Bill Text: CA AB2524 | 2019-2020 | Regular Session | Amended

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Check Sellers, Bill Payers and Proraters Law: out-of-state activities.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Passed) 2020-09-25 - Chaptered by Secretary of State - Chapter 159, Statutes of 2020. [AB2524 Detail]

Download: California-2019-AB2524-Amended.html

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Amended  IN  Senate  July 02, 2020

Amended  IN  Assembly  June 04, 2020

Amended  IN  Assembly  May 12, 2020

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Assembly Bill

No. 2524

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Introduced by Assembly Member Wicks

February 19, 2020

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An act to amend Sections 12002.1, 12004, 12100, 12201, 12315, 12315.1, 12316, and 12319 of, to add Sections 12003.3, 12006, 12300.7, 12315.5, 12319.1, 12319.2, 12330.1, and 12405 to, and to repeal Sections 12200.1 and 12200.3 of, the Financial Code, relating to financial institutions.

LEGISLATIVE COUNSEL'S DIGEST

AB 2524, as amended, Wicks. Proraters.

(1) Existing law, the Check Sellers, Bill Payers and Proraters Law, prohibits a person from engaging in the business of receiving money or evidences thereof for the purpose of distributing the money or evidences thereof among creditors in payment or partial payment of the obligations of the debtor without first obtaining a license from the Commissioner of Business Oversight. The law authorizes the commissioner, upon a reasonable opportunity to be heard, to suspend or revoke a license issued under the law for specified reasons, including that the licensee has violated those provisions.

This bill would specify that these provisions apply to persons who engage in this conduct on behalf of a debtor, debtor and would specify that these provisions apply to persons who solicit money or evidence thereof, thereof or who process related payments. The bill also would apply these provisions to a person who engages in debt settlement services, as defined.

Existing law provides certain exemptions, including the services of a person licensed to practice law in this state, when the person renders services in the course of the person’s practice as an attorney-at-law, and the fees and disbursements of the person, whether paid by the debtor or other person, are not charges or costs and expenses subject to specified limitations.

This bill would, instead, exempt from these provisions, an attorney or a law firm when services rendered by the attorney or law firm do not result in charges or costs regulated by the law, the fees and disbursements are not charges or costs shared, directly or indirectly, with the prorater or check seller, and the attorney or law firm meets one of several criteria, including that the attorney or law firm is retained by the debtor primarily for purposes other than the settlement of consumer debt. The bill would also exempt certain nonprofit business organizations.

Existing law prohibits the commissioner from issuing a license to a corporation that is not organized under the laws of this state for the purpose of conducting those activities. The law also prohibits a licensee from conducting those activities outside of the state.

This bill would repeal those prohibitions.

Existing law requires an application for a license to meet certain criteria, including that the application is in writing, under oath, and in a form prescribed by the commissioner.

This bill would additionally require, among other things, an application to include, to the extent the information is known or should be known by the applicant, a statement listing each civil or criminal case or administrative action relating to financial fraud or misuse brought against the applicant or any of its officers, directors, or owners and would require an applicant to submit a full set of the applicant’s fingerprints for purposes of obtaining national criminal history records from the Federal Bureau of Investigation’s Criminal Justice Information Services Division.

Existing law prohibits the total charges received by a prorater, or any other person for the prorater’s services, from exceeding in the aggregate 12% for the first $3,000, 11% for the next $2,000, and 10% for any of the remaining payments distributed by a prorater to the creditors of a debtor, except for payments made on recurrent obligations. The law also authorizes other charges, including an origination fee of a sum not to exceed $50, as specified.

This bill would prohibit a prorater engaged in the provision of debt settlement services from requesting or receiving payment of any fee or consideration for any debt settlement service unless specified requirements are met, including that the prorater has renegotiated, settled, reduced, or otherwise altered the terms of at least one debt pursuant to a debt settlement agreement. The bill would also place certain conditions on a fee or consideration charged to the debtor by a prorater engaged in the provision of debt settlement services, including that the fee or consideration bears the same proportional relationship to the total fee for renegotiating, settling, reducing, or altering the terms of the entire debt balance as the individual debt amount bears to the entire debt amount.

Existing law voids a contract with the debtor if a prorater contracts for, receives, or makes any charge in excess of the maximum permitted by the law, except as the result of an accidental and bona fide error, and requires the prorater to return to the debtor all charges received from the debtor.

This bill would, similarly, void the contract if a debtor is sued by a creditor for a debt that is included in the contract with the prorater. The This bill would also authorize a debtor to terminate a contract with a prorater at any time, subject to a certain notice requirement.

Existing law requires a contract between a prorater and a debtor to contain specified information, including every debt to be prorated with the creditor’s name and disclose the total of all those debts.

This bill would require that a contract between a debtor and a prorater engaged in the provision of debt settlement services comply with other requirements and contain additional disclosures, including that despite the best efforts of the prorater, there is no guarantee that any particular debt or all debt will be reduced or eliminated. The bill would also require a prorater to provide certain financial information, including, but not limited to, a statement of accounting to the debtor, containing specified information at least once a month while a contract is in effect, and on or before the 5th business day after a debtor requests a statement of accounting. The bill would authorize a debtor to bring a civil action, as specified, for a violation of those contractual disclosure and other requirements. The bill would also require a prorater to make a specified annual report to the department and would require the commissioner to suspend the license of a prorater during any period of noncompliance with that reporting requirement.

The bill would authorize a debtor to bring a civil action, as specified, for a violation of those contractual disclosure and other requirements. The bill would make the operation of that provision contingent on AB 2443 of the 2019–20 Regular Session not being enacted before January 1, 2021.

(2) Existing law, the Unfair Practices Act, makes certain business practices unlawful, including false advertising.

This bill would prohibit a prorater from engaging in specified practices, including, posting, or directly or indirectly causing to be posted, an online review or ranking on an internet website if the prorater or its agent provided anything of value in exchange for favorable treatment in that review or ranking.

Digest Key

Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

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Bill Text

The people of the State of California do enact as follows:

SECTION 1.

 Section 12002.1 of the Financial Code is amended to read:

12002.1.

 A prorater is a person who, for compensation by a debtor and on behalf of a debtor, engages in whole or in part in the business of receiving or soliciting money or evidences thereof, or processing payment for the purpose of distributing the money or evidences thereof among creditors in payment or partial payment of the obligations of the debtor. either of the following:

(a) Receiving or soliciting money or evidences thereof, or processing payment for the purpose of distributing the money or evidences thereof among creditors in payment or partial payment of the obligations of the debtor.

(b) Engaging in debt settlement services, as defined in Section 12003.3.

SEC. 2.

 Section 12003.3 is added to the Financial Code, to read:

12003.3.

 (a) “Debt settlement services” means any of the following:

(1) Offering to provide advice, or offering to act or acting as an intermediary between a debtor and one or more of the debtor’s creditors, if the primary purpose of that advice or action is to obtain a settlement for less than the full amount of debt, whether in principal, interest, fees, or other charges, incurred primarily for personal, family, or household purposes including, but not limited to, offering debt negotiation, debt reduction, or debt relief services. purposes.

(2) Advising, encouraging, assisting, or counseling a debtor to accumulate funds in an account for future payment of a reduced amount of debt to one or more of the debtor’s creditors.

(b) Persons holding themselves out as being engaged in debt settlement services shall be deemed to be engaged in the provision of debt settlement services, regardless of whether those persons actually provide those services.

SEC. 3.

 Section 12004 of the Financial Code is amended to read:

12004.

 “Licensee” means a person licensed by the commissioner to engage in the business of a business agent, prorater, or check seller pursuant to this division.

SEC. 4.

 Section 12006 is added to the Financial Code, to read:

12006.

 “Settlement account” means a depository account used for the purpose of holding funds of a debtor to be distributed to a creditor in the event of a settlement of the debtor’s debt with the creditor.

SEC. 5.

 Section 12100 of the Financial Code is amended to read:

12100.

 This division does not apply to any of the following:

(a) Any person, or the person’s authorized agent, doing business under license and authority of the Commissioner of Business Oversight under Division 1 (commencing with Section 99) or under any law of this state or of the United States relating to banks, trust companies, building or savings associations, industrial loan companies, personal property brokers, credit unions, title insurance companies or underwritten title companies, as defined in Section 12402 of the Insurance Code, escrow agents subject to Division 6 (commencing with Section 17000), or finance lenders subject to Division 9 (commencing with Section 22000).

(b)(1)Any person licensed under Chapter 14A (commencing with Section 1851) of Division 1 or any agent of the person, when selling any traveler’s check, as defined in Section 1852, which is issued by the person.

(2)Any person licensed under Division 16 (commencing with Section 33000) or any agent of the person, when selling any payment instrument, as defined in Section 33059, which is issued by the person.

(c)

(b) Attorneys and law firms that meet all of the following criteria:

(1) The services rendered by the attorney or law firm do not result in charges or costs regulated by this division.

(2) The fees and disbursements are not charges or costs shared, directly or indirectly, with the prorater or check seller.

(3) Any of the following is true:

(A) The attorney or law firm is retained by the debtor for the purpose of legal representation in consumer debt litigation.

(B) The attorney or law firm provides debt settlement services pursuant to representation by retainer for a debt collection matter that does not involve consumer debt.

(C) The attorney or law firm is retained by the debtor primarily for purposes other than the settlement of consumer debt.

(d)

(c) Any transaction in which money or other property is paid to a “joint control agent” for disbursal or use in payment of the cost of labor, materials, services, permits, fees, or other items of expense incurred in construction of improvements upon real property.

(e)

(d) A merchant-owned credit or creditors association, or a member-owned, member-controlled, or member-directed association whose principal function is that of servicing the community as a reporting agency.

(f)

(e) Any agency or service subject to Title 2.91 (commencing with Section 1812.500) of Part 4 of Division 3 of the Civil Code, when providing services under that title.

(g)

(f) Any person licensed under Part 1 (commencing with Section 10000) of Division 4 of the Business and Professions Code, when acting in any capacity for which the person is licensed under that part.

(h)

(g) A common law or statutory assignment for the benefit of creditors or the operation or liquidation of property or a business enterprise under supervision of a creditor’s committee.

(i)

(h) The services of a person licensed as a certified public accountant or a public accountant in this state, when the person renders services in the course of the person’s practice as a certified public accountant or a public accountant, and the fees and disbursements of the person, whether paid by the debtor or other person, are not charges or costs and expenses regulated by or subject to the limitations of this chapter. These fees and disbursements shall not be shared, directly or indirectly, with the prorater or check seller.

(j)Any person licensed under Chapter 14 (commencing with Section 1800) of Division 1 or any agent of the person, when selling any check or draft that is drawn by the person and is of the type described in paragraph (3) of subdivision (a) of Section 1800.5.

(k)Any group of banks each of which is organized under the laws of a nation other than the United States and one or more of which are licensed by the Commissioner of Financial Institutions under Article 3 (commencing with Section 1750) of Chapter 13.5 of Division 1, or any agent of the group, when selling any foreign currency traveler’s check, as defined in Section 1852, issued by the group. Each bank that is a member of the group is jointly and severally liable to pay the foreign currency traveler’s check.

(l)Any transaction of the type described in Section 1854.1.

(m)

(i) Any nonprofit business organization that is certified as tax-exempt by the Internal Revenue Service and that does not receive compensation from the debtor for providing debt settlement services.

SEC. 6.

 Section 12200.1 of the Financial Code is repealed.

SEC. 7.

 Section 12200.3 of the Financial Code is repealed.

SEC. 8.

 Section 12201 of the Financial Code is amended to read:

12201.

 (a) An application for a license shall be in writing, under oath, and in a form prescribed by the commissioner and shall contain all of the following:

(1) (A) The applicant’s name, residential address, business email address, and any all business address addresses in California.

(B) If the applicant is a partnership or association, the information described in subparagraph (A) with respect to every managing member thereof.

(C) If the applicant is a corporation, the information described in subparagraph (A) with respect to every executive officer or director thereof.

(2) The name and home business address of every executive officer and director of the applicant and every person that owns, directly or indirectly, more than 20 percent of the voting interests of the applicant.

(3) (A) To the extent the information is known or should be known by the applicant, a statement listing each civil or criminal case or administrative action relating to financial fraud or misuse brought against the applicant or any of its officers, directors, or owners.

(B) The statement required by this paragraph shall summarize, with respect to each case or action, the claims asserted and the terms of any judgment, decision, or settlement.

(4) A copy of each form of agreement and the schedule of fees and charges that the applicant will use with debtors.

(b) Notwithstanding any other law, the commissioner may by rule or order prescribe circumstances under which to accept electronic records or electronic signatures. This section does not require the commissioner to accept electronic records or electronic signatures.

(c) For purposes of this section, the following terms have the following meanings:

(1) “Electronic record” means an initial license application, or material modification of that license application, and any other record created, generated, sent, communicated, received, or stored by electronic means. “Electronic record” also includes, but is not limited to, all of the following:

(A) An application, amendment, supplement, and exhibit, filed for any license, consent, or other authority.

(B) A financial statement, report, or advertising.

(C) An order, license, consent, or other authority.

(D) A notice of public hearing, accusation, and statement of issues in connection with any application, license, consent, or other authority.

(E) A proposed decision of a hearing officer and a decision of the commissioner.

(F) The transcripts of a hearing.

(G) A release, newsletter, interpretive opinion, determination, or specific ruling.

(H) Correspondence between a party and the commissioner directly relating to any document listed in subparagraphs (A) to (G), inclusive.

(2) “Electronic signature” means an electronic sound, symbol, or process attached to or logically associated with an electronic record and executed or adopted by a person with the intent to sign the electronic record.

(d) The Legislature finds and declares that the Department of Business Oversight has continuously implemented methods to accept records filed electronically, and is encouraged to continue to expand its use of electronic filings to the extent feasible, as budget, resources, and equipment are made available to accomplish that goal.

(e) Each applicant for initial registration, licensure, or certification under this division shall submit a full set of the applicant’s fingerprints for the commissioner to obtain national criminal history records from the Federal Bureau of Investigation’s Criminal Justice Information Services Division.

(f) An applicant or prorater shall notify the commissioner within 30 days of a material change in any of the information submitted in connection with any application or renewal application for a license under this division, including, but not limited to, all of the following:

(1) A change in the applicant or prorater’s home or business address.

(2) A merger or dissolution relevant to the license.

(3) If an applicant or prorater, including officers, directors, or owners, pleads guilty to or is convicted of any misdemeanor involving financial mismanagement or malfeasance or felony.

SEC. 9.

 Section 12300.7 is added to the Financial Code, to read:

12300.7.

 (a) (1) A prorater shall not publicly make or permit another entity or person to publicly make on its behalf a statement or representation that is deceptive, false, or misleading.

(2) A prorater shall be deemed to have permitted a deceptive, false, or misleading statement or representation to be made on its behalf if the prorater knew or should have known that the statement was made.

(b) A prorater shall not post, or directly or indirectly cause to be posted, an online review or ranking on an internet website if the prorater or its agent provided anything of value in exchange for favorable treatment in that review or ranking.

(c) A nonattorney prorater or an attorney prorater licensed in a state other than California shall not represent that its services include furnishing legal advice or performing legal services.

(d) A prorater shall not employ any unfair, unconscionable, or deceptive act or practice, including the knowing omission of any material information.

(e) A prorater shall not represent that the prorater is a not-for-profit entity unless it is organized and properly operating as a not-for-profit organization under the law of the state in which it was formed or has received certification of tax-exempt status from the Internal Revenue Service.

SEC. 10.

 Section 12315 of the Financial Code is amended to read:

12315.

 (a) A prorater that is not engaged in the provision of debt settlement services shall not receive any fee unless he the prorater has the consent of at least 51 percent of the total amount of indebtedness and of the number of creditors listed in the prorater’s contract with the debtor, or such a like number of creditors have accepted a distribution of payment.

(b) A prorater engaged in the provision of debt settlement services shall not request or receive payment of any fee or consideration for any debt settlement service unless both of the following requirements are satisfied:

(1) The prorater has renegotiated, settled, reduced, or otherwise altered the terms of at least one debt pursuant to a debt settlement agreement.

(2) The debtor has made at least one payment pursuant to the debt settlement agreement described in paragraph (1).

SEC. 11.

 Section 12315.1 of the Financial Code is amended to read:

12315.1.

 A prorater that is not engaged in the provision of debt settlement services shall notify, in writing, all creditors listed in the prorate contract of the debtors desire to engage the services of the prorater within five days of the effective date of the contract as defined in Section 12320. The notification shall include a notice as to the proposed monthly payment to be made to the creditor. Every contract between a prorater and a debtor shall list every debt to be prorated with the creditor’s name, and disclose the total of all such debts.

SEC. 12.

 Section 12315.5 is added to the Financial Code, to read:

12315.5.

 A prorater engaged in the provision of debt settlement services, with respect to debts it renegotiates, settles, reduces, or otherwise alters individually, shall comply with one of the following requirements:

(a) (1) The fee or consideration charged to the debtor shall bear the same proportional relationship to the total fee for renegotiating, settling, reducing, or altering the terms of the entire debt balance as the individual debt amount bears to the entire debt amount.

(2) For purposes of this subdivision, the individual debt amount and the entire debt amount are those owed by the debtor at the time the debt is enrolled in the service.

(b) (1) The fee or consideration charged to the debtor shall be a percentage of the amount saved as a result of the renegotiation, settlement, reduction, or alteration. The percentage charged shall not change from one individual debt to another.

(2) For purposes of this subdivision, the amount saved is equal to the difference between the amount of debt enrolled in the program and the amount of money required to satisfy the debt.

SEC. 10.SEC. 13.

 Section 12316 of the Financial Code is amended to read:

12316.

 (a) (1) If a prorater contracts for, receives, or makes any charge in excess of the maximum permitted by this division, except as the result of an accidental and bona fide error, the prorater’s contract with the debtor shall be void, and the prorater shall return to the debtor all charges received from the debtor.

(2) If a prorater makes an accidental and bona fide error as set forth in paragraph (1), the prorater shall promptly refund to the debtor the amount in excess free of any charges, fees, or offsets.

(b)If a debtor is sued by a creditor for a debt that is included in the contract with the prorater, the prorater’s contract with the debtor shall be void, and the prorater shall return to the debtor all charges and payments, excluding payments distributed to a creditor, received from the debtor for all debts placed with the prorater for settlement.

(c)

(b) (1) A debtor may terminate a contract with a prorater at any time without a penalty of any sort by notifying the prorater in writing, electronically, or orally.

(2) The oral notice described in paragraph (1) shall be deemed effective when given, given to the prorater, and the electronic notice shall be deemed effective when sent. sent to the prorater.

SEC. 11.Section 12319 of the Financial Code is amended to read:

12319.

Every contract between a prorater and a debtor shall:

(a)Begin with a cautionary disclosure that contains all of the following information in conspicuous boldface type that is not smaller than 14-point Arial font:

(1)Despite the best efforts of the prorater, there is no guarantee that any particular debt or all debt will be reduced or eliminated.

(2)The number of months estimated to settle all debts.

(3)The conditions that the debtor must satisfy before the prorater will make a settlement offer to a creditor or take other action with respect to the creditor.

(4)The debtor is still required to pay all bills unless the creditor states otherwise.

(5)If the debtor stops making timely payments to any creditor, any of the following may occur:

(A)Creditors may still try to collect.

(B)Creditors may sue.

(C)The debtor’s wages may be garnished or bank accounts levied.

(D)

The debtor’s credit score or credit rating may be negatively impacted.

(b)List each debt to be prorated and, with respect to each debt, the creditor’s name and total amount of the debt.

(c)Disclose the estimated period of time it will take the debtor to complete the payments required by the contract.

(d)Disclose the amount of the prorater’s charges and fees.

(e)Disclose the approximate number and amount of installments required to pay the debts in full.

(f)Disclose the name and address of the prorater and of the debtor.

(g)Contain other provisions or disclosures as the commissioner shall determine are necessary for the protection of the debtor and the proper conduct of business by a prorater.

(h)Disclose the telephone number at which the debtor may speak with a representative of the prorater during normal business hours.

(i)If the prorater’s services are offered or negotiated in one of the languages set forth in Section 1632 of the Civil Code, a translated copy of the statement required by subdivision (a) shall be provided to the borrower in that language.

(j)Disclose the sources of income that are exempt from collection under California law.

(k)Disclose that debt resolution services may not be suitable for all individuals.

(l)Disclose that bankruptcy may provide an alternative to debt settlement.

(m)Disclose, in terms easily understood by an unsophisticated consumer, the method that the prorater will use to calculate the charges and fees for debt settlement services.

(n)

Disclose that canceled debt generally is counted as income under federal tax law, and the debtor may have to pay income taxes on the amount of forgiven or reduced debt.

(o)

Disclose that specific results cannot be predicted or guaranteed, and the prorater cannot require a creditor to negotiate or settle a debt.

SEC. 14.

 Section 12319 of the Financial Code is amended to read:

12319.

 Every contract between a prorater that is not engaged in the provision of debt settlement services and a debtor shall:

(a) List every debt to be prorated with the creditor’s name and disclose the total of all such debts; those debts.

(b) Provide payments reasonably within the ability of the debtor to pay in precise terms; terms.

(c) Disclose in precise terms the rate and amount of the prorater’s charge; charge.

(d) Disclose the approximate number and amount of installments required to pay the debts in full; full.

(e) Disclose the name and address of the prorater and of the debtor; debtor.

(f) Contain such other provision provisions or disclosures as the commissioner shall determine is necessary for the protection of the debtor and the proper conduct of business by a prorater.

SEC. 15.

 Section 12319.1 is added to the Financial Code, to read:

12319.1.

 Every contract between a prorater engaged in the provision of debt settlement services and a debtor shall:

(a) Begin with a cautionary disclosure that is substantially similar to all of the following information and is presented in conspicuous boldface type that is not smaller than 1.4 times the size of the font of the remaining portions of the contract:

(1) Despite the best efforts of the prorater, there is no guarantee that any particular debt will be reduced or eliminated.

(2) If the debtor stops making timely payments to any creditor, any of the following may occur:

(A) Creditors may still try to collect.

(B) Creditors may sue, and if they are successful, may obtain a judgment, which may include a garnishment of wages or a levy of attachment on bank accounts.

(C) The debtor’s credit score or credit rating may be negatively impacted.

(b) List each debt to be settled and, with respect to each debt, the creditor’s name and amount of the debt.

(c) Disclose the estimated amount of time necessary to achieve the represented results.

(d) Disclose the conditions that the debtor must satisfy before the prorater will make a settlement offer to a creditor.

(e) Disclose the amount of the prorater’s charges and fees and disclose, in terms easily understood by an unsophisticated consumer, the method used to calculate these charges and fees.

(f) Disclose the estimated number and amount of deposits required to settle the debts.

(g) Disclose the name and business address of the prorater and of the debtor.

(h) Contain other provisions or disclosures as the commissioner shall determine are necessary for the protection of the debtor and the proper conduct of business by a prorater.

(i) Disclose the telephone number at which the debtor may speak with a representative of the prorater during normal business hours.

(j) If the prorater’s services are offered or negotiated in one of the languages set forth in Section 1632 of the Civil Code, provide a translated copy of the statement required by subdivision (a) to the borrower in that language.

(k) Disclose that some sources of income are exempt from collection under California law.

(l) Disclose that debt settlement services may not be suitable for all individuals.

(m) Disclose that bankruptcy may provide an alternative to debt settlement for those who qualify.

(n) Disclose that canceled debt may be counted as income under federal tax law, and the debtor may have to pay income taxes on the amount of forgiven or reduced debt.

(o) Disclose that specific results cannot be predicted or guaranteed, and the prorater cannot require a creditor to negotiate or settle a debt.

SEC. 12.Section 12319.1 is added to the Financial Code, to read:

SEC. 16.

 Section 12319.2 is added to the Financial Code, to read:

12319.1.12319.2.

 A prorater shall do all of the following:

(a) Upon receipt of an IRS Form 1099-C, Cancellation of Debt, forward the form to the debtor and include a copy by mail and email of any additional IRS forms including: with the recommendation that the debtor consult a tax advisor.

(1)IRS Form 982 or any superseding form number as determined by the Internal Revenue Service.

(2)IRS Publication 4681 or any superseding form number as determined by the Internal Revenue Service.

(b)Upon settlement of any debt, send the forms listed in paragraphs (1) and (2) of subdivision (a) by mail and email to the debtor with advice to take these forms to the debtor’s tax preparer if the debtor receives a 1099-C, Cancellation of Debt form from any creditor.

(c)

(b) (1) Distribute a statement of accounting to a debtor at least once a month while the contract is in effect, and on or before the fifth business day after a debtor requests a statement of accounting.

(2) A prorater that enables, or arranges to enable, both of the following shall be deemed to have satisfied the requirements of this subdivision:

(A) Twenty-four hour per day, seven day per week electronic access, which is both downloadable and printable by a consumer, to all of the debtor’s deposit account transaction information, including all deposit and withdrawal activity.

(B) Twenty-four hour per day, seven day per week electronic access by a debtor to all account activity, including, but not limited to, settlement information including account status, settlement dates, settlement amounts, and fees paid.

(d)

(c) Include in any statement of accounting the following information to the extent applicable:

(1) The amount of money that the debtor has deposited into the debtor’s settlement account, and all withdrawals therefrom, from the time of the debtor’s entering into the contract.

(2) The amounts, dates, and creditors associated with each settlement obtained by the prorater on behalf of the debtor.

(3) The fees that the prorater has billed and collected in connection with each of the debts settled.

(4) The amount of money that the debtor holds in the debtor’s settlement account.

(5) With respect to any debt settled by the prorater on behalf of the debtor, all of the following information:

(A) The total amount of money that the debtor paid to the creditor in full discharge of the debtor’s debt.

(B) The amount of the debt at the time the prorater and the debtor entered into the contract.

(C) The amount of the debt at the time the creditor agreed to settle the debt.

(D) The amount of compensation that the prorater received to settle the debt.

SEC. 13.SEC. 17.

 Section 12330.1 is added to the Financial Code, to read:

12330.1.

 (a) A prorater engaged in the provision of debt settlement services shall annually report to the department commissioner all of the following information information, at a minimum, with respect to California residents in its debt settlement services in this state during the prior year:

(1) The total number of enrolled debtors.

(2)The average and median number of enrolled debts per debtor.

(3)The average and median total amount of debt at time of enrollment.

(4)The average percentage of savings between amount and initial enrolled debt amount.

(5)The median percentage of savings between settlement amount and initial enrolled debt amount.

(6)The average and median length of time for a debtor to complete a debt settlement contract.

(7)The average and median length of time for an enrolled debt to be settled.

(8)The percentage of debtors who have successfully completed a contract with the prorater.

(9)The percentage of debtors who were current on payments on any enrolled debt at the time of enrollment.

(10)The average and median increase in the balance of an enrolled debt during the term of the contract to be calculated by subtracting the initial enrolled debt amount from the debt amount at the time of settlement or account closure.

(11)The average and median annual net income of debtors who have enrolled in the past year and their sources of income.

(12)For debtors who defaulted or canceled the contract before settlement, the average number of monthly payments made before default.

(13)The average and median monthly amount deposited by debtors to their settlement account.

(14)The total number of debts enrolled that were transferred in ownership during the term of the contract.

(15)The average and median percentage of enrolled accounts held by original creditors and debt buyers.

(16)The average and median amount of fees paid to the prorater during the term of the contract.

(17)The average number of creditors per debtor who filed a lawsuit during the term of the contract.

(2) The total number of enrolled debts.

(3) The total amount of the enrolled debts.

(4) The total number of enrolled debtors whose reported income is solely composed of benefits from Social Security Administration.

(5) The total number of debtors who canceled the contract at any time during the reporting year.

(6) The total number of debtors whose income includes public benefits.

(7) The average and median savings on the settled debts based on the amount of the debt at the time of enrollment, including the prorater’s fees.

(8) The percentage of the fees for the prorater’s service relative to the amount of the debt at the time of enrollment.

(9) The number of debts that changed ownership during the reporting year.

(10) Any other information reasonably requested by the commissioner.

(b) The After notice and opportunity for a hearing, the commissioner shall may suspend the license of a prorater during any period of noncompliance with subdivision (a).

(c) A prorater may request, in writing, an extension of no more than two months to make the report required by subdivision (a) no more than two months. (a). The commissioner shall not grant a request for an extension made after the original due date of the report.

(d)Pursuant to Section 12400, the commissioner may revoke the license of any prorater who fails to disclose factual information in its advertising and other communication to debtors regarding any of the following:

(1)The average and median length of time it takes for an enrolled account to settle.

(2)That enrolled debts may be delinquent and go unpaid while the debtor makes initial deposits into the debt settlement account and that this will result in negative credit reporting for the debtor.

(3)That the debtor may be sued by creditors of any enrolled debt while the debt is enrolled.

SEC. 14.SEC. 18.

 Section 12405 is added to the Financial Code, immediately following Section 12404, to read:

12405.

 (a) A debtor who is a party to a contract that does not comply with the requirements of Section 12300.7, 12314, 12316, 12319, or 12319.1 may bring a civil action against the prorater responsible for the violation. A debtor who brings a civil action pursuant to this section may be awarded all of the following:

(1)Civil penalties in an amount to be determined by the court of no less than one thousand dollars ($1,000) and no more than five thousand dollars ($5,000) per violation.

(2)Compensatory damages.

(3)Reasonable attorney’s fees and costs.

(4)Injunctive relief.

(1) Actual damages.

(2) Any other relief that the court deems proper.

(b) An action brought pursuant to this section shall be commenced within four years of the latest later of the following dates:

(1) The last payment by or on behalf of the debtor pursuant to the contract.

(2) The date on which the debtor discovered or reasonably should have discovered the facts giving rise to the debtor’s claim.

SEC. 19.

 The addition of Section 12405 to the Financial Code by Section 18 of this act shall become operative only if Assembly Bill 2443 of the 2019–20 Regular Session is not enacted before January 1, 2021.