Senate Introduced Bill 1056
























SENATE BILL NO. 1056


   April 22, 1998, Introduced by Senator BOUCHARD and referred to the
        Committee on Financial Services.



        A bill to amend 1975 PA 148, entitled

   "Debt management act,"

   by amending sections 2, 5, 6, 8, 13, 14, 15, 16, and 18 (MCL

   451.412, 451.415, 451.416, 451.418, 451.423, 451.424, 451.425,

   451.426, and 451.428); and to repeal acts and parts of acts.

               THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 1         Sec. 2.  As used in this act:

 2         (a) "Bureau" means the corporation,  and 
             securities, AND

 3    LAND DEVELOPMENT bureau of the department.  of commerce.
             

 4         (b) "Counselor" means an employee or agent of a licensee who

 5    engages in  scheduling,  counseling  ,
              and budget analysis

 6    functions.

 7         (c) "Creditor" means a person for whose benefit  moneys
             are 

 8    MONEY IS being collected and disbursed by a licensee.  The
              A

 9    licensee is not a creditor for purposes of this act.


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                                   2

 1         (d) "Debt management" means the planning and management of

 2    the financial affairs of a debtor and the receipt of  funds
             

 3    MONEY from the debtor for distribution to  creditors
              A CREDITOR

 4    in payment or partial payment of the debtor's obligations.

 5         (e) "Debtor" means a person from whom  moneys are
              MONEY IS

 6    being collected for the benefit of  creditors  A
             CREDITOR of the

 7    debtor.

 8         (f) "Department" means the department of  commerce
              CONSUMER

 9    AND INDUSTRY SERVICES.

10         (g) "Director" means the director of the department  of

11     commerce  or his OR HER authorized representative.

12         (h) "Fees and charges of the licensee" means the total

13    amount of money to be charged a debtor by the licensee including

14    the $25.00 initial payment.

15         (i) "License" means a written certificate or exemption order

16    issued by the director.

17         (j) "Licensee" means  an individual, partnership,
             unincor-

18     porated association, or corporation  A PERSON
                       licensed under this

19    act.  Except as to  sections 5(1), 5(3),  SECTION
             5(1) OR (7) or

20    8, a licensee includes a person exempted pursuant to section 4(2)

21    or (4).

22         (k) "Office" means each location by street name, building

23    number, city, and  state  ZIP CODE where a person
             engages in the

24    debt management business IN THIS STATE.

25         (l) "Office manager" means an employee or owner charged
             with

26    the supervision, oversight, or approval of the functions of

27    budget analysis, counseling, or scheduling.



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 1         (m) "Person" means an individual,  a 
             corporation,  a 

 2    partnership,  an  association,  a 
             joint stock company,  a  trust

 3    where the interests of the beneficiaries are evidenced by a

 4    security, LIMITED LIABILITY COMPANY, or  an unincorporated

 5     organization  OTHER LEGAL ENTITY.

 6         Sec. 5.  (1)  A person desiring to obtain a license to

 7     engage in the debt management business in this state shall
                       file

 8     with the department an application in writing, under oath,
                       set-

 9     ting forth the person's business name, the exact location of
                       the

10     person's office, the names and addresses of the officers and

11     directors if an association or a corporation, and if a
                       partner-

12     ship, the partnership name and the names and addresses of
                       the

13     partners, a copy of the certificate of assumed name or
                       certifi-

14     cate of partnership or articles of incorporation, and such
                       addi-

15     tional data as the director prescribes by rule or order.  At
                       the

16     time of filing the application the applicant shall pay to
                       the

17     department a license fee of $50.00 for each office and an
                       inves-

18     tigation fee of $50.00.  At the time of filing the
                       application

19     the applicant shall furnish a surety bond to the people of
                       the

20     state of Michigan in a sum equivalent of $5,000.00 for each
                       busi-

21     ness office maintained by the licensee, conditioned upon the

22     faithful accounting of all moneys collected upon accounts

23     entrusted to a licensee engaged in debt management, and the

24     licensee's employees and agents.  The bond shall be approved
                       by

25     the director and filed in the office of the bureau.  A
                       person,

26     firm, or corporation shall not engage in the business of
                       debt

27     management until a good and sufficient bond is filed in



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 1    accordance with this act.  The bureau may by rule provide
             for an

 2     appropriate deposit of cash, securities, or the assignment
                       of the

 3     coverage of other surety bonds in lieu of the debt
                       management

 4     bond if the director is satisfied that comparable or more
                       exten-

 5     sive coverage results.  AN APPLICANT FOR A LICENSE
                       TO ENGAGE IN

 6    THE DEBT MANAGEMENT BUSINESS IN THIS STATE SHALL FILE AN APPLICA-

 7    TION WITH THE DIRECTOR IN WRITING AND UNDER OATH THAT INCLUDES

 8    ALL OF THE FOLLOWING:

 9         (A) THE NAME AND EXACT ADDRESS OF THE APPLICANT AND THE NAME

10    AND ADDRESS OF EACH OF THE FOLLOWING, AS APPLICABLE:

11         (i) IF THE APPLICANT IS A CORPORATION, ITS OFFICERS AND

12    DIRECTORS.

13         (ii) IF THE APPLICANT IS AN ASSOCIATION, ITS OFFICERS
             AND

14    DIRECTORS.

15         (iii) IF THE APPLICANT IS A PARTNERSHIP, EACH PARTNER.

16         (iv) IF THE APPLICANT IS A LIMITED LIABILITY COMPANY,
             ITS

17    MANAGER OR MANAGERS AS THOSE TERMS ARE DEFINED IN SECTION 102 OF

18    THE MICHIGAN LIMITED LIABILITY COMPANY ACT, 1993 PA 23, MCL

19    450.4101 TO 450.5200.

20         (v) IF THE APPLICANT IS ANY OTHER LEGAL ENTITY, THE
             MANAGER

21    OR OTHER PERSON DESIGNATED TO CONTROL THE OPERATION OF THAT LEGAL

22    ENTITY.

23         (B) A COPY OF A CERTIFICATE OF AN ASSUMED NAME, IF

24    APPLICABLE.

25         (C) ONE OR MORE OF THE FOLLOWING, AS APPLICABLE:

26         (i) IF THE APPLICANT IS A CORPORATION, A COPY OF THE

27    ARTICLES OF INCORPORATION.



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 1         (ii) IF THE APPLICANT IS AN ASSOCIATION, A COPY OF THE

 2    ORGANIZATIONAL DOCUMENTS OF THE ASSOCIATION.

 3         (iii) IF THE APPLICANT IS A PARTNERSHIP, A COPY OF THE
             PART-

 4    NERSHIP AGREEMENT.

 5         (iv) IF THE APPLICANT IS A LIMITED LIABILITY COMPANY, A
             COPY

 6    OF THE ARTICLES OF ORGANIZATION.

 7         (2) UPON FILING THE APPLICATION, THE APPLICANT SHALL DO ALL

 8    OF THE FOLLOWING:

 9         (A) PAY TO THE DEPARTMENT A LICENSE FEE OF $50.00.

10         (B) PAY TO THE DEPARTMENT AN INVESTIGATION FEE OF $50.00.

11         (C) FURNISH A $5,000.00 SURETY BOND TO THE PEOPLE OF THE

12    STATE OF MICHIGAN FOR EACH OFFICE ESTABLISHED BY THE APPLICANT.

13    HOWEVER, IF AN APPLICANT ESTABLISHES MORE THAN 10 OFFICES ENGAGED

14    IN THE BUSINESS OF DEBT MANAGEMENT IN THIS STATE AND FOR WHICH A

15    SURETY BOND HAS BEEN FURNISHED, THE SURETY BOND PRESCRIBED BY

16    THIS SUBDIVISION SHALL BE WAIVED FOR ANY ADDITIONAL OFFICE SUBSE-

17    QUENTLY ESTABLISHED.

18         (D) FILE AN APPOINTMENT OF THE DIRECTOR AS THE AGENT OF THE

19    APPLICANT FOR SERVICE OF PROCESS IN THIS STATE.

20         (3) THE DIRECTOR SHALL NOT ACCEPT AN APPLICATION OR ISSUE A

21    LICENSE THAT INCLUDES A BUSINESS NAME THAT IS THE SAME OR SIMILAR

22    TO AN EXISTING BUSINESS NAME ON FILE WITH THE DEPARTMENT.

23         (4) AN APPLICANT SHALL INCLUDE WITH THE APPLICATION BOTH OF

24    THE FOLLOWING:

25         (A) A BLANK COPY OF A FORM CONTRACT TO BE USED BY A DEBTOR

26    AND THE APPLICANT.





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 1         (B) A COPY OF THE CREDITOR'S AGREEMENT FORM TO BE USED BY

 2    THE APPLICANT AND A CREDITOR.

 3         (5) SERVICE OF PROCESS UPON THE DIRECTOR SHALL BE CONSIDERED

 4    SERVICE UPON AN APPLICANT OR LICENSEE.

 5         (6)  (2) A licensee shall submit for approval
             concurrently 

 6    AN APPLICANT SHALL INCLUDE with  this  THE
             application a blank

 7    copy of the  form of  contract FORM to be used
             between the debtor

 8    and the licensee, the budget analysis form, and the creditor's

 9    agreement form  that shall be used and shall submit to the
             bureau

10     for approval all changes and amendments thereto  TO
                       BE USED BY

11    THE LICENSEE AND A CREDITOR.  A contract FORM or OTHER form may

12    not be used without the BUREAU'S approval.  of the bureau.
              ANY

13    CHANGE IN A FORM SHALL BE SUBMITTED TO THE BUREAU.

14         (7)  (3) The  UNLESS SURRENDERED, REVOKED, OR
             SUSPENDED, A

15    license issued under this act  shall expire 
             EXPIRES on December

16    31  , following its issuance unless sooner surrendered,
             revoked,

17     or suspended, but may be renewed as provided in this act
                        OF THE

18    YEAR ISSUED.  A LICENSE MAY BE RENEWED BEFORE THE EXPIRATION DATE

19    AS PROVIDED UNDER THIS ACT.

20          (4) The application shall be accompanied by an
             appointment

21     of the director as agent of the applicant for service of
                       process

22     in this state.  Service upon the director shall be
                       sufficient

23     service upon any licensee under the act, if the person
                       seeking

24     service upon the licensee shall certify to the director that
                       a

25     diligent attempt was made to affect personal service upon
                       the

26     licensee and that this effort was unavailing. 





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 1         (8)  (5)  A licensee shall  make
              CREATE, maintain, and

 2    preserve accurate and complete books and records relating to

 3     his  THE LICENSEE'S business.  These
              THE books and records

 4    shall be  kept current  MAINTAINED according to
             generally

 5    accepted accounting standards and procedures.  A licensee or an

 6    applicant  for a license  shall  furnish
             written notice to 

 7    NOTIFY the bureau  specifying  OF the address
              of the place 

 8    where  those  THE books and records are  to
             be  kept.  A change

 9     of  IF A LICENSEE CHANGES THE location of 
                       these  THE BOOKS AND

10    records,  shall be reported promptly to  THE
             LICENSEE SHALL

11    PROMPTLY NOTIFY the bureau.  The director may prescribe by rule

12    or order the form and contents of books and records relating to a

13    licensee's  debt management  business.

14         (9)  (6) Financial statements  A FINANCIAL
             STATEMENT shall

15    be filed with an application for A debt management license.  The

16    director may require THAT A financial  statements 
             STATEMENT PRE-

17    SCRIBED UNDER THIS ACT BE certified by an independent certified

18    public accountant.

19         (10) IF A LICENSEE IS A CORPORATION, THE DIRECTOR SHALL NOT

20    REQUIRE OF THAT CORPORATION INFORMATION CONCERNING A MEMBER OF

21    THE BOARD OF DIRECTORS OF THAT CORPORATION, IF THAT MEMBER DOES

22    NOT RECEIVE A SALARY, STOCK DIVIDEND, OR OTHER FINANCIAL BENEFIT

23    FROM THAT CORPORATION OTHER THAN REIMBURSEMENT OF THE ACTUAL

24    EXPENSES INCURRED IN CARRYING OUT THE DUTIES OF A DIRECTOR OF

25    THAT CORPORATION.

26         Sec. 6.  (1)  Upon the filing of the application and
             payment

27     of the fees and approval of the bond, the department shall



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 1    investigate the facts and shall issue a license to an
             applicant

 2     if it finds that the financial responsibility, experience,
                       char-

 3     acter, and general fitness of the applicant and of the
                       members

 4     thereof, if the applicant is a partnership or an
                       association, and

 5     of the officers and directors if the applicant is a
                       corporation,

 6     are such as to command the confidence of the community to
                       warrant

 7     belief that the business will be operated fairly and
                       honestly

 8     within the provisions of this act.  UPON FILING THE
                       APPLICATION,

 9    RECEIPT OF THE FEES, AND APPROVAL OF THE BOND, THE DEPARTMENT

10    SHALL INVESTIGATE THE APPLICANT'S RESPONSIBILITY, EXPERIENCE,

11    CHARACTER, AND GENERAL FITNESS.  IF THE RESULT OF THE INVESTIGA-

12    TION WARRANTS A BELIEF THAT THE BUSINESS WILL BE OPERATED FAIRLY

13    AND HONESTLY, THE DEPARTMENT SHALL ISSUE A LICENSE.  THE INVESTI-

14    GATION OF THE APPLICANT SHALL AT LEAST INCLUDE THE FOLLOWING AS

15    APPLICABLE:

16         (A) IF THE APPLICANT IS A CORPORATION, THE OFFICERS AND

17    DIRECTORS OF THE CORPORATION.

18         (B) IF THE APPLICANT IS A PARTNERSHIP, ALL THE PARTNERS OF

19    THE PARTNERSHIP.

20         (C) IF THE APPLICANT IS AN ASSOCIATION, ALL THE OFFICERS OF

21    THE ASSOCIATION.

22         (D) IF THE APPLICANT IS AN INDIVIDUAL, THE INDIVIDUAL.

23         (2) A license shall not be issued if THE INVESTIGATION

24    REVEALS 1 OR MORE OF THE FOLLOWING:

25         (a)  An  THAT AN individual 
             applicant, or any of the

26     applicant's members if the applicant is a partnership or





   04731'97

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 1    association, or any of the applicant's officers or directors
             if

 2     the applicant is a corporation  LISTED UNDER
                       SUBSECTION (1)(A):

 3         (i) Was ever convicted of a crime involving moral
             turpitude

 4     which shall include  INCLUDING forgery,
             embezzlement, obtaining

 5    money under false pretenses, larceny, extortion, conspiracy to

 6    defraud, or any other  like  SIMILAR offense.

 7         (ii) Violated or failed to comply with  a
             provision of  this

 8    act or a rule  or order  promulgated  or
             issued  under this act.

 9         (iii) Had a license to engage in the business of debt
             man-

10    agement revoked or suspended for any reason other than failure to

11    pay licensing fees in this state or another state.

12         (iv) Defaulted in the payment of money collected for
             others,

13    including the discharge of debts through bankruptcy proceedings.

14    The director may, at his OR HER discretion, waive this restric-

15    tion if provided with evidence of justifiable cause for the bank-

16    ruptcy, plus convincing evidence of the fitness of the bankrupt

17    party to carry out his or her functions under this act.

18         (b) An individual applicant is not at least 18 years of age

19    and a citizen of the United States.

20         (c) An applicant which is a partnership, corporation, or

21    association has not been granted authority to do business in this

22    state.

23         (d) The applicant is an employee or owner of a collection

24    agency as defined in  Act No.  361 of the Public Acts of
             1974,

25     being sections 445.211 to 445.245 of the Michigan Compiled
                       Laws 

26    FORMER 1974 PA 361, MCL 445.211 TO 445.245, or process serving

27    business or in any manner is affiliated with a collection agency



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 1    or process serving business.  The director may, in his OR HER

 2    discretion, waive this restriction on a showing of sufficient

 3    safeguards in the operation of the collection agency.

 4         (3) An individual applicant  ,  OR AN office
             manager  ,  or

 5    counselor OF A DEBT MANAGEMENT COMPANY shall pass an examination

 6    within the first 180 days  of  AFTER employment.
             THE EXAMINATION

 7    SHALL BE administered by the director or his OR HER designee.
              ,

 8     which  THE examination may be oral or written, or
                        partly oral

 9     and partly written  BOTH, and shall be practical in
                       nature and

10    sufficiently thorough to ascertain the applicant's fitness.

11     Questions  THE EXAMINATION MAY INCLUDE QUESTIONS
             on bookkeeping,

12    credit adjusting, business ethics, agency, contracts, debtor and

13    creditor relationships, trust funds, and the provisions of this

14    act and rules promulgated  thereunder may be included in the

15     examination  UNDER THIS ACT.  The director may
                       charge an examina-

16    tion fee of $25.00.  for administering this examination.
             

17         Sec. 8.  A licensee shall before  BEFORE
             December 1 of each

18    year, A LICENSEE SHALL make application to the department for

19    renewal of its license.  The application shall be on the form

20    prescribed by the department and shall be accompanied by a fee of

21    $50.00 for each office together with a bond IN THE SAME MANNER as

22     in the case of  an original application.  The
             application shall

23    cover each  branch  office  which 
             WITHIN THIS STATE THAT is

24    under the ownership and control of the applying entity.

25    Financial statements shall be filed with THE application for

26    renewal of  debt management licenses  A LICENSE. 
             The director





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 1    may require THAT THE financial statements BE certified by an

 2    independent certified public accountant.

 3         Sec. 13.  (1)  A licensee shall not charge or receive a
             fee

 4     until the licensee has the consent of at least 51% in number
                       and

 5     dollar amount of all the creditors of the debtor, or until
                       51% in

 6     number and dollar amount of creditors have accepted a
                       payment. 

 7 UPON ESTABLISHING A DEBT MANAGEMENT PLAN FOR A CLIENT, A LICENSEE

 8    MAY CHARGE AND RECEIVE A FEE.  HOWEVER, IF 51% IN NUMBER AND

 9    DOLLAR AMOUNT OF ALL THE DEBTOR'S CREDITORS DO NOT CONSENT TO THE

10    DEBT MANAGEMENT PROGRAM, THE FEE SHALL BE RETURNED TO THE CLIENT

11    BEFORE CLOSING THE ACCOUNT.

12         (2)  Consents  CONSENT FROM A CREDITOR shall
             be recorded on

13    a separate  format  FORM, approved by the director.
              and  THE

14    FORM shall contain a list of ALL the creditors, the manner in

15    which consent was sought, the date of each contact, the NAME OF

16    THE person contacted, the response obtained, any revised or spe-

17    cial conditions or arrangements  which  THAT
             condition their con-

18    sent, and the date  at  ON which the required
              consents were 

19    CONSENT WAS secured.  The  format  FORM shall
             contain other

20    information THAT the director may PRESCRIBE by rule or order.

21     prescribe. 

22         (3)  Consent may be sought by mail and, in the case of
             writ-

23     ten notice to a creditor without response, implied consent
                       to the

24     proposed payments may be presumed 14 calendar days after
                       mailing

25     the notice.  In the case of payment to a creditor acceptance
                       may

26     be presumed 7 calendar days after mailing the check.
                        THE CONSENT

27    OF A CREDITOR MAY BE SOUGHT BY MAILING A NOTICE OF A DEBT



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 1    MANAGEMENT PLAN TO A CREDITOR.  IF THE CREDITOR DOES NOT RESPOND

 2    WITHIN 14 DAYS AFTER THE MAILING OF THE NOTICE, IT MAY BE PRE-

 3    SUMED THAT THE CREDITOR HAS GIVEN CONSENT.

 4         (4) IF A PAYMENT UNDER THE DEBT MANAGEMENT PLAN IS MAILED TO

 5    A CREDITOR, ACCEPTANCE OF THE PAYMENT OR PLAN MAY BE PRESUMED 7

 6    DAYS AFTER MAILING THE PAYMENT.

 7         Sec. 14.  (1) A contract between a licensee and debtor shall

 8    INCLUDE ALL OF THE FOLLOWING:

 9         (a)  List every  EACH creditor to whom
             payments will be made

10    and the amount  owing to that  OWED EACH creditor.

11         (b)  Disclose the rate and total  THE maximum
             ANNUAL amount

12    of the licensee's charges.

13         (c)  Disclose the actual  THE beginning and
             ending dates of

14    the contract, THE TERM OF which shall not be longer than  24
              60

15    months.

16         (d)  Disclose the  THE number of months and
             the total prin-

17    cipal amount plus approximate interest charges required to liqui-

18    date in full the debts, except mortgage or land contract interest

19    payments, described in the contract.  The licensee shall provide

20     to  the debtor WITH an estimate of the 
             affect of  EFFECT inter-

21    est and carrying charges HAVE on the debtor's account.

22         (e)  Disclose the  THE name and address of the
             licensee and

23    of the debtor.

24         (f)  Contain such other and further  OTHER
             provisions or

25    disclosures  as  THAT the director  shall
             determine  DETERMINES

26    are necessary for the protection of the debtor and the proper

27    conduct of business by  the  A licensee.



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 1         (2)  Distribute to the creditors of the debtor monthly
             all

 2     funds received from a debtor or on behalf of the debtor,
                       except

 3     that no more than an amount equal to one month's fee plus
                       the

 4     close out fee may be retained in the debtor's trust account
                       at

 5     any time, unless approved by the department by rule or
                       order. 

 6    UNLESS OTHERWISE APPROVED BY THE DEPARTMENT AND EXCEPT FOR AN

 7    AMOUNT EQUAL TO A MONTHLY FEE OR CLOSEOUT FEE, A LICENSEE SHALL

 8    DISTRIBUTE TO THE CREDITORS OF THE DEBTOR, AT LEAST MONTHLY, ALL

 9    MONEY RECEIVED FROM A DEBTOR OR ON BEHALF OF A DEBTOR.

10         Sec. 15.  (1) Payments received by a licensee from or on

11    behalf of a debtor for the benefit of  creditors  A
             CREDITOR

12    shall be held in trust in a separate bank account maintained for

13    the benefit of  debtors  THE DEBTOR.  The
             licensee shall not

14     commingle a payment with his own property or funds, but
                       shall

15     maintain a separate trust account and deposit in that
                       account

16     payments received from a debtor.  However, the  A
                       licensee may

17    deposit  a specified amount of  its own 
             funds  MONEY in the sep-

18    arate trust account  upon approval of the director 
             IF AT ALL

19    TIMES THE BALANCE IN THE TRUST ACCOUNT IS GREATER THAN THE SUM OF

20    THE ESCROW BALANCES OF EACH DEBTOR'S ACCOUNT.  Disbursements

21    whether to the debtor or to the creditors of the debtor  ,
              shall

22    be made from the trust account.  Payments  A
             PAYMENT from a

23    debtor or on behalf of a debtor shall be deposited in the account

24    not later than 2 business days after receipt  thereof
              OF THE

25    PAYMENT.

26         (2) The trust account shall be reconciled not less than once

27    a month.  The reconciliation shall  consist of ascertaining
             



   04731'97

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 1    ASCERTAIN the actual cash balance in the account and 
             comparing 

 2    COMPARE it with the sum of the escrow balances in each debtor's

 3    account.  This shall be done not more than 45 days after
             receipt

 4     of the monthly bank statement and shall be prepared on a
                       form

 5     approved by the director and shall be kept as a permanent
                       record

 6     of the licensee.  THE RECONCILIATION MAY BE DONE
                       ELECTRONICALLY

 7    OR BY ANY OTHER APPROPRIATE METHOD AND SHALL BE DONE NOT MORE

 8    THAN 45 BUSINESS DAYS AFTER RECEIPT OF THE BANK STATEMENT.  AN

 9    ELECTRONIC OR OTHER APPROPRIATE NOTATION OF THE RECONCILIATION

10    SHALL BE KEPT AS A PERMANENT RECORD OF THE LICENSEE AND SHALL BE

11    CONSIDERED AS IN COMPLIANCE WITH THIS SECTION.

12         (3) The trust account shall  at all times 
             have an actual

13     minimum  cash balance equal to OR GREATER THAN the
             sum of the

14    escrow balances of each debtor's account, and failure to maintain

15    that amount  shall be  IS cause for a summary
             suspension of the

16    license.

17         (4)  When the  IF A trust account fails to
             contain suffi-

18    cient funds to cover the debtor escrow balances, the licensee

19    shall immediately upon discovery  ,  notify the
             director by tele-

20    phone or by  telegraphic notice, followed by an explanatory

21     letter, and the remedial action taken  TELEGRAPH. 
                       THE LICENSEE

22    SHALL ALSO PROVIDE WRITTEN NOTICE INCLUDING A DESCRIPTION OF THE

23    REMEDIAL ACTION TAKEN.

24         Sec. 16.  A licensee or exempted person shall DO ALL OF THE

25    FOLLOWING:

26         (a)  Make, keep, and preserve for 6 years the accounts,

27     correspondence, memoranda, papers, books, and other records
                       and



   04731'97

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 1    make the reports that the department by rule prescribes as

 2     necessary or appropriate in the public interest or for the
                       pro-

 3     tection of debtors and creditors.  The accounts,
                       correspondence,

 4     memoranda, papers, books, and other records are subject at
                       any

 5     time to reasonable periodic, special, or other examinations
                       by

 6     examiners or other representatives of the department as the

 7     director deems necessary or appropriate in the public
                       interest or

 8     for the protection of the public.  CREATE AND
                       MAINTAIN RECORDS,

 9    IN A MANNER APPROVED BY THE DEPARTMENT, WHICH SHALL ALLOW FOR

10    ELECTRONIC, PHOTOCOPY, OR COMPUTERIZED METHODS, OF THE ACCOUNTS,

11    CORRESPONDENCE, MEMORANDA, PAPERS, BOOKS, AND OTHER RECORDS OF

12    THE DEBT MANAGEMENT BUSINESS.

13         (b)  Deliver to the debtor a completed and signed true
             copy

14     of the contract between the licensee and the debtor upon
                       execu-

15     tion of the contract.  MAKE ALL THE RECORDS CREATED
                       AND MAIN-

16    TAINED UNDER SUBDIVISION (A) AVAILABLE FOR EXAMINATION BY EXAMIN-

17    ERS OF THE DEPARTMENT AT REASONABLE INTERVALS OR UPON A SPECIAL

18    DEMAND OF THE DEPARTMENT.

19         (c)  Deliver to the debtor a receipt for a payment
             within 5

20     days after receipt of that payment.  The department may
                       waive

21     this requirement upon a showing of acceptable alternative

22     notice.  MAKE REPORTS TO THE DEPARTMENT AS
                       PRESCRIBED BY RULE.

23         (d)  Provide a debtor with a written statement covering
             the

24     last 12 months activity within 5 business days of a request
                       for

25     the statement or with a verbal accounting upon demand.  The
                       writ-

26     ten statement or verbal accounting shall indicate the total

27     amount received from or on behalf of the debtor, the total
                       amount



   04731'97

                                  16

 1    paid to each individual creditor, the total amount of the
             charges

 2     deducted from payments, and the amount held in reserve.
                        UPON

 3    CONTRACTING WITH A DEBTOR, GIVE A COPY OF THE CONTRACT TO THE

 4    DEBTOR.

 5         (e)  Not more than 120 days after the date the contract
             is

 6     entered into, give the debtor a written statement which
                       indicates

 7     the total amount received from or on behalf of the debtor,
                       the

 8     total amount paid to each individual creditor, the total
                       amount

 9     of the charges deducted from payments, and any amount held
                       in

10     reserve, a copy of this statement shall be retained in the

11     debtor's file.  The administrator may waive this requirement
                       upon

12     a showing of an acceptable alternative notice. 
                       UNLESS THE

13    DEPARTMENT ALLOWS AN ACCEPTABLE ALTERNATIVE METHOD, DELIVER A

14    RECEIPT TO A DEBTOR WITHIN 5 DAYS AFTER RECEIVING A PAYMENT FROM

15    A DEBTOR.

16         (F) WITHIN 5 BUSINESS DAYS AFTER A REQUEST FROM A DEBTOR,

17    PROVIDE A WRITTEN STATEMENT THAT INCLUDES ALL OF THE FOLLOWING:

18         (i) ALL TRANSACTIONS CONCERNING THE MONEY RECEIVED FROM
             OR

19    ON BEHALF OF THE DEBTOR.

20         (ii) THE TOTAL AMOUNT PAID TO EACH CREDITOR.

21         (iii) THE TOTAL AMOUNT OF CHARGES DEDUCTED FROM THE
             PAYMENTS

22    RECEIVED.

23         (iv) THE AMOUNT HELD IN RESERVE.

24         (G) UNLESS AN ACCEPTABLE ALTERNATIVE METHOD IS APPROVED BY

25    THE DEPARTMENT, NOT MORE THAN 120 DAYS AFTER CONTRACTING WITH A

26    DEBTOR, PROVIDE A WRITTEN STATEMENT TO THE DEBTOR THAT INCLUDES

27    ALL OF THE FOLLOWING:



   04731'97

                                  17

 1         (i) THE TOTAL AMOUNT RECEIVED FROM AND ON BEHALF OF THE

 2    DEBTOR.

 3         (ii) THE TOTAL AMOUNT PAID TO EACH CREDITOR.

 4         (iii) THE TOTAL AMOUNT DEDUCTED FROM THE PAYMENTS
             RECEIVED.

 5         (iv) THE AMOUNT HELD IN RESERVE.

 6         (H) AT LEAST ANNUALLY, VERIFY PAYMENTS TO SELECTED

 7    CREDITOR'S ACCOUNTS AND DO ALL OF THE FOLLOWING:

 8         (i) REVIEW EACH DEBTOR'S ACCOUNT FILE.

 9         (ii) REVIEW CHECKS PAID BY THE LICENSEE.

10         (iii) REVIEW PROCEDURES USED BY THE LICENSEE FOR
             PROCESSING

11    CHECKS AND HANDLING CASH.

12         (iv) REVIEW THE COMPLAINT FILE MAINTAINED BY THE
             LICENSEE.

13         (v) VERIFY PAYMENTS TO SELECTED CREDITOR ACCOUNTS.

14         (vi) REVIEW SELECTED COUNSELOR RECORDS AND WORK PAPERS.

15         Sec. 18.  (1)  By contract a  A licensee
              or person exempt

16     pursuant to section 4(2) or (4)  may charge a
                       reasonable fee

17     for  UNDER A debt management services CONTRACT.
              The fees and

18     charges of the licensee with respect to a debtor's account
                        A FEE

19    shall not exceed 15% of the amount of the debt to be liquidated

20    during the express term of the contract.  The licensee  or
             person

21     exempt pursuant to section 4(2) or (4)  may require
                       THE DEBTOR TO

22    MAKE an initial payment  by the debtor  of an
             amount not more

23    than  $25.00  $50.00, which is part of the total
              fees and

24     charges  FEE stated in the contract.  This
                       amount shall be

25     deducted from total fees and charges in determining the
                       monthly

26     amortizable amount for subsequent fees earned.  THE
                       INITIAL





   04731'97

                                  18

 1    PAYMENT SHALL BE DEDUCTED FROM THE AMOUNT OF A SUBSEQUENT FEE

 2    THAT IS AMORTIZED, IF ANY.

 3         (2) In the event of cancellation or default on the per-

 4    formance of the contract by the debtor before its successful com-

 5    pletion, the licensee  or person exempt pursuant to section
             4(2)

 6     or (4)  may collect $50.00 in addition to fees
                       previously

 7    received.  an amount equal to $25.00.  This
              charge  $50.00 FEE

 8    does not apply to THE total payment  of  UNDER the
             contract.

 9     before the term of the contract expires. 

10         (3) A contract  shall not be  IS NOT effective
             until a

11    debtor has made a payment to the licensee for distribution to

12     his  THE DEBTOR'S creditors.

13         (4)  It shall be deemed a cancellation on behalf of the

14     debtor if the debtor fails to make payments for 60 days, or
                       4

15     consecutive payments are missed, whichever is the shorter

16     period.  In the event of extraordinary circumstances, the
                       debtor

17     may file with the licensee a letter of continuation of the
                       con-

18     tract for a specific period, which shall maintain the
                       contract in

19     effect, even if more than 4 consecutive payments are missed
                       or 60

20     days elapsed without payment.  During this period the
                       licensee

21     may not accrue or assess fees or other charges.  A letter of
                       con-

22     tinuation may not be filed with the licensee at the
                       beginning of

23     a contract.  The contract between the licensee and the
                       debtor

24     shall clearly state the debtor's right to file a letter of
                       con-

25     tinuation of the contract under this subsection. 
                       IF A DEBTOR

26    FAILS TO MAKE A PAYMENT TO A LICENSEE WITHIN 60 DAYS AFTER THE

27    DATE A PAYMENT WAS DUE UNDER A CONTRACT OR FAILS TO MAKE 4



   04731'97

                                  19

 1    CONSECUTIVE PAYMENTS THAT WERE DUE UNDER THE CONTRACT, THE

 2    CONTRACT IS CONSIDERED CANCELED BY THE DEBTOR.  A DEBTOR MAY FILE

 3    A LETTER OF CONTINUATION OF THE CONTRACT EVEN IF THE DEBTOR DID

 4    NOT MAKE A PAYMENT WITHIN 60 DAYS AFTER A PAYMENT WAS DUE OR

 5    FAILED TO MAKE 4 CONSECUTIVE PAYMENTS THAT WERE DUE UNDER THE

 6    CONTRACT.  IF A LETTER OF CONTINUATION IS FILED, THE CONTRACT

 7    REMAINS IN EFFECT.  A CONTRACT BETWEEN A LICENSEE AND A DEBTOR

 8    SHALL CLEARLY PROVIDE FOR A LETTER OF CONTINUATION BY A DEBTOR.

 9    A LETTER OF CONTINUATION MAY NOT BE FILED WITH A LICENSEE AT THE

10    BEGINNING OF A CONTRACT.

11         (5)  If a licensee contracts for, receives, or makes a

12     charge in excess of the maximum permitted by this act or
                       rules

13     promulgated under this act, except as the result of an
                       inadver-

14     tent clerical error, the licensee shall return to the debtor
                       the

15     amount of the payments received from the debtor or on his
                       behalf

16     and not distributed to creditors, plus, as a penalty, an
                       amount

17     equal to the amount overcharged.  A LICENSEE SHALL
                       NOT CONTRACT

18    FOR, RECEIVE, OR CHARGE A DEBTOR AN AMOUNT GREATER THAN AUTHO-

19    RIZED BY THIS ACT.  A PERSON WHO VIOLATES THIS SUBSECTION SHALL

20    RETURN TO THE DEBTOR ALL MONEY RECEIVED FROM THE DEBTOR, OR ON

21    BEHALF OF THE DEBTOR, THAT WAS NOT DISTRIBUTED TO A CREDITOR,

22    AND, AS A PENALTY, AN ADDITIONAL EQUAL AMOUNT.

23         Enacting section 1.  Section 27 of the debt management act,

24    1975 PA 148, MCL 451.437, is repealed.









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