December 6, 2007, Introduced by Senators HUNTER, CLARKE, OLSHOVE, SCOTT, BRATER, BASHAM and CLARK-COLEMAN and referred to the Committee on Banking and Financial Institutions.
A bill to license and regulate debt settlement services
providers; to prescribe the powers and duties of certain state
governmental officers and entities; to provide penalties; and to
repeal acts and parts of acts.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 1. This act shall be known and may be cited as the "debt
settlement services act".
Sec. 2. As used in this act:
(a) "Administrator" means the commissioner of the department
or his or her authorized representative.
(b) "Affiliate" means 1 of the following:
(i) With respect to an individual, any of the following:
(A) The spouse of the individual, a sibling of the individual,
or the spouse of a sibling of the individual.
(B) An individual or the spouse of an individual who is a
lineal ancestor or lineal descendant of the individual or the
individual's spouse.
(C) An aunt, uncle, great-aunt, great-uncle, first cousin,
niece, nephew, grandniece, or grandnephew, whether related by the
whole or the half blood or adoption, or the spouse of any of them.
(D) Any other individual occupying the residence of the
individual.
(ii) With respect to an entity, any of the following:
(A) A person that directly or indirectly controls, is
controlled by, or is under common control with the entity.
(B) An officer of, or an individual performing similar
functions with respect to, the entity.
(C) A director of, or an individual performing similar
functions with respect to, the entity.
(D) A person that receives or received more than $25,000.00
from the entity in either the current year or the preceding year or
a person that owns more than 10% of, or an individual who is
employed by or is a director of, a person that receives or received
more than $25,000.00 from the entity in either the current year or
the preceding year.
(E) An officer or director of, or an individual performing
similar functions with respect to, a person described in sub-
subparagraph (A).
(F) The spouse of, or an individual occupying the residence
of, an individual described in sub-subparagraphs (A) to (E).
(G) An individual who has the relationship specified in
subparagraph (i)(D) to an individual or the spouse of an individual
described in sub-subparagraphs (A) to (E).
(c) "Agreement" means an agreement between a provider and an
individual for the performance of debt settlement services.
(d) "Bank" means a financial institution, including, but not
limited to, a commercial bank, savings bank, savings and loan
association, credit union, mortgage bank, or trust company, engaged
in the business of banking, chartered under federal or state law,
and regulated by a federal or state banking regulatory authority.
(e) "Business address" means the physical location of a
business, including the name and number of a street.
(f) "Certified debt specialist" means an individual certified
by a training program or certifying organization that authenticates
the competence of individuals providing assistance to other
individuals in connection with debt settlement services.
(g) "Concessions" means assent to repayment of a debt on terms
more favorable to an individual than the terms of the contract
between the individual and a creditor.
(h) "Control person" means a director, manager, or executive
officer of an applicant or licensee or any other individual who has
the authority to participate in the direction, directly or
indirectly through 1 or more other persons, of the management or
policies of an applicant or licensee.
(i) "Debt settlement services" means acting or offering to act
as an intermediary between an individual and 1 or more creditors of
the individual for the purpose of adjusting, settling, discharging,
reaching a compromise on, or otherwise altering the terms of
payment of the individual's obligations, without receiving or
exercising direct control over any money of the individual, for the
purpose of distributing that money to those creditors. The term
does not include any of the following:
(i) Legal services provided in an attorney-client relationship
by an attorney licensed or otherwise authorized to practice law in
this state.
(ii) Accounting services provided in an accountant-client
relationship by a certified public accountant licensed to provide
accounting services in this state.
(iii) Debt management services provided by a person licensed
under the debt management act, 1975 PA 148, MCL 451.411 to 451.437.
(j) "Department" means the office of financial and insurance
services.
(k) "Entity" means a person other than an individual.
(l) "Good faith" means honesty in fact and the observance of
reasonable standards of fair dealing.
(m) "License application" means an application for an initial
or renewal license as a provider under this act.
(n) "Person" means an individual, corporation, limited
liability company, business trust, estate, trust, partnership,
association, joint venture, or any other legal or commercial
entity. The term does not include a public corporation, government,
or governmental subdivision, agency, or instrumentality.
(o) "Principal amount of the debt" means the amount of a debt
at the time of the execution of the agreement.
(p) "Program" means a program or strategy in which a provider
furnishes debt settlement services, which contemplate that
creditors will settle debts for less than the full principal
amount of debt owed by an individual, to which the individual makes
payments directly to the creditors.
(q) "Provider" means a person required to be licensed under
this act that provides, offers to provide, or agrees to provide
debt settlement services directly or through others.
(r) "Record" means information that is inscribed on a tangible
medium or that is stored in an electronic or other medium and is
retrievable in perceivable form.
(s) "Settlement fee" means a charge imposed on or paid by an
individual in connection with a creditor's assent to accept in full
satisfaction of a debt an amount less than the principal amount of
the debt.
(t) "Sign" means any of the following with present intent to
authenticate or adopt a record:
(i) To execute or adopt a tangible symbol.
(ii) To attach to or logically associate with the record an
electronic sound, symbol, or process.
(u) "State" means a state of the United States, the District
of Columbia, Puerto Rico, the United States Virgin Islands, or any
territory or insular possession subject to the jurisdiction of the
United States.
Sec. 3. (1) This act does not apply to an agreement with an
individual who resides outside of this state at the time of the
agreement.
(2) This act does not apply to a provider to the extent that
the provider meets any of the following:
(a) Provides or agrees to provide debt settlement,
educational, or counseling services to an individual who the
provider has no reason to know resides in this state at the time
the provider agrees to provide the services.
(b) Receives no compensation for debt settlement services from
or on behalf of the individuals to whom it provides the services or
from their creditors.
(3) This act does not apply to any of the following persons or
their employees when the person or the employee is engaged in the
regular course of the person's business or profession:
(a) A judicial officer, a person acting under an order of a
court or an administrative agency, or an assignee for the benefit
of creditors.
(b) A bank.
(c) An affiliate of a bank if the affiliate is regulated by a
federal or state banking regulatory authority.
(d) A title insurer, escrow company, or other person that
provides bill-paying services if the provision of debt settlement
services is incidental to the bill-paying services.
Sec. 4. (1) Except as otherwise provided in this section,
beginning July 1, 2008, a provider may not provide debt settlement
services to an individual, who it reasonably should know resides in
this state at the time it agrees to provide the services, unless
the provider is licensed under this act.
(2) If a provider is licensed under this act, subsection (1)
does not apply to an employee or agent of the provider.
(3) The administrator shall maintain and publicize a list of
the names of all licensed providers.
(4) A person who is providing debt settlement services on or
before April 1, 2008 and intends to provide debt settlement
services as a licensee under this act shall file a license
application with the administrator by April 1, 2008.
Sec. 5. (1) A license application shall be in a form
prescribed by the administrator.
(2) A license application must be accompanied by all of the
following:
(a) The fee established by the administrator under section 22.
(b) Evidence of aggregate umbrella insurance that meets all of
the following:
(i) Is in the amount of at least $250,000.00.
(ii) Insures against the risks of dishonesty, fraud, theft, and
other misconduct on the part of the applicant or a director,
employee, or agent of the applicant.
(iii) Is issued by an insurance company authorized to do
business in this state, is rated at least A by a nationally
recognized rating organization, and has a maximum deductible of
$10,000.00.
(iv) Is payable to the applicant, the individuals who have
agreements with the applicant, and the commissioner, as their
interests may appear.
(v) Is not subject to cancellation by the applicant without an
effective policy in place to cover the canceled insurance.
(c) Proof of authority to do business in this state.
Sec. 6. (1) A license application must be signed under penalty
of false statement and include all of the following:
(a) The applicant's name, principal business address and
telephone number, and all other business addresses in this state.
(b) Electronic mail addresses and internet website addresses
of the applicant.
(c) All names under which the applicant conducts business.
(d) The address of each location in this state at which the
applicant will provide debt settlement services or a statement that
the applicant will not have a physical location in the state at
which it will provide debt settlement services.
(e) The name and home address of each officer and director of
the applicant and each person that owns at least 10% of the
applicant.
(f) A list of every state in which the applicant or any of its
officers or directors were licensed or registered to provide debt
settlement services in the 5-year period immediately preceding the
application.
(g) A list of every state in which any individuals who
received debt settlement services from the applicant in the 5-year
period immediately preceding the application resided.
(h) A statement describing, to the extent it is known or
should be known by the applicant, any material civil or criminal
judgment or litigation and any material administrative or
enforcement action by a governmental agency in any jurisdiction
against the applicant or any of its officers, directors, owners, or
agents.
(i) A description of the applicant's financial analysis and
initial budget program, including any form or electronic model,
used to evaluate the financial condition of individuals.
(j) A copy of each form of agreement that the applicant will
use with individuals who reside in this state.
(k) The schedule of fees and charges that the applicant will
use with individuals who reside in this state.
(l) A description of any ownership interest of at least 10% by
any director, owner, or employee of the applicant in any of the
following:
(i) An affiliate of the applicant.
(ii) An entity that provides products or services to the
applicant or any individual relating to the applicant's debt
settlement services.
(m) The identity of each director who is an affiliate of the
applicant.
(n) Any other information that the administrator reasonably
requires to perform his or her duties under this act.
(2) A license applicant or licensed provider shall notify the
administrator within 10 days after a change in the information
described in section 5(2)(b) or subsection (1)(a), (b), (d), (h),
(j), or (k).
(3) Except for the information required under subsection (1)(l)
and the addresses required under subsection (1)(e), the
administrator shall make the information in a license application
available to the public.
Sec. 7. (1) Subject to subsections (2) and (3), the
administrator shall issue a license as a provider to a person that
complies with sections 5 and 6.
(2) After reviewing an application, the commissioner may deny
a license under this act to an applicant if the commissioner
determines, based on the financial condition and responsibility,
financial business and experience, character, and general fitness
of the applicant and the experience, character, and general fitness
of each control person and any shareholders of the applicant, that
it is not in the public interest to permit the applicant to provide
debt settlement services in this state.
(3) The administrator shall deny a license as a provider to an
applicant if the application is not accompanied by the fee
established by the administrator under section 22.
Sec. 8. (1) When the commissioner determines that an
application for a license under this act is substantially complete,
the commissioner shall promptly notify the applicant in writing of
the date on which he or she determined that the application was
substantially complete and shall approve or deny the application
within 120 days after that date. If the commissioner does not
approve or deny an application within that 120-day period, the
commissioner shall issue the license.
(2) If the commissioner determines that an applicant is not
qualified to receive a license and denies the application, the
commissioner shall notify the applicant in writing that the
application has been denied, stating the basis for denial.
(3) If the commissioner denies an application for a license,
or fails or refuses to issue a license after the expiration of the
time period described in subsection (1), the applicant may appeal
and request a hearing pursuant to the administrative procedures act
of 1969, 1969 PA 306, MCL 24.201 to 24.328, and any rules of
procedure adopted by the administrator. If a hearing is held, the
commissioner shall reconsider the application and issue a written
order granting or denying the application after the hearing.
(4) Subject to sections 9(3) and 24, a license as a provider
is valid for 1 year.
Sec. 9. (1) A renewal license application must be in a form
prescribed by the administrator, signed under penalty of false
statement, and meet all of the following:
(a) Be filed at least 30 and not more than 60 days before the
license expires.
(b) Be accompanied by the fee established by the administrator
under section 22.
(c) Contain a financial statement, reviewed by a certified
accountant, for the applicant's fiscal year immediately preceding
the application.
(d) Disclose any changes in the information contained in the
applicant's initial license application or its immediately previous
renewal license application, as applicable.
(e) Include evidence of aggregate umbrella insurance that
meets the requirements of section 5(2)(b).
(f) Include any other information that the administrator
reasonably requires to perform his or her duties under this act.
(2) Except for the information required under section 6(1)(l)
and the addresses required under section 6(1)(e), the administrator
shall make the information in a renewal license application
available to the public.
(3) If a licensed provider files a timely and complete renewal
license application, the license remains effective until the
administrator, in a record, notifies the applicant of a denial and
states the reasons for the denial.
(4) If the administrator denies a renewal license application,
the applicant may appeal and request a hearing pursuant to the
administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to
24.328, and the rules of procedure adopted by the administrator.
While the appeal is pending, the applicant shall continue to
provide debt settlement services to individuals with whom it has
agreements. If the denial is affirmed, subject to the
administrator's order and section 23, the applicant shall continue
to provide debt settlement services to individuals with whom it has
agreements until, with the approval of the administrator, it
transfers the agreements to another licensed provider.
Sec. 10. (1) A provider shall act in good faith in all matters
under this act.
(2) A provider shall maintain a toll-free communication
system, staffed at a level that reasonably permits an individual to
speak to a certified debt specialist or customer-service
representative, as appropriate, during ordinary business hours.
Sec. 11. (1) Before providing debt settlement services, a
licensed provider shall give the individual an itemized list of
goods and services and the charges for each. The list must be clear
and conspicuous, be in a record the individual may keep whether or
not the individual assents to an agreement, and describe the goods
and services the provider offers, either free of additional charge
if the individual enters into an agreement or for a charge if the
individual does not enter into an agreement.
(2) A provider may not furnish debt settlement services unless
the provider does both of the following through the services of a
certified debt specialist:
(a) Provides the individual with reasonable education about
the management of personal finance.
(b) Has prepared a financial analysis for the individual.
(3) Before an individual assents to an agreement to engage in
a program, a provider shall do all of the following:
(a) Provide the individual with a copy of the analysis and
program required under subsection (2) in a record that identifies
the provider and that the individual may keep whether or not the
individual assents to the agreement.
(b) Inform the individual of the availability, at the
individual's option, of assistance by a toll-free communication
system or in person to discuss the financial analysis and
program required under subsection (2).
(4) Before an individual assents to an agreement to engage in
a program, the provider shall inform the individual of all of the
following:
(a) Programs are not suitable for all individuals, and the
individual may ask the provider about bankruptcy or other ways to
deal with indebtedness.
(b) Establishment of a program may adversely affect the
individual's credit rating or credit scores.
(c) Nonpayment of debt may lead creditors to increase finance
and other charges or undertake litigation or other collection
activity.
(d) Unless the individual is insolvent, if a creditor settles
for less than the full amount of the debt, the program may result
in the creation of taxable income to the individual, even
though the individual does not receive any money.
(e) Specific results cannot be predicted or guaranteed, and
the provider cannot force negotiations or settlements with
creditors but will advocate solely on behalf of the individual.
(f) Programs require that individuals meet a certain savings
goal in order to maximize settlement results.
(g) The provider does not provide accounting or legal advice
to individuals.
(h) The provider is the individual's advocate and does not
receive compensation from creditors, banks, or third party
collection agencies.
(i) The provider is not responsible for distribution of any
payments to the individual's creditors.
(j) The name and business address of the provider.
Sec. 12. (1) A provider may satisfy the requirements of
section 11, 13, or 17(3) by means of the internet or other
electronic means if the provider obtains an individual's consent in
the manner provided in section 101(c)(1) of the federal act, 15 USC
7001.
(2) A provider shall present the disclosures and materials
required under sections 11, 13, and 17(3) in a form that can be
accurately reproduced for later reference.
(3) If the disclosure of the information under section 11(4)
is made by means of an internet website, the disclosure of that
information must appear on 1 or more webpages that contain no other
information and that the individual must view before he or she has
an opportunity to assent to formation of a program.
(4) At the time it provides the materials and agreement
required under section 11(3) or (4), 13, or 17(3), a provider shall
inform the individual that if he or she makes an electronic,
telephonic, or written request, it will send the individual a
written copy of the materials and shall comply with a request as
provided in subsection (5).
(5) If a provider receives a request, at any time before the
expiration of 90 days after an individual's program is completed or
terminated, to send a written copy of the materials required under
section 11(3) or (4), 13, or 17(3), the provider shall send it at
no charge within 3 business days after the request. However, a
provider is not required to comply with a request more than once
per calendar month or if it reasonably believes that the request is
made for purposes of harassment. If a request under this subsection
is made more than 90 days after an individual's program is
completed or terminated, the provider shall send a written copy of
the materials requested within a reasonable time.
(6) A provider that maintains an internet website shall
disclose all of the following on the homepage of its website or on
a webpage that is clearly and conspicuously connected to the
homepage by a link that clearly reveals its contents:
(a) Its name and all names under which it does business.
(b) Its principal business address, telephone number, and
electronic mail address, if any.
(7) If a consumer who has consented to electronic
communication in the manner provided in section 101(c) of the
federal act, 15 USC 7001, withdraws his or her consent as provided
in the federal act, a provider may terminate its agreement with the
consumer. If the producer elects to terminate an agreement with a
consumer under this subsection, it shall notify the consumer that
it will terminate the agreement unless the consumer, within 30 days
after receiving the notification, consents to electronic
communication in the manner provided in section 101(c) of the
federal act, 15 USC 7001.
(8) As used in this section:
(a) "Consumer" means an individual who seeks or obtains goods
or services that are used primarily for personal, family, or
household purposes.
(b) "Federal act" means the federal electronic signatures in
global and national commerce act, 15 USC 7001 to 7031.
Sec. 13. (1) An agreement must meet all of the following:
(a) Be in a record.
(b) Be dated and signed by the individual.
(c) Include the name of the individual and the address where
the individual resides.
(d) Include the name, business address, and telephone number
of the provider.
(e) Be delivered to the individual immediately upon formation
of the agreement.
(f) Disclose all of the following:
(i) The services to be provided.
(ii) The amount, or method of determining the amount, of all
fees, individually itemized, to be paid by the individual.
(iii) How the provider will comply with its obligations under
section 18(1).
(iv) That the individual may cancel the agreement under section
14.
(v) That the individual may contact the administrator with any
questions or complaints regarding the provider.
(vi) The address, telephone number, and internet address or
website of the administrator.
(vii) An estimate of the duration of the program.
(g) A schedule of payments to be made by or on behalf of the
individual that includes the amount of each payment, the date on
which each payment is due, and an estimate of the date of the final
payment.
(2) For purposes of subsection (1)(e), delivery of an
electronic record occurs when it is made available in a format in
which the individual may retrieve, save, and print it and the
individual is notified that it is available.
(3) If the administrator supplies a provider with any
information required under subsection (1)(f)(vi), the provider may
comply with that requirement only by disclosing the information
supplied by the administrator.
(4) An agreement must provide all of the following:
(a) That the individual has a right to terminate the agreement
at any time, without penalty or obligation, by giving the provider
written or electronic notice, and that termination in this manner
revokes all powers of attorney granted by the individual to the
provider.
(b) That the provider will notify the individual within 5 days
after learning of a creditor's decision to cease negotiation with
the provider and that this notice will include both of the
following:
(i) The identity of the creditor.
(ii) The right of the individual to modify or terminate the
agreement.
(5) An agreement may confer on a provider a power of attorney
to settle the individual's debt for not more than 50% of the amount
of the debt. An agreement may not confer a power of attorney to
settle a debt for more than 50% of that amount, but may confer a
power of attorney to negotiate with creditors of the individual on
behalf of the individual. An agreement must provide that the
provider will obtain the assent of the individual after a creditor
has assented to a settlement for more than 50% of the amount of the
debt.
(6) An agreement may not do any of the following:
(a) Provide for application of the law of any jurisdiction
other than the United States and this state.
(b) Except as permitted under 9 USC 2, contain a provision
that modifies or limits otherwise available forums or procedural
rights, including the right to trial by jury, that are generally
available to the individual under law other than this act.
(c) Contain a provision that restricts the individual's
remedies under this act or law other than this act.
(d) Contain a provision that does either of the following:
(i) Limits or releases the liability of any person for not
performing the agreement or for violating this act.
(ii) Indemnifies any person for liability arising under the
agreement or this act.
(7) All rights and obligations described in subsection (4) and
section 15 exist even if not provided in the agreement. A provision
in an agreement that violates subsection (4), (5), or (6) is void.
Sec. 14. (1) An individual may cancel an agreement before
midnight of the third business day after the individual assents to
it. However, if the agreement does not comply with subsection (2)
or section 13 or 18, the individual may cancel the agreement within
30 days after the individual assents to it. To exercise the right
of cancellation under this subsection, the individual must give
notice in a record to the provider. Notice by mail is given when
mailed.
(2) An agreement must be accompanied by a form that contains
the following notice in boldfaced type, surrounded by bold black
lines:
"Notice of right of cancellation
You may cancel this agreement, without any penalty or
obligation, at any time before midnight of the third business day
that begins the day after you agree to it by electronic
communication or by signing it. To cancel this agreement during
this period, send an email to [email address of provider] or mail
or deliver a signed, dated copy of this notice or any other written
notice to [name of provider] at [address of provider] before
midnight on [date].
If you cancel this agreement within the 3-day period, we will
refund all money you already have paid us.
I cancel this agreement,
__________________________________ [print your name]
__________________________________ [sign your name]
__________________________________ [date]".
(3) If an individual terminates an agreement that is not
otherwise subject to subsection (1), the provider shall immediately
return to the individual 65% of the fees associated with that
percentage of the principal amount remaining unsettled at the time
of termination.
Sec. 15. Unless the administrator by rule provides otherwise,
the disclosures and documents required under this act must be in
English. If a provider communicates with an individual primarily in
a language other than English, the provider must furnish a
translation into the other language of the disclosures and
documents required by this act.
Sec. 16. (1) A provider may not directly or indirectly impose
a fee or other charge on an individual or receive money from or on
behalf of an individual for debt settlement services except as
permitted in this section.
(2) All of the following apply to the fees a provider may
charge an individual for debt settlement services:
(a) Subject to subdivision (c), the aggregate amount of fees
charged by the provider, including the fees described in
subdivision (b) and subsection (4), shall not exceed 18% of the
principal amount of the debt brought into the program.
(b) The total amount of fees charged by the provider for
consultation, obtaining a credit report, setting up an account, and
providing other similar services related to establishing the amount
of the individual's debt and developing the program shall not
exceed 4% of the principal amount of the debt brought into the
program.
(c) If the individual completes all of his or her obligations
under the agreement, the aggregate amount of the fees charged by
the provider shall not exceed an amount that, when added to the
aggregate amount of all of the offers of settlement obtained by the
provider for the debtor, exceeds the principal amount of the debt
brought into the program.
(d) A provider may require that the individual pay some or all
of the fees described in subdivision (b) at the time the agreement
is executed or at the inception of the plan. The remainder of the
aggregate amount of the fees charged under this subsection shall be
paid by the individual on a pro rata basis, in monthly
installments, over a period determined by the provider that is at
least equal to 1/2 of the estimate of the duration of the program
estimated under section 13(1)(f)(vii). However, the individual may
accelerate or prepay any unpaid installment payments of fees, and
the provider may require that the individual immediately pay the
remaining balance of the unpaid fees if the provider obtains offers
of settlement from creditors for at least 1/2 of the debts included
in the program.
(3) A provider may not impose charges or receive payment for
debt settlement services until the provider and the individual have
signed an agreement that complies with sections 13 and 18.
(4) If an individual assents to an agreement, a provider may
not impose a fee or other charge for educational or counseling
services, or similar services, except as provided in this
subsection. The administrator may authorize a provider to charge an
additional fee based on the nature and extent of the educational or
counseling services furnished by the provider, but the aggregate
fees may not exceed the amount specified in subsection (2)(a). If a
payment to a provider by an individual under this act is
dishonored, a provider may impose a reasonable charge to the
individual that does not exceed the amount permitted by law.
Sec. 17. (1) If a provider imposes a fee or other charge or
receives money or other payments not authorized in section 16, the
individual may void the agreement and recover as provided in
section 25.
(2) If a provider is not licensed under this act when an
individual assents to an agreement, the agreement is void and the
provider does not have a claim against the individual for breach of
contract or for restitution.
(3) If an individual who has entered into a fee agreement
fails for 60 days to make payments required by the agreement, the
provider may terminate the agreement.
Sec. 18. (1) A provider that has entered into an agreement
shall provide the individual with the accounting required under
subsection (2) at each of the following times:
(a) While the agreement is in effect, within 5 business days
after a request by the individual. However, the provider is not
required to comply with more than 1 request under this subdivision
in any calendar month.
(b) After each settlement of a debt with a creditor on behalf
of the individual.
(c) At the time the agreement is canceled or terminated.
(2) If a provider has established a program for an individual
and a creditor has agreed to accept as payment in full an amount
less than the principal amount of the debt owed by the individual,
the provider shall provide the individual with all of the following
in a record:
(a) The total amount and terms of the settlement.
(b) The amount of the debt when the individual assented to the
program.
(c) The amount of the debt when the creditor agreed to the
settlement.
(d) The calculation of a settlement fee.
(3) A provider shall maintain records for each individual for
whom it provides debt settlement services for at least 5 years
after the final payment made by the individual and produce a copy
of them to the individual within a reasonable time after a request
for them. A provider may use electronic or other means of storage
of the records.
Sec. 19. (1) A provider may not, directly or indirectly, do
any of the following:
(a) Settle a debt on behalf of an individual for more than 50%
of the amount of the debt owed a creditor, unless the individual
assents to the settlement after the creditor has assented.
(b) Take a power of attorney that authorizes it to settle a
debt, unless the power of attorney expressly limits the provider's
authority to settle debts for not more than 50% of the amount of
the debt owed a creditor.
(c) Exercise or attempt to exercise a power of attorney after
an individual has terminated an agreement.
(d) Initiate a transfer from an individual's account at a bank
or with another person unless the transfer is 1 of the following:
(i) A return of money to the individual.
(ii) Before termination of an agreement, properly authorized by
the agreement and this act, for payment of a fee.
(e) Offer a gift or bonus, premium, reward, or other
compensation to an individual for executing an agreement.
(f) Settle a debt or lead an individual to believe that a
payment to a creditor is in settlement of a debt to the creditor,
unless the individual at the time of settlement receives a
certification or confirmation by the creditor that the payment is
in full settlement of the debt.
(g) Make any of the following representations:
(i) That the provider will furnish money to pay bills or
prevent attachments.
(ii) That payment of a certain amount will permit satisfaction
of a certain amount or range of indebtedness.
(iii) That participation in a program will or may prevent
litigation, garnishment, attachment, repossession, foreclosure,
eviction, or loss of employment.
(h) Misrepresent that it is authorized or competent to furnish
legal advice or perform legal services.
(i) Represent that it is a nonprofit entity unless it is
organized and properly operating as a nonprofit entity under the
law of the state in which it was formed or represent that it is a
tax-exempt entity unless it has received certification of tax-
exempt status from the federal internal revenue service.
(j) Take a confession of judgment or power of attorney to
confess judgment against an individual.
(k) Employ an unfair, unconscionable, or deceptive act or
practice, including, but not limited to, the knowing omission of
any material information.
(2) If a provider furnishes debt settlement services to an
individual, the provider may not directly or indirectly do any of
the following:
(a) Purchase a debt or obligation of the individual.
(b) Receive any of the following from or on behalf of the
individual:
(i) A promissory note or other negotiable instrument other than
a check or a demand draft.
(ii) A postdated check or demand draft.
(c) Lend money or provide credit to the individual, except as
a deferral of a settlement fee at no additional expense to the
individual.
(d) Obtain a mortgage or other security interest from any
person in connection with the services provided to the individual.
(e) Except as permitted by federal law, disclose the identity
or identifying information of the individual or the identity of the
individual's creditors, unless 1 of the following applies:
(i) The disclosure is to the administrator, upon proper demand.
(ii) The disclosure is to a creditor of the individual, to the
extent necessary to secure the cooperation of the creditor in a
program.
(iii) The disclosure is necessary to administer the program.
(f) Except as otherwise provided in section 16, provide the
individual less than the full benefit of a compromise of a debt
arranged by the provider.
(g) Charge the individual for or provide credit or other
insurance, coupons for goods or services, membership in a club,
access to computers or the internet, or any other matter not
directly related to debt settlement services or educational
services concerning personal finance.
(h) Furnish legal advice or perform legal services, unless the
person furnishing that advice to or performing those services for
the individual is licensed to practice law.
(i) Advise individuals to stop payment on any of the accounts
being handled by the provider.
(3) This act does not authorize any person to engage in the
practice of law.
(4) A provider may not directly or indirectly receive a gift
or bonus, premium, reward, or other compensation for advising,
arranging, or assisting an individual in connection with obtaining
an extension of credit or other service from a lender or service
provider, except for educational or counseling services required in
connection with a government-sponsored program.
(5) A provider that advertises debt settlement services shall
not disclose information in conflict with the information specified
in section 11(4)(c) and (d).
Sec. 20. (1) Within 30 days after a provider is served with
notice of a civil action for violation of this act by or on behalf
of an individual who resides in this state at either the time of an
agreement or the time the notice is served, the provider shall
notify the administrator in a record that it has been sued.
(2) If a provider delegates any of its duties or obligations
under an agreement or this act to an independent contractor or any
other person, the provider is liable for conduct of the person that
would violate the agreement or this act if done by the provider.
Sec. 21. (1) The administrator may receive complaints, take
action to obtain voluntary compliance with this act, or seek or
provide remedies as provided in this act.
(2) The administrator may investigate and examine, in this
state or elsewhere, by subpoena or otherwise, the activities,
books, accounts, and records of a person that provides or offers to
provide debt settlement services, or a person to which a provider
has delegated its obligations under an agreement or this act, to
determine compliance with this act. The administrator or department
shall not disclose information that identifies individuals who have
agreements with a provider to the public. In connection with an
investigation of a person, the administrator may do any of the
following:
(a) Charge the person the reasonable expenses necessarily
incurred to conduct the examination.
(b) Require or permit a person to file a statement under oath
as to all the facts and circumstances of a matter to be
investigated.
(3) The administrator may promulgate rules under the
administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to
24.328, to implement and enforce this act.
(4) The administrator may enter into cooperative arrangements
with any other federal or state agency that has authority over
providers and may exchange with any of those agencies information
about a provider, including information obtained during an
examination of the provider.
Sec. 22. (1) Within 30 days of the effective date of this act,
the administrator shall establish a schedule of fees to be paid by
applicants and licensees in that state fiscal year for the expense
of administering this act.
(2) By September 30 of each year, the administrator shall
establish a schedule of fees to be paid by applicants and licensees
in the next state fiscal year for the expense of administering this
act.
(3) In establishing initial and renewal license fees under
this section, the administrator shall consider each licensee's
business volume and number of locations and any other factors he or
she considers reasonable in order to generate money sufficient to
pay, but not to exceed, the department's reasonably anticipated
costs of administering this act.
(4) The department of treasury shall establish and administer
a restricted, interest-bearing account in the general fund known as
the debt settlement services act account. All money received or
collected for fees and charges under this act shall be paid into
the account to the credit of the department. Money in the account
and interest earned on the account shall only be used for the
implementation and operation of this act and the operation of the
department. Money in the account at the end of a fiscal year shall
not revert to the general fund but shall be carried over in the
account to the next fiscal year.
Sec. 23. (1) The administrator may enforce this act and rules
adopted under this act by taking 1 or more of the following
actions:
(a) Ordering a provider or a director, employee, or other
agent of a provider to cease and desist from any violations.
(b) Ordering a provider or a person that has caused a
violation to correct the violation, including, but not limited to,
making restitution of money or property to a person aggrieved by a
violation.
(c) Prosecuting a civil action to do 1 or more of the
following:
(i) Impose on a provider or a person that has caused a
violation a civil fine of not more than $10,000.00 for each
violation.
(ii) Enforce an order of the administrator.
(iii) Obtain restitution or an injunction or other equitable
relief.
(d) Intervening in an action brought under section 25.
(2) If a person violates or knowingly authorizes, directs, or
aids in the violation of a final order issued under subsection
(1)(a) or (b), the person is subject to a civil fine of not more
than $20,000.00 for each violation.
(3) The administrator may maintain an action to enforce this
act in any county.
(4) The administrator may recover the reasonable costs of
enforcing this act under this section, including reasonable
attorney fees.
Sec. 24. (1) The administrator may suspend, revoke, or deny
renewal of a provider's license if any of the following are met:
(a) A fact or condition exists that, if it had existed when
the licensee applied for license as a provider, would have been a
reason for denying a license.
(b) The provider has committed a material violation of this
act or a rule or order of the administrator under this act.
(c) The provider is insolvent. As used in this subdivision,
"insolvent" means any of the following:
(i) Has generally ceased to pay debts in the ordinary course of
business other than as a result of good-faith dispute.
(ii) Is unable to pay debts as they become due.
(iii) Is insolvent within the meaning of the bankruptcy code, 11
USC 101 to 1330.
(d) The provider or an employee or affiliate of the provider
refuses to permit the administrator to make an examination
authorized by this act, fails to comply with section 21(2)(b)
within 15 days after a request, or made a material
misrepresentation or omission in complying with section 21(2)(b).
(e) The provider did not respond within a reasonable time and
in an appropriate manner to communications from the administrator.
(2) If the administrator suspends or revokes a provider's
license, the provider may appeal and request a hearing pursuant to
the administrative procedures act of 1969, 1969 PA 306, MCL 24.201
to 24.328.
Sec. 25. (1) If an agreement is void under section 17(2), the
individual may recover in a civil action all money paid by or on
behalf of the individual under the agreement, in addition to the
recovery under subsection (3)(c) and (d).
(2) If an individual voids an agreement under section 17(1),
the individual may recover in a civil action 3 times the total
amount of the fees, charges, money, or payments made by the
individual to the provider, in addition to the recovery under
subsection (3)(d).
(3) Subject to subsection (4), an individual with respect to
whom a provider violates this act may recover any of the following
in a civil action from the provider and any person that caused the
violation:
(a) Compensatory damages for injury, including, but not
limited to, noneconomic injury, caused by the violation.
(b) Except as otherwise provided in subsection (4), for a
violation of section 11, 13, 14, 15, 16, 18, or 19(1) or (2), the
greater of the amount recoverable under subdivision (a) or
$5,000.00.
(c) Punitive damages.
(d) Reasonable attorney fees and costs.
(4) In a class action, except for a violation of section
19(1)(e), the minimum damages provided in subsection (3)(b) do not
apply.
(5) In addition to the remedy available under subsection (3),
if a provider violates an individual's rights under section 14, the
individual may recover in a civil action all money paid or
deposited by or on behalf of the individual under the agreement,
except for amounts paid to creditors.
(6) A provider is not liable under this section for a
violation of this act if the provider proves that the violation was
not intentional and resulted from a good-faith error
notwithstanding the maintenance of procedures reasonably adapted to
avoid the error. An error of legal judgment with respect to a
provider's obligations under this act is not a good-faith error.
If, in connection with a violation, the provider has received more
money than authorized by an agreement or this act, the defense
provided by this subsection is not available unless the provider
refunds the excess within 2 business days after learning of the
violation.
Sec. 26. (1) If an act or practice of a provider violates both
this act and the Michigan consumer protection act, 1976 PA 331, MCL
445.901 to 445.922, an individual may not recover under both acts
for the same act or practice.
(2) An action or proceeding brought under section 23 must be
commenced within 4 years after the conduct that is the basis of the
administrator's complaint.
(3) An action brought under section 25 must be commenced
within 2 years after the latest of the following:
(a) The individual's last transmission of money to a provider.
(b) Subject to subsection (4), the date on which the
individual discovered or reasonably should have discovered the
facts giving rise to the individual's claim.
(c) Termination of actions or proceedings by the administrator
with respect to a violation of this act.
(4) The period prescribed in subsection (3)(b) is tolled
during any period during which the provider or, if different, the
defendant has materially and willfully misrepresented information
required by this act to be disclosed to the individual, if the
information misrepresented is material to the establishment of the
liability of the defendant under this act.
Enacting section 1. This act is repealed effective July 1,
2015.
Enacting section 2. This act does not take effect unless all
of the following bills of the 94th Legislature are enacted into
law:
(a) Senate Bill No. 65.
(b) Senate Bill No. 960.