 703. Reports to department.
14Section 704. Violations.
15Section 705. Banking Fund.
16Chapter 21. Miscellaneous Provisions
19Section 2102. Transitional provisions.
20Section 2103. Repeal.
21Section 2104. Effective date.
26Section 101. Short title.
29Section 102. Definitions.
30The following words and phrases when used in this act shall
3"Affiliate." Any of the following:
15"Bank." A financial institution, including a commercial
16bank, savings bank, savings and loan association, credit union,
17mortgage bank and trust company, engaged in the business of
18banking, chartered under Federal or State law and regulated by a
19Federal or State banking regulatory authority.
23"Debt settlement services." Services as an intermediary
24between an individual and one or more unsecured creditors of the
25individual for the purpose of obtaining concessions where the
26contemplated concessions involve a reduction in principal of the
27individual's unsecured debt. The term does not include:
7"Department." The Department of Banking of the Commonwealth.
10"Payday loan." As follows:
25"Person." An individual, corporation, business trust,
26estate, trust, partnership, limited liability company,
27association, joint venture or any other legal or commercial
28entity. The term does not include a public corporation,
29government or governmental subdivision, agency or
9"Secretary." The Secretary of Banking of the Commonwealth.
10Section 103. Nonapplicability.
26Section 301. Requirements.
27(a) General rule.--Except as provided under subsection (b)
28and on or after the effective date of this section, a provider
29may not provide debt settlement services to an individual who it
30reasonably should know resides in this Commonwealth at the time
8Section 302. Application and required documentation.
13(1) A licensing fee established by the department.
14(2) One of the following:
17(ii) A surety bond filed with the department, in a
18form approved by the department, for a term no less than
19the expiration of the license and in the amount of
20$25,000. The surety bond must run to the Commonwealth for
21the benefit of the Commonwealth and of an individual who
22resides in this Commonwealth that agrees to receive debt
23settlement services from the provider. Payment of surety
24bond must be conditioned upon noncompliance of the
25provider or its agent with this act.
28Section 303. Required information for application.
1department and shall include the following:
10(5) A description of the ownership interest of an
11officer, director, agent or employee of the applicant in an
12affiliate or subsidiary of the applicant or in another
13business entity that will provide any service to the
14applicant or to a consumer relating to the applicant's
15provision of debt settlement services.
16(6) A list of other states in which the applicant is
17licensed or registered for the provision of debt settlement
18services, including a relevant license or registration number
19and information regarding whether a license or registration
20in another state has ever been suspended or revoked.
21(7) A copy of a liability or fidelity insurance policy
22that insures against dishonesty, fraud, theft or other
23malfeasance on the part of the applicant's employees,
24officers, directors or principals.
4Section 304. Not-for-profit license fees.
5Notwithstanding any other provision of this act, a domestic
6or foreign not-for-profit corporation or association registered
7under 15 Pa.C.S. Pt. II Subpt. C (relating to nonprofit
8corporations) with the Secretary of the Commonwealth which has
9annual gross revenues from debt settlement services fees and
10charges of less than $3,000,000 annually shall pay an initial
11license fee of $500 and an annual renewal fee of $350.
12Section 305. Penal bond.
19(ii) Is in an amount equal to $25,000.
20(iii) The licensee will hold directly or in trust.
21(iv) Is in a form acceptable to the department.
22(2) The bond shall meet all of the following:
25(ii) Run to the Commonwealth for its use.
30(iv) Contains a cancellation provision as provided
1under subsection (d).
2(b) Right of aggrieved person.--
8(ii) Recover fees and costs by filing a formal
9complaint against the licensee with the department which
10shall adjudicate the matter. The adjudication shall be
11binding upon the surety company and enforceable by the
12department in Commonwealth Court and by an aggrieved
13person in any court.
14(2) An aggrieved person seeking to recover from a bond
15that has already been forfeited by the department or which
16the department is in the process of forfeiting may recover
17payment on the bond if, after filing a petition with the
18department, the department consents to the aggrieved person's
19requested payment or portion of the payment. The department
20may pay the aggrieved person from the bond proceeds it
22(c) Additional relief.--
23(1) Nothing under this section shall be construed to
24limit the ability of a court or magisterial district judge to
25award to an aggrieved person other damages, court costs and
26attorney fees, except that claims that are not fees or
27related costs may not be recovered from the bond.
2(d) Cancellation of bonds.--A bond shall contain a provision
3that it may not be canceled for cause unless notice of intention
4to cancel is given to the department at least 30 days before the
5day upon which cancellation takes effect. Cancellation of the
6bond shall not invalidate the bond regarding the period of time
7it was in effect.
8Section 306. Application information.
12Section 307. Public availability of application information.
13Except for the addresses required under section 303(3) and
14the proprietary information required under section 303(5), the
15department shall make the information in an application for
16licensure and renewal of licensure as a provider available to
18Section 308. Certificate of licensure.
19(a) Time for issuance.--The department shall decide whether
20to issue a license to an applicant within 60 days of receiving
21the applicant's completed application. The department may extend
22the time period for 30 days and shall notify the applicant of
23the extended time period, including a final decision date, in
25(b) Investigation.--Upon receipt of a completed application
26the department may conduct an investigation of the applicant,
27including its owners, officers, directors, principals or agents,
28in order to decide whether to issue the license.
4(d) Duration.--A license shall be issued for a period of one
5year on a schedule determined by the department, except that if
6a license is issued prior to the beginning of a licensing year,
7the license shall only be valid until the end of that licensing
8year, at which time it may be renewed subject to this act. If a
9license is denied, canceled, surrendered, revoked or suspended,
10no part of the license fee or license renewal fee shall be
11subject to rebate.
12(e) Contents.--The license shall be on a form determined by
13the department and shall contain the name of the licensee, the
14address at which the licensee is conducting business and a
18(g) Transfer prohibited.--
25(h) Conditional licenses.--The department may impose
26conditions on the issuance of a license under this act. If the
27department determines that conditions imposed upon a license
28have not been fulfilled, the department may take action
29authorized under this act against the licensee. For applicants,
30the department may issue licenses effective immediately upon
3(i) Transitional license.--
4(1) A person that is providing debt settlement services
5before the effective date of this section and that seeks to
6continue providing the services after the effective date of
7this section shall submit an application for a license under
8this act not less than ten days prior to the effective date
9of this section. The applicant may continue to provide debt
10settlement services, according to this act, while the
11department processes the application for licensure.
12(2) A person providing debt settlement services before
13the effective date of this section who does not submit an
14application for a license within ten days of the effective
15date of this section must cease operations until it has met
16the conditions for licensure under this act.
17Section 309. Renewal of license.
18(a) Procedure.--An application for renewal of a license
19shall be submitted to the department in the manner determined by
20the department. The application for renewal shall be accompanied
21by a fee of $1,250.
22(b) Required condition.--The department shall determine the
23information and documentation that shall be provided in the
24application for renewal of a license in a manner sufficient to
25establish that the licensee will continue to conduct its
26business in accordance with this act.
27Section 310. Grounds for denial.
11(4) Does not possess the financial responsibility,
12character, reputation, integrity and general fitness
13sufficient to warrant the belief that the debt settlement
14services business will be conducted lawfully, honestly and in
15the public interest.
30(11) Becomes insolvent.
4"Insolvent." As follows:
7(2) The applicant or licensee cannot meet the
8obligations of the applicant or licensee as they mature or is
9in a financial condition that the applicant or licensee
10cannot continue in business in a safe manner to the customers
11of the applicant or licensee.
12Section 311. Payday loans.
16Section 312. Reinstatement.
26Section 313. Limitations.
27(a) Name or address.--A licensee may not conduct business
28under this act under a name or at an address different from that
29contained on the licensee's license. If a licensee changes its
30name or its business address, it shall notify the department
3(b) Other businesses.--A licensee may not conduct a business
4other than the debt settlement service business licensed by the
5department under this act unless it notifies the department in
6writing at least 30 days before beginning to conduct that
10Section 501. Good faith.
15(a) Disclosure.--Before an individual consents to pay for
16goods or services offered by a provider, the provider must
17disclose truthfully, in a clear and conspicuous manner, the
18following material information:
19(1) All of the following:
30(2) If the debt settlement service includes a settlement
1offer to any of the individual's creditors or debt
2collectors, the amount of money or the percentage of each
3outstanding debt that the individual shall accumulate before
4the provider will make a bona fide settlement offer to each
6(3) If an aspect of the debt settlement services relies
7upon or results in the individual's failure to make timely
8payments to creditors or debt collectors, that the use of the
9debt settlement services will likely adversely affect the
10individual's creditworthiness, may result in the individual
11being subject to collection actions or sued by creditors or
12debt collectors and may increase the amount of money the
13individual owes due to the accrual of fees and interest.
14(4) If the provider requests or requires the individual
15to place funds in an account at a bank, that the individual
16owns the funds held in the account, the individual may
17withdraw from the debt settlement services at any time
18without penalty and, if the individual withdraws, that the
19individual shall receive all funds in the account, other than
20funds earned by the provider, within seven business days of
21the individual's request.
24(i) Bears the same proportional relationship to the
25total fee for settling the entire debt balance as the
26individual debt amount bears to the entire debt amount.
27For purposes of this subparagraph, the individual debt
28amount and the entire debt amount shall be amounts owed
29at the time the debt was enrolled in the debt settlement
1(ii) Is a percentage of the amount saved as a result
2of the settlement. The percentage charged may not change
3from one individual debt to another. For purposes of this
4subparagraph, the amount saved shall be the difference
5between the amount owed at the time the debt was enrolled
6in the debt settlement service and the amount actually
7paid to satisfy the debt.
8(d) Construction.--Nothing under this section shall prohibit
9requesting or requiring the individual to place funds in an
10account to be used for the provider's fees for payments to
11creditors or debt collectors in connection with the
12renegotiation, settlement, reduction or other alteration of the
13terms of payment or other terms of debt, if:
14(1) The funds are held in an account at a bank.
24(5) The individual may withdraw from the debt settlement
25services at any time without penalty and shall receive all
26funds in the account, other than funds earned by the provider
27in compliance with this section, within seven days of the
1agreement, the agreement shall be voidable by the individual.
3ADMINISTRATION AND ENFORCEMENT
4Section 701. Powers and duties.
5The department shall have the authority to:
6(1) As follows:
7(i) Examine an instrument, document, account, book,
8record or file of a licensee or a person having a
9connection to the licensee or make other investigations
10as may be necessary to administer this act. The
11examination may include documents, accounts, books or
12records that relate to the operation of the licensee that
13are in the possession of an affiliate, subsidiary or
14other business entity.
15(ii) Under the authority of this paragraph, the
16department may remove an instrument, document, account,
17book, record or file of a licensee or person to a
18location outside of the licensee's or person's office
24(2) Conduct administrative hearings on a matter
25pertaining to this act and issue subpoenas to compel the
26attendance of witnesses or the production of documents,
27accounts, books or records at a hearing. A document, account,
28book or record subject to subpoena may be retained by the
29department until the proceeding in connection with which it
30was subpoenaed is completed. A department official may
3(3) Request and receive information or records,
4including reports of criminal history record information,
5from a Federal, State, local or foreign government entity
6regarding an applicant, a licensee or a person related to the
7business of debt settlement services. The cost associated
8with the request shall be paid by the applicant or licensee.
25(9) Provide the following on its Internet website:
30(iii) Information on filing consumer complaints,
1including a toll-free telephone number.
2(iv) A list of current licensees.
3Section 702. Administrative proceedings.
4(a) Hearings.--A person aggrieved by a decision of the
5department may appeal the decision to the secretary. The appeal
6shall be conducted under 2 Pa.C.S. Ch. 5 Subch. A (relating to
7practice and procedure of Commonwealth agencies).
11(c) Final orders.--
21Section 703. Reports to department.
22(a) Annual report.--A licensee shall file an annual report
23with the department on a date determined by the department
24setting forth information as the department shall require
25concerning the debt settlement services business conducted by
26the licensee during the preceding calendar year. The report
27shall be on a form provided by the department.
1against the licensee by any Federal or State agency. The report
2must be filed no later than seven days after the licensee is
3made aware of the final order. The licensee shall provide
4updates to the department as to the status of an enforcement
5action as required by the department.
6(c) Penalty.--A licensee who fails to file an annual report
7with the department as required under subsection (a) may be
8subject to a penalty of $100 for each day after the date that
9the annual report was required to be filed.
10Section 704. Violations.
13(b) Unfair trade practices.--A person who is in violation of
14this act shall be in violation of the act of December 17, 1968
15(P.L.1224, No.387), known as the Unfair Trade Practices and
16Consumer Protection Law.
17Section 705. Banking Fund.
24This act modifies, limits and supersedes the Electronic
25Signatures in Global and National Commerce Act (Public Law 106-
26229, 15 U.S.C. § 7001 et seq.), but does not modify, limit or
27supersede section 101(c) of the Electronic Signatures in Global
28and National Commerce Act or authorize electronic delivery of
29any of the notices described in section 103(b) of the Electronic
30Signatures in Global and National Commerce Act.
1Section 2102. Transitional provisions.
2Transactions entered into before the effective date of this
3section and the rights, duties and interests resulting from the
4transactions may be completed, terminated or enforced as
5required or permitted by a law repealed or modified under this
6act as though the repeal or modification had not occurred.
7Section 2103. Repeal.
14Section 2104. Effective date.
15This act shall take effect in 60 days.