Bill Text: FL S0336 | 2012 | Regular Session | Comm Sub
Bill Title: Debt Settlement Services
Spectrum: Slight Partisan Bill (Republican 2-1)
Status: (Failed) 2012-03-09 - Died in Commerce and Tourism [S0336 Detail]
Download: Florida-2012-S0336-Comm_Sub.html
Florida Senate - 2012 CS for SB 336 By the Committee on Banking and Insurance; and Senators Richter and Gaetz 597-02034-12 2012336c1 1 A bill to be entitled 2 An act relating to debt settlement services; amending 3 s. 817.801, F.S.; defining terms and revising 4 definitions; amending s. 817.802, F.S.; conforming a 5 cross-reference; amending s. 817.803, F.S.; clarifying 6 that an attorney is exempt from regulation under part 7 IV of ch. 817, F.S., under certain circumstances; 8 creating s. 817.8035, F.S.; requiring that debt 9 settlement services be provided pursuant to a debt 10 settlement plan; requiring a debt settlement provider 11 to make certain disclosures to the debtor before a 12 debtor consents to payment; prohibiting a debt 13 settlement provider from making certain 14 misrepresentations to a debtor; providing certain 15 conditions that a debt settlement provider must meet 16 before receiving payment; providing that a debtor may 17 withdraw any account funds placed with a debt 18 settlement provider at any time without penalty; 19 amending s. 817.804, F.S.; extending auditing and 20 insurance requirements to persons providing debt 21 settlement services; amending s. 817.805, F.S.; 22 authorizing a debt settlement provider to hold funds 23 in order to allow the funds to accumulate; providing a 24 directive to the Division of Statutory Revision; 25 providing for applicability; providing an effective 26 date. 27 28 Be It Enacted by the Legislature of the State of Florida: 29 30 Section 1. Section 817.801, Florida Statutes, is amended to 31 read: 32 817.801 Definitions.—As used in this part, the term: 33 (1) “Credit counseling agency” means ananyorganization 34 providing debt management services or credit counseling 35 services. 36 (2) “Credit counseling services” means confidential money 37 management, debt reduction, and financial educational services. 38 (3) “Creditor contribution” means any sum that a creditor 39 agrees to contribute to a credit counseling agency, whether 40 directly or by setoff against amounts otherwise payable to the 41 creditor on behalf of a debtordebtors. 42 (4) “Debt management plan” means a written agreement or 43 contract between a credit counseling agency and a debtor whereby 44 the credit counseling agency, in return for a direct or indirect 45 payment by the debtor of fees not exceeding those specified in 46 s. 817.802, will provide credit counseling services or debt 47 management services that contemplate that the debtor’s creditors 48 will reduce finance charges or fees incurred by the debtor for 49 late payment, default, or delinquency. 50 (5)(4)“Debt management services” means services provided 51 to a debtor pursuant to a debt management plan by a credit 52 counseling agencyorganizationfor a fee to: 53 (a) Effect the adjustment, compromise, reduction of 54 interest rate or fees, modification of terms, negotiation, or 55 discharge of any unsecured account, note, or other indebtedness 56 of the debtor; or 57 (b) Receive from the debtor and disburse to a creditor any 58 money or other thing of value with the expectation that the 59 debtor will repay the entire principal amount of the unsecured 60 debt owed to the creditor. 61 62 Debt management services do not include debt settlement 63 services. 64 (6) “Debt settlement plan” means a written agreement or 65 contract between a debt settlement provider and a debtor whereby 66 the provider, in return for payment by the debtor, will provide 67 debt settlement services that contemplate that creditors of the 68 debtor will settle debts for less than the principal amount of 69 the debt. 70 (7) “Debt settlement provider” means any person providing 71 debt settlement services. 72 (8) “Debt settlement services” means services provided to a 73 debtor with the expectation of obtaining the agreement of the 74 debtor’s creditors to accept less than the principal amount of 75 the debtor’s unsecured debt in full satisfaction of the debt. 76 Debt settlement services do not include debt management 77 services. 78 (9)(5)“Person” means any individual, corporation, 79 partnership, trust, association, or other legal entity. 80 (10) “Principal amount of the debt” means the total 81 outstanding balance of each unsecured debt included in a debt 82 management plan or debt settlement plan, including accumulated 83 interest and penalties that are not subject to an initial 84 concession by a creditor pursuant to the debt management plan, 85 and which are calculated individually and in the aggregate as of 86 the date the plan is executed. 87 Section 2. Subsection (1) of section 817.802, Florida 88 Statutes, is amended to read: 89 817.802 Unlawful fees and costs.— 90 (1) It is unlawful for any person, while engaging in debt 91 management services or credit counseling services, to charge or 92 accept from a debtor residing in this state, directly or 93 indirectly, a fee or contribution greater than $50 for the 94 initial setup or initial consultation. Subsequently, the person 95 may not charge or accept a fee or contribution from a debtor 96 residing in this state greater than $120 per year for additional 97 consultations or, alternatively, if debt management services as 98 defined in s. 817.801(5)(b)817.801(4)(b)are provided, the 99 person may charge the greater of 7.5 percent of the amount paid 100 monthly by the debtorto the personor $35 per month. 101 Section 3. Section 817.803, Florida Statutes, is amended to 102 read: 103 817.803 Exceptions.—Nothing inThis part does not apply 104appliesto: 105 (1) An attorney licensed to practice law in this state who 106 is providing debt management, credit counseling, or debt 107 settlement services and who, in providing such services, is 108 acting in compliance with the Florida Rules of Professional 109 Conduct.Any debt management orcredit counseling services110provided in the practice of law in this state;111 (2) AAnyperson who engages in debt adjustment to adjust 112 the indebtedness owed to such person.; or113 (3) The following entities or their subsidiaries: 114 (a) The Federal National Mortgage Association; 115 (b) The Federal Home Loan Mortgage Corporation; 116 (c) The Florida Housing Finance Corporation, a public 117 corporation created in s. 420.504; 118 (d) A bank, bank holding company, trust company, savings 119 and loan association, credit union, credit card bank, or savings 120 bank that is regulated and supervised by the Office of the 121 Comptroller of the Currency, the Office of Thrift Supervision, 122 the Federal Reserve, the Federal Deposit Insurance Corporation, 123 the National Credit Union Administration, the Office of 124 Financial Regulation of the Department of Financial Services, or 125 any state banking regulator; 126 (e) A consumer reporting agency as defined in the Federal 127 Fair Credit Reporting Act, 15 U.S.C. ss. 1681-1681y, as it 128 existed on April 5, 2004; or 129 (f) Any subsidiary or affiliate of a bank holding company, 130 its employees and its exclusive agents acting under written 131 agreement. 132 Section 4. Section 817.8035, Florida Statutes, is created 133 to read: 134 817.8035 Debt settlement plans; disclosures to debtor; 135 payments; refunds.— 136 (1) Debt settlement services provided to a debtor residing 137 in this state may be provided only pursuant to a debt settlement 138 plan that complies with this part. 139 (2) Before a debtor consents to payment for debt settlement 140 services, the debt settlement provider must disclose, in writing 141 and in a clear and conspicuous manner, all of the following 142 material information: 143 (a) The amount of time necessary to achieve the represented 144 results and, to the extent that the debt settlement service may 145 include a settlement offer to any of the debtor’s creditors or 146 debt collectors, the anticipated time by which the debt 147 settlement provider will make a bona fide settlement offer to 148 each of them. 149 (b) To the extent that the debt settlement service may 150 include a settlement offer to any of the debtor’s creditors or 151 debt collectors, the amount of money or the percentage of each 152 outstanding debt that the debtor must accumulate before the debt 153 settlement provider will make a bona fide settlement offer to 154 each of them. 155 (c) To the extent that any aspect of the debt settlement 156 service relies upon or results in the debtor’s failure to make 157 timely payments to creditors or debt collectors, that the use of 158 the debt settlement service will likely adversely affect the 159 debtor’s creditworthiness, may result in the debtor being 160 subject to collection actions or sued by creditors or debt 161 collectors, and may increase the amount of money the debtor owes 162 due to the accrual of fees and interest. 163 (d) To the extent that the debt settlement provider 164 requests or requires the debtor to place funds in an account at 165 a state or federal financial institution insured by the Federal 166 Deposit Insurance Corporation or the National Credit Union Share 167 Insurance Fund, that the debtor owns the funds held in the 168 account, the debtor may withdraw such funds from the debt 169 settlement service at any time without penalty, and, if the 170 debtor requests to withdraw such funds, the debtor must receive 171 all funds in the account, other than funds earned by the debt 172 settlement provider, within 7 business days after the debtor’s 173 request. 174 (3) A debt settlement provider may not misrepresent, 175 directly or by implication, any material aspect of any debt 176 settlement service, including, but not limited to, the amount of 177 money or the percentage of the debt amount which a debtor may 178 save by using such service; the amount of time necessary to 179 achieve the represented results; the amount of money or the 180 percentage of each outstanding debt the debtor must accumulate 181 before the debt settlement provider will initiate attempts or 182 make a bona fide offer to negotiate, settle, or modify the terms 183 of the debtor’s debt with the debtor’s creditors or debt 184 collectors; the effect of the service on a debtor’s 185 creditworthiness; the effect of the service on the collection 186 efforts of the debtor’s creditors or debt collectors; the 187 percentage or number of debtors who attain the represented 188 results; and whether a debt settlement service is offered or 189 provided by a nonprofit entity. 190 (4) A debt settlement provider may not receive payment of 191 any fee or consideration for any debt settlement service until: 192 (a) The debt settlement provider has renegotiated, settled, 193 reduced, or otherwise altered the terms of at least one debt 194 pursuant to a debt settlement plan; 195 (b) The debtor has made at least one payment pursuant to 196 that debt settlement plan; and 197 (c) The fee or consideration for settling each individual 198 debt enrolled in a debt settlement plan is a percentage of the 199 amount saved as a result of the settlement. The percentage 200 charged may not change from one individual debt to another and 201 may not exceed 30 percent of the amount saved. The amount saved 202 is the difference between the amount owed at the time the debtor 203 enrolled in the debt settlement plan and the amount actually 204 paid to satisfy the debt. 205 (5) This section does not prohibit a debt settlement 206 provider from requesting or requiring the debtor to place funds 207 in an account to be used for the debt settlement provider’s fees 208 and for payments to creditors or debt collectors in connection 209 with a renegotiation, settlement, reduction, or other alteration 210 of the terms of payment or other terms of a debt if: 211 (a) The funds are held in an account at a state or federal 212 financial institution insured by the Federal Deposit Insurance 213 Corporation or the National Credit Union Share Insurance Fund; 214 (b) The debtor owns the funds held in the account and is 215 paid accrued interest on the account, if any; 216 (c) The entity administering the account is not owned or 217 controlled by, or in any way affiliated with, the debt 218 settlement provider; and 219 (d) The entity administering the account does not give or 220 accept any money or other compensation in exchange for referrals 221 of business by the debt settlement provider. 222 (6) The debtor may withdraw from the debt settlement 223 service at any time without penalty, and must receive all funds 224 held in the account, other than funds earned by the debt 225 settlement provider in compliance with this part, within 7 226 business days after the debtor’s request. 227 Section 5. Subsection (1) of section 817.804, Florida 228 Statutes, is amended to read: 229 817.804 Requirements; disclosure and financial reporting.— 230 (1) Any person engaged in debt management services, debt 231 settlement services, or credit counseling services shall: 232 (a) Obtain from a licensed certified public accountant an 233 annual audit in accordance with generally accepted auditing 234 standards which includesthat shall includeall accounts of such 235 person in which the funds of debtors are deposited and from 236 which payments are made to creditors on behalf of debtors. If 237 another person administers accounts on behalf of a debtor under 238 agreement with a debt settlement provider, or under the 239 direction or control of that provider, the audit must include 240 all accounts in which the funds of residents of this state are 241 deposited and from which payments are made at the direction or 242 control of the debt settlement provider or its affiliate. 243 (b) Obtain and maintain at all times insurance coverage for 244 employee dishonesty, depositor’s forgery, and computer fraud. 245 The insurance coverage must bein an amountnot less than the 246 greater of $100,000 or 10 percent of the monthly average of the 247 aggregate amount of all deposits made for distribution to 248 creditors with such person by all debtors for the 6 months 249 immediately preceding the date of initial application for or 250 renewal of the insurance. The deductible on such coverage may 251shallnot exceed 10 percent of the face amount of the policy 252 coverage. 253 Section 6. Section 817.805, Florida Statutes, is amended to 254 read: 255 817.805 Disbursement of funds.—Any person engaged in debt 256 management, debt settlement, or credit counseling services shall 257 disburse to the appropriate creditors all funds received from a 258 debtor, less any fees permitted by s. 817.802 and any creditor 259 contributions, within 30 days after receipt of such funds, 260 unless, under a debt settlement plan, reasonable payment of one 261 or more of the debtor’s obligations requires that the funds be 262 held for a longer period in order to accumulate. However, a 263 creditor contribution may not reduce any sums to be credited to 264 the account of a debtor making a payment to the credit 265 counseling agency for further payment to the creditor. Further, 266 any person engaged in such services mustshallmaintain a 267 separate trust account for the receipt of any funds from debtors 268 and the disbursement of such funds on behalf of such debtors. 269 Section 7. The Division of Statutory Revision is requested 270 to rename part IV of chapter 817, Florida Statutes, as “Credit 271 Counseling and Debt Settlement Services.” 272 Section 8. This act applies to debt settlement plans 273 executed on or after July 1, 2012. 274 Section 9. This act shall take effect July 1, 2012.