Bill Text: MN SF586 | 2013-2014 | 88th Legislature | Introduced
Bill Title: Debt management and debt settlement provisions modification
Sponsorship: Partisan Bill (Democrat 4)
Status: (Introduced - Dead) 2013-05-13 - HF substituted on General Orders HF694 [SF586 Detail]
Download: Minnesota-2013-SF586-Introduced.html
1.2relating to debt management and debt settlement; clarifying exemption for
1.3attorneys at law; modifying regulation of debt settlement services;amending
1.4Minnesota Statutes 2012, sections 332A.02, subdivision 8, by adding a
1.5subdivision; 332B.02, subdivision 13, by adding a subdivision; 332B.06,
1.6subdivisions 1, 4; 332B.09.
1.7BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.8 Section 1. Minnesota Statutes 2012, section 332A.02, subdivision 8, is amended to read:
1.9 Subd. 8. Debt management services provider. "Debt management services
1.10provider" means any person offering or providing debt management services to a debtor
1.11domiciled in this state, regardless of whether or not a fee is charged for the services and
1.12regardless of whether the person maintains a physical presence in the state. This term
1.13includes any person to whom debt management services are delegated, and does not
1.14include services performed by the following when engaged in the regular course of their
1.15respective businesses and professions:
1.16 (1) exempt attorneys at law, escrow agents, accountants, broker-dealers in securities;
1.17 (2) state or national banks, credit unions, trust companies, savings associations,
1.18title insurance companies, insurance companies, and all other lending institutions duly
1.19authorized to transact business in Minnesota;
1.20 (3) persons who, as employees on a regular salary or wage of an employer not
1.21engaged in the business of debt management, perform credit services for their employer;
1.22 (4) public officers acting in their official capacities and persons acting as a debt
1.23management services provider pursuant to court order;
1.24 (5) any person while performing services incidental to the dissolution, winding up,
1.25or liquidation of a partnership, corporation, or other business enterprise;
2.1 (6) the state, its political subdivisions, public agencies, and their employees;
2.2 (7) collection agencies, provided that the services are provided to a creditor;
2.3 (8) "qualified organizations" designated as representative payees for purposes of the
2.4Social Security and Supplemental Security Income Representative Payee System and the
2.5federal Omnibus Budget Reconciliation Act of 1990, Public Law 101-508;
2.6 (9) accelerated mortgage payment providers. "Accelerated mortgage payment
2.7providers" are persons who, after satisfying the requirements of sections332.30 to
332.303 ,
2.8receive funds to make mortgage payments to a lender or lenders, on behalf of mortgagors,
2.9in order to exceed regularly scheduled minimum payment obligations under the terms of
2.10the indebtedness. The term does not include: (i) persons or entities described in clauses (1)
2.11to (8); (ii) mortgage lenders or servicers, industrial loan and thrift companies, or regulated
2.12lenders under chapter 56; or (iii) persons authorized to make loans under section47.20,
2.13subdivision 1 . For purposes of this clause and sections
332.30 to
332.303 , "lender" means
2.14the original lender or that lender's assignee, whichever is the current mortgage holder;
2.15 (10) trustees, guardians, and conservators; and
2.16 (11) debt settlement services providers.
2.17 Sec. 2. Minnesota Statutes 2012, section 332A.02, is amended by adding a subdivision
2.18to read:
2.19 Subd. 10a. Exempt attorney at law. "Exempt attorney at law" means an attorney
2.20who:
2.21(1) is licensed or otherwise authorized to practice law in this state;
2.22(2) does not have a business relationship with the debt settlement services provider
2.23that is in any way related to the provision of debt settlement services; and
2.24(3) provides debt management services as an ancillary matter to the primary
2.25representation of a client.
2.26 Sec. 3. Minnesota Statutes 2012, section 332B.02, subdivision 13, is amended to read:
2.27 Subd. 13. Debt settlement services provider. "Debt settlement services provider"
2.28means any person offering or providing debt settlement services to a debtor domiciled
2.29in this state, regardless of whether or not a fee is charged for the services and regardless
2.30of whether the person maintains a physical presence in the state. The term includes any
2.31person to whom debt settlement services are delegated. The term shall not include an
2.32exempt attorney at law and persons listed in section332A.02, subdivision 8 , clauses (1)
2.33 (2) to (10), or a debt management services provider.
3.1 Sec. 4. Minnesota Statutes 2012, section 332B.02, is amended by adding a subdivision
3.2to read:
3.3 Subd. 13a. Exempt attorney at law. "Exempt attorney at law" means an attorney
3.4who:
3.5(1) is licensed or otherwise authorized to practice law in this state;
3.6(2) does not have a business relationship with the debt settlement services provider
3.7that is in any way related to the provision of debt settlement services; and
3.8(3) provides debt settlement services as an ancillary matter to the primary
3.9representation of a client.
3.10 Sec. 5. Minnesota Statutes 2012, section 332B.06, subdivision 1, is amended to read:
3.11 Subdivision 1. Written agreement required. (a) A debt settlement services
3.12provider may not perform, or impose any charges or receive any payment for, any debt
3.13settlement services until the provider and the debtor have executed a debt settlement
3.14services agreement that contains all terms of the agreement between the debt settlement
3.15services provider and the debtor, and the provider complies with all the applicable
3.16requirements of this chapter.
3.17(b) A debt settlement services agreement must:
3.18(1) be in writing, dated, and signed by the debt settlement services provider and
3.19the debtor;
3.20(2) conspicuously indicate whether or not the debt settlement services provider is
3.21registered with the Minnesota Department of Commerce and include any registration
3.22number; and
3.23(3) be written in the debtor's primary language if the debt settlement services provider
3.24advertises in that language, or in the language in which the agreement was negotiated,
3.25regardless of whether the debt settlement services provider advertises in that language.
3.26(c) The registrant must furnish the debtor with a copy of the signed contract upon
3.27execution.
3.28 Sec. 6. Minnesota Statutes 2012, section 332B.06, subdivision 4, is amended to read:
3.29 Subd. 4. Disclosures. (a) A person offering to provide or providing debt settlement
3.30services must disclose both orally and in writing whether or not the person is registered
3.31with the Minnesota Department of Commerce and any registration number.
3.32(b) No person may provide debt settlement services unless the person first has
3.33provided, both orally and in writing, on a single sheet of paper, separate from any other
3.34document or writing, the following verbatim notice:
4.1CAUTION
4.2We CANNOT GUARANTEE that you will successfully reduce or eliminate your
4.3debt.
4.4If you stop paying your creditors, there is a strong likelihood some or all of the
4.5following may happen:
4.6• YOUR WAGES OR BANK ACCOUNT MAY STILL BE GARNISHED.
4.7• YOU MAY STILL BE CONTACTED BY CREDITORS.
4.8• YOU MAY STILL BE SUED BY CREDITORS for the money you owe.
4.9• FEES, INTEREST, AND OTHER CHARGES WILL CONTINUE TO MOUNT
4.10UP DURING THE (INSERT NUMBER) MONTHS THIS PLAN IS IN EFFECT.
4.11Even if we do settle your debt, YOU MAY STILL HAVE TO PAY TAXES on
4.12the amount forgiven.
4.13Your credit rating may be adversely affected.
4.14(c) The heading, "CAUTION," must be in bold, underlined, 28-point type, and the
4.15remaining text must be in 14-point type, with a double space between each statement.
4.16(d) The disclosures and notices required under this subdivision must be provided in
4.17the debtor's primary language if the debt settlement services provider advertises in that
4.18language, or in the language in which the agreement was negotiated, regardless of whether
4.19the debt settlement services provider advertises in that language.
4.20 Sec. 7. Minnesota Statutes 2012, section 332B.09, is amended to read:
4.21332B.09 FEES; WITHDRAWAL OF CREDITORS; NOTIFICATION TO
4.22DEBTOR OF SETTLEMENT OFFER.
4.23 Subdivision 1. Choice of fee structure. A debt settlement services provider may
4.24calculate fees on a percentage of debt basis or on a percentage of savings basis. The fee
4.25structure shall be clearly disclosed and explained in the debt settlement services agreement.
4.26 Subd. 2.Fees as a percentage of debt Calculation of fees. (a) The total amount of
4.27the fees claimed, demanded, charged, collected, or receivedunder this subdivision by a
4.28debt settlement services agreement shall becalculated as 15 percent of the aggregate debt.
4.29A debt settlement services provider that calculates fees as a percentage of debt may:
4.30(1) charge an origination fee, which may be designated by the debt settlement
4.31services provider as nonrefundable, of:
4.32(i) $200 on aggregate debt of less than $20,000; or
4.33(ii) $400 on aggregate debt of $20,000 or more;
4.34(2) charge a monthly fee of:
4.35(i) no greater than $50 per month on aggregate debt of less than $40,000; and
5.1(ii) no greater than $60 per month on aggregate debt of $40,000 or more; and
5.2(3) charge a settlement fee for the remainder of the allowable fees, which may be
5.3demanded and collected no earlier than upon delivery to the debt settlement services
5.4provider by a creditor of a bona fide written settlement offer consistent with the terms of
5.5the debt settlement services agreement. A settlement fee may be assessed for each debt
5.6settled, but the sum total of the origination fee, the monthly fee, and the settlement fee
5.7may not exceed 15 percent of the aggregate debt.
5.8(b) The collection of monthly fees shall cease under this subdivision when the
5.9total monthly fees and the origination fee equals 40 percent of the total fees allowable
5.10under this subdivision.
5.11(c) In no event may more than 40 percent of the total amount of fees allowable be
5.12claimed, demanded, charged, collected, or received by a debt settlement services provider
5.13any earlier than upon delivery to the debt settlement services provider by a creditor of
5.14a bona fide written settlement offer consistent with the terms of the debt settlement
5.15services agreement.
5.16(1) for fees calculated on a percentage of debt basis, 15 percent of the aggregate
5.17debt; and
5.18(2) for fees calculated on a percentage of savings basis, 30 percent of the savings
5.19actually negotiated by the debt settlement services provider. The savings shall be
5.20calculated as the difference between the aggregate debt that is stated in the debt settlement
5.21services agreement at the time of its execution and the total amount that the debtor actually
5.22pays to settle all the debts included in the debt settlement services agreement, provided
5.23that only savings resulting from concessions actually negotiated by the debt settlement
5.24services provider may be counted.
5.25 Subd. 3.Fees as a percentage of savings Collection of fees. (a) The total amount
5.26of the fees claimed, demanded, charged, collected, or received under this subdivision
5.27shall be calculated as 30 percent of the savings actually negotiated by the debt settlement
5.28services provider. The savings shall be calculated as the difference between the aggregate
5.29debt that is stated in the debt settlement services agreement at the time of its execution
5.30and total amount that the debtor actually pays to settle all the debts stated in the debt
5.31settlement services agreement, provided that only savings resulting from concessions
5.32actually negotiated by the debt settlement services provider may be counted. A debt
5.33settlement services provider that calculates fees as a percentage of savings may:
5.34(1) charge an origination fee, which may be designated by the debt settlement
5.35services provider as nonrefundable, of:
5.36(i) $300 on aggregate debt of less than $20,000; or
6.1(ii) $500 on aggregate debt of $20,000 or more;
6.2(2) charge a monthly fee of:
6.3(i) no greater than $65 on aggregate debt of less than $40,000; and
6.4(ii) no greater than $75 on aggregate debt of $40,000 or more; and
6.5(3) charge a settlement fee for the remainder of the allowable fees, which may be
6.6demanded and collected no earlier than upon delivery to the debt settlement services
6.7provider by a creditor of a bona fide, final written settlement offer consistent with the
6.8terms of the debt settlement services agreement. A settlement fee may be assessed for each
6.9debt settled, but the sum total of the origination fee, the monthly fee, and the settlement
6.10fee may not exceed 30 percent of the savings, as calculated under paragraph (a).
6.11(b) The collection of monthly fees shall cease under this subdivision when the
6.12total of monthly fees and the origination fee equals 50 percent of the total fees allowable
6.13under this subdivision. For the purposes of this subdivision, 50 percent of the total fees
6.14allowable shall assume a settlement of 50 cents on the dollar.
6.15(c) In no event may more than 50 percent of the total amount of fees allowable be
6.16claimed, demanded, charged, collected, or received by a debt settlement services provider
6.17any earlier than upon delivery to the debt settlement services provider by a creditor of a
6.18bona fide, final written settlement offer consistent with the terms of the debt settlement
6.19services agreement.
6.20A debt settlement services provider may not impose or collect any payment pursuant
6.21to a debt settlement services agreement before the debt settlement service provider has
6.22fully performed all of the following:
6.23(1) the debt settlement services contained in the agreement; and
6.24(2) any additional services the debt settlement services provider has agreed to
6.25perform.
6.26If more than one debt is the subject of the debt settlement services agreement, a
6.27debt settlement services provider may only charge or collect that proportion of total fees
6.28allowable under this section that equals the proportion of the aggregate debt the individual
6.29settled debt represents.
6.30 Subd. 4. Fees exclusive. No fees, charges, assessments, or any other compensation
6.31may be claimed, demanded, charged, collected, or received other than the fees allowed
6.32under this section. Any fees collected in excess of those allowed under this section must
6.33be immediately returned to the debtor.
6.34 Subd. 5. Withdrawal of creditor. Whenever a creditor withdraws from a debt
6.35settlement services plan, the debt settlement services provider must promptly notify the
6.36debtor of the withdrawal, identify the creditor, and inform the debtor of the right to modify
7.1the debt settlement services agreement, unless at least 50 percent of the listed creditors
7.2withdraw, in which case the debt settlement services provider must notify the debtor of the
7.3debtor's right to cancel. In no case may this notice be provided more than 15 days after the
7.4debt settlement services provider learns of the creditor's decision to withdraw from a plan.
7.5 Subd. 6. Timely notification of settlement offer. A debt settlement services
7.6provider must make all reasonable efforts to notify the debtor within 24 hours of a
7.7settlement offer made by a creditor.
7.8 Sec. 8. EFFECTIVE DATE.
7.9Sections 5 to 7 are effective for debt settlement service agreements entered into on
7.10or after August 1, 2013.
1.3attorneys at law; modifying regulation of debt settlement services;amending
1.4Minnesota Statutes 2012, sections 332A.02, subdivision 8, by adding a
1.5subdivision; 332B.02, subdivision 13, by adding a subdivision; 332B.06,
1.6subdivisions 1, 4; 332B.09.
1.7BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.8 Section 1. Minnesota Statutes 2012, section 332A.02, subdivision 8, is amended to read:
1.9 Subd. 8. Debt management services provider. "Debt management services
1.10provider" means any person offering or providing debt management services to a debtor
1.11domiciled in this state, regardless of whether or not a fee is charged for the services and
1.12regardless of whether the person maintains a physical presence in the state. This term
1.13includes any person to whom debt management services are delegated, and does not
1.14include services performed by the following when engaged in the regular course of their
1.15respective businesses and professions:
1.16 (1) exempt attorneys at law, escrow agents, accountants, broker-dealers in securities;
1.17 (2) state or national banks, credit unions, trust companies, savings associations,
1.18title insurance companies, insurance companies, and all other lending institutions duly
1.19authorized to transact business in Minnesota;
1.20 (3) persons who, as employees on a regular salary or wage of an employer not
1.21engaged in the business of debt management, perform credit services for their employer;
1.22 (4) public officers acting in their official capacities and persons acting as a debt
1.23management services provider pursuant to court order;
1.24 (5) any person while performing services incidental to the dissolution, winding up,
1.25or liquidation of a partnership, corporation, or other business enterprise;
2.1 (6) the state, its political subdivisions, public agencies, and their employees;
2.2 (7) collection agencies, provided that the services are provided to a creditor;
2.3 (8) "qualified organizations" designated as representative payees for purposes of the
2.4Social Security and Supplemental Security Income Representative Payee System and the
2.5federal Omnibus Budget Reconciliation Act of 1990, Public Law 101-508;
2.6 (9) accelerated mortgage payment providers. "Accelerated mortgage payment
2.7providers" are persons who, after satisfying the requirements of sections
2.8receive funds to make mortgage payments to a lender or lenders, on behalf of mortgagors,
2.9in order to exceed regularly scheduled minimum payment obligations under the terms of
2.10the indebtedness. The term does not include: (i) persons or entities described in clauses (1)
2.11to (8); (ii) mortgage lenders or servicers, industrial loan and thrift companies, or regulated
2.12lenders under chapter 56; or (iii) persons authorized to make loans under section
2.13subdivision 1
2.14the original lender or that lender's assignee, whichever is the current mortgage holder;
2.15 (10) trustees, guardians, and conservators; and
2.16 (11) debt settlement services providers.
2.17 Sec. 2. Minnesota Statutes 2012, section 332A.02, is amended by adding a subdivision
2.18to read:
2.19 Subd. 10a. Exempt attorney at law. "Exempt attorney at law" means an attorney
2.20who:
2.21(1) is licensed or otherwise authorized to practice law in this state;
2.22(2) does not have a business relationship with the debt settlement services provider
2.23that is in any way related to the provision of debt settlement services; and
2.24(3) provides debt management services as an ancillary matter to the primary
2.25representation of a client.
2.26 Sec. 3. Minnesota Statutes 2012, section 332B.02, subdivision 13, is amended to read:
2.27 Subd. 13. Debt settlement services provider. "Debt settlement services provider"
2.28means any person offering or providing debt settlement services to a debtor domiciled
2.29in this state, regardless of whether or not a fee is charged for the services and regardless
2.30of whether the person maintains a physical presence in the state. The term includes any
2.31person to whom debt settlement services are delegated. The term shall not include an
2.32exempt attorney at law and persons listed in section
2.33 (2) to (10), or a debt management services provider.
3.1 Sec. 4. Minnesota Statutes 2012, section 332B.02, is amended by adding a subdivision
3.2to read:
3.3 Subd. 13a. Exempt attorney at law. "Exempt attorney at law" means an attorney
3.4who:
3.5(1) is licensed or otherwise authorized to practice law in this state;
3.6(2) does not have a business relationship with the debt settlement services provider
3.7that is in any way related to the provision of debt settlement services; and
3.8(3) provides debt settlement services as an ancillary matter to the primary
3.9representation of a client.
3.10 Sec. 5. Minnesota Statutes 2012, section 332B.06, subdivision 1, is amended to read:
3.11 Subdivision 1. Written agreement required. (a) A debt settlement services
3.12provider may not perform, or impose any charges or receive any payment for, any debt
3.13settlement services until the provider and the debtor have executed a debt settlement
3.14services agreement that contains all terms of the agreement between the debt settlement
3.15services provider and the debtor, and the provider complies with all the applicable
3.16requirements of this chapter.
3.17(b) A debt settlement services agreement must:
3.18(1) be in writing, dated, and signed by the debt settlement services provider and
3.19the debtor;
3.20(2) conspicuously indicate whether or not the debt settlement services provider is
3.21registered with the Minnesota Department of Commerce and include any registration
3.22number; and
3.23(3) be written in the debtor's primary language if the debt settlement services provider
3.24advertises in that language, or in the language in which the agreement was negotiated,
3.25regardless of whether the debt settlement services provider advertises in that language.
3.26(c) The registrant must furnish the debtor with a copy of the signed contract upon
3.27execution.
3.28 Sec. 6. Minnesota Statutes 2012, section 332B.06, subdivision 4, is amended to read:
3.29 Subd. 4. Disclosures. (a) A person offering to provide or providing debt settlement
3.30services must disclose both orally and in writing whether or not the person is registered
3.31with the Minnesota Department of Commerce and any registration number.
3.32(b) No person may provide debt settlement services unless the person first has
3.33provided, both orally and in writing, on a single sheet of paper, separate from any other
3.34document or writing, the following verbatim notice:
4.1CAUTION
4.2We CANNOT GUARANTEE that you will successfully reduce or eliminate your
4.3debt.
4.4If you stop paying your creditors, there is a strong likelihood some or all of the
4.5following may happen:
4.6• YOUR WAGES OR BANK ACCOUNT MAY STILL BE GARNISHED.
4.7• YOU MAY STILL BE CONTACTED BY CREDITORS.
4.8• YOU MAY STILL BE SUED BY CREDITORS for the money you owe.
4.9• FEES, INTEREST, AND OTHER CHARGES WILL CONTINUE TO MOUNT
4.10UP DURING THE (INSERT NUMBER) MONTHS THIS PLAN IS IN EFFECT.
4.11Even if we do settle your debt, YOU MAY STILL HAVE TO PAY TAXES on
4.12the amount forgiven.
4.13Your credit rating may be adversely affected.
4.14(c) The heading, "CAUTION," must be in bold, underlined, 28-point type, and the
4.15remaining text must be in 14-point type, with a double space between each statement.
4.16(d) The disclosures and notices required under this subdivision must be provided in
4.17the debtor's primary language if the debt settlement services provider advertises in that
4.18language, or in the language in which the agreement was negotiated, regardless of whether
4.19the debt settlement services provider advertises in that language.
4.20 Sec. 7. Minnesota Statutes 2012, section 332B.09, is amended to read:
4.21332B.09 FEES; WITHDRAWAL OF CREDITORS; NOTIFICATION TO
4.22DEBTOR OF SETTLEMENT OFFER.
4.23 Subdivision 1. Choice of fee structure. A debt settlement services provider may
4.24calculate fees on a percentage of debt basis or on a percentage of savings basis. The fee
4.25structure shall be clearly disclosed and explained in the debt settlement services agreement.
4.26 Subd. 2.
4.27the fees claimed, demanded, charged, collected, or received
4.28debt settlement services agreement shall be
4.29
4.30
4.31
4.32
4.33
4.34
4.35
5.1
5.2
5.3
5.4
5.5
5.6
5.7
5.8
5.9
5.10
5.11
5.12
5.13
5.14
5.15
5.16(1) for fees calculated on a percentage of debt basis, 15 percent of the aggregate
5.17debt; and
5.18(2) for fees calculated on a percentage of savings basis, 30 percent of the savings
5.19actually negotiated by the debt settlement services provider. The savings shall be
5.20calculated as the difference between the aggregate debt that is stated in the debt settlement
5.21services agreement at the time of its execution and the total amount that the debtor actually
5.22pays to settle all the debts included in the debt settlement services agreement, provided
5.23that only savings resulting from concessions actually negotiated by the debt settlement
5.24services provider may be counted.
5.25 Subd. 3.
5.26
5.27
5.28
5.29
5.30
5.31
5.32
5.33
5.34
5.35
5.36
6.1
6.2
6.3
6.4
6.5
6.6
6.7
6.8
6.9
6.10
6.11
6.12
6.13
6.14
6.15
6.16
6.17
6.18
6.19
6.20A debt settlement services provider may not impose or collect any payment pursuant
6.21to a debt settlement services agreement before the debt settlement service provider has
6.22fully performed all of the following:
6.23(1) the debt settlement services contained in the agreement; and
6.24(2) any additional services the debt settlement services provider has agreed to
6.25perform.
6.26If more than one debt is the subject of the debt settlement services agreement, a
6.27debt settlement services provider may only charge or collect that proportion of total fees
6.28allowable under this section that equals the proportion of the aggregate debt the individual
6.29settled debt represents.
6.30 Subd. 4. Fees exclusive. No fees, charges, assessments, or any other compensation
6.31may be claimed, demanded, charged, collected, or received other than the fees allowed
6.32under this section. Any fees collected in excess of those allowed under this section must
6.33be immediately returned to the debtor.
6.34 Subd. 5. Withdrawal of creditor. Whenever a creditor withdraws from a debt
6.35settlement services plan, the debt settlement services provider must promptly notify the
6.36debtor of the withdrawal, identify the creditor, and inform the debtor of the right to modify
7.1the debt settlement services agreement, unless at least 50 percent of the listed creditors
7.2withdraw, in which case the debt settlement services provider must notify the debtor of the
7.3debtor's right to cancel. In no case may this notice be provided more than 15 days after the
7.4debt settlement services provider learns of the creditor's decision to withdraw from a plan.
7.5 Subd. 6. Timely notification of settlement offer. A debt settlement services
7.6provider must make all reasonable efforts to notify the debtor within 24 hours of a
7.7settlement offer made by a creditor.
7.8 Sec. 8. EFFECTIVE DATE.
7.9Sections 5 to 7 are effective for debt settlement service agreements entered into on
7.10or after August 1, 2013.
