Bill Text: NJ A4598 | 2024-2025 | Regular Session | Introduced
Bill Title: Makes certain for-profit debt adjusters eligible for licensing to conduct business in State.
Spectrum: Bipartisan Bill
Status: (Introduced) 2024-06-17 - Introduced, Referred to Assembly Regulated Professions Committee [A4598 Detail]
Download: New_Jersey-2024-A4598-Introduced.html
Sponsored by:
Assemblywoman YVONNE LOPEZ
District 19 (Middlesex)
Assemblywoman VICTORIA A. FLYNN
District 13 (Monmouth)
SYNOPSIS
Makes certain for-profit debt adjusters eligible for licensing to conduct business in State.
CURRENT VERSION OF TEXT
As introduced.
An Act concerning the licensing of debt adjusters and amending and supplementing P.L.1979, c.16.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. Section 1 of P.L.1979, c.16 (C.17:16G-1) is amended to read as follows:
1. As used in this act:
a. "Nonprofit social service agency" or "nonprofit consumer credit counseling agency" means any corporation duly organized under Title 15 of the Revised Statutes or Title 15A of the New Jersey Statutes, no part of the assets, income or profit of which is distributable to, or enures to the benefit of its members, directors or officers, except to the extent permitted under this act, and which is engaged in debt adjustment.
b. "Credit counseling" means any guidance or educational program or advice offered by a nonprofit social service agency or nonprofit consumer credit counseling agency for the purpose of fostering the responsible use of credit and debt management.
c. (1) "Debt adjuster" means a person who either (a) acts or offers to act for a consideration as an intermediary between a debtor and his creditors for the purpose of settling, compounding, or otherwise altering the terms of payment of any debts of the debtor, or (b) who, to that end, receives money or other property from the debtor, or on behalf of the debtor, for payment to, or distribution among, the creditors of the debtor.
(2) The following persons shall not be deemed debt adjusters: (a) [an attorney-at-law of this State who is not principally engaged as a debt adjuster] any person engaged in the practice of law; (b) a person who is a regular, full-time employee of a debtor, and who acts as an adjuster of his employer's debts; (c) a person acting pursuant to any order or judgment of court, or pursuant to authority conferred by any law of this State or the United States; (d) a person who is a creditor of the debtor, or an agent of one or more creditors of the debtor, and whose services in adjusting the debtor's debts are rendered without cost to the debtor; (e) a person who, at the request of a debtor, arranges for or makes a loan to the debtor, and who, at the authorization of the debtor, acts as an adjuster of the debtor's debts in the disbursement of the proceeds of the loan, without compensation for the services rendered in adjusting those debts; or (f) a person who is: (i) certified by the United States Secretary of Housing and Urban Development as a housing counseling organization or agency pursuant to section 106 of Pub.L.90-448 (12 U.S.C. s.1701x); (ii) participating in a counseling program approved by the New Jersey Housing and Mortgage Finance Agency; and (iii) not holding
or disbursing the debtor's funds.
d. "Debtor" means an individual or two or more individuals who are jointly and severally, or jointly or severally indebted.
e. "For-profit debt adjuster" means a person or entity that conducts some or all of the activities described in paragraph 1 of subsection c. of this section but: (1) does not receive or hold, actually or constructively, consumer funds; and (2) is subject to the provisions of 16 C.F.R. 310.4, or any successor federal law or regulation.
(cf: P.L.2009, c.173, s.1)
2. Section 2 of P.L.1979, c.16 (C.17:16G-2) is amended to read as follows:
2. a. No person other than a nonprofit social service agency [or], a nonprofit consumer credit counseling agency, or a for-profit debt adjuster shall act as a debt adjuster.
b. It shall be unlawful for any nonprofit social service agency [or], nonprofit consumer credit counseling agency, or for-profit debt adjuster to act as a debt adjuster without first obtaining a license from the Commissioner of the Department of Banking pursuant to this act.
c. A licensee is authorized to offer credit counseling.
(cf: P.L.1986, c.184, s.2)
3. Section 5 of P.L.1979, c.16 (C.17:16G-5) is amended to read as follows:
5. a. Any nonprofit social service agency or nonprofit consumer credit counseling agency licensed under this act shall be bonded to the satisfaction of the commissioner for each location pursuant to regulation. In setting the bonding requirements for each location, the commissioner shall consider the number of debtors provided credit counseling and debt adjustment services at that location, and the balance of funds in the trust account required to be maintained pursuant to section 3 of P.L.2005, c.287 (C.17:16G-9). A for-profit debt adjuster shall not be subject to requirements of this subsection.
b. The commissioner may require a licensee to file an annual report containing that information required by the commissioner by regulation concerning activities conducted as a licensee in the preceding calendar year. The report shall be submitted under oath and in the form and within the time specified by the commissioner by regulation.
c. The commissioner may require a high-cost home loan counselor to file an annual report containing that information required by the commissioner by regulation concerning activities conducted pursuant to subsection g. of section 5 of P.L.2003, c.64 (C.46:10B-26) as a registrant in the preceding calendar year. The report shall be submitted under oath and in the form and within the time specified by the commissioner by regulation.
d. Each licensee shall file with the commissioner on or before April 1 of each year a copy of its annual report, containing the information required by the commissioner by regulation pursuant to P.L.1979, c.16 (C.17:16G-1 et seq.) and section 3 of P.L.2005, c.287 (C.17:16G-9). A licensee or high-cost home loan counselor that fails to make and file its annual report in the form and within the time provided in this section shall be subject to a penalty of not more than $100 for each day's failure, and the commissioner may revoke or suspend its authority to do business in this State. The penalty may be collected in a summary proceeding pursuant to the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.). A warrant may issue in lieu of a summons.
e. Each licensee shall have its financial records relating to debt adjustment audited annually by a certified public accountant or a public accountant, which audit shall be filed with the commissioner. Such an audit shall certify that the salaries and expenses paid by the licensee are reasonable compared to those incurred by comparable organizations providing similar, except that a for-profit debt adjuster shall not be required to provide this certification.
f. After reviewing the annual report and audit, the Commissioner of Banking and Insurance may cause an examination of the licensee to be made, the actual expenses of such an examination shall be paid by the licensee, and the commissioner may maintain any action against any licensee to recover the fees and expenses herein provided for.
g. The licensee shall make a copy of the annual report and audit available for public inspection at each of the licensee's locations.
(cf: P.L.2007, c.81, s.25)
4. Section 6 of P.L.1979, c.16 (C.17:16G-6) is amended to read as follows:
6. a. A licensee may charge a fee to cover the cost of providing debt adjustment and credit counseling.
b. The fee for debt adjustment for a nonprofit social service agency and a nonprofit consumer credit counseling agency shall not exceed 1% of the gross monthly income of the person to whom the service is rendered, but in no case more than $15.00 in any one month, except as may be otherwise provided by rule or regulation promulgated by the commissioner. This fee may be waived in the discretion of the licensee.
c. The commissioner is authorized to establish the maximum fee that may be charged by a nonprofit social service agency and a nonprofit consumer credit counseling agency for credit counseling.
d. The commissioner is authorized to establish maximum fees that may be charged by for-profit debt adjusters for debt adjustment and credit counseling
(cf: P.L.1986, c.184, s.4)
5. (New section) Every for-profit debt adjuster licensee shall, at the time an agreement is executed by a debtor, or as shortly thereafter as practical, distribute or otherwise make available to the debtor, in paper form or by electronic means if the debtor so agrees, a copy of the executed agreement. The agreement shall disclose:
a. the services that the licensee will perform;
b. the methodology that the licensee will use to calculate fees to be charged for debt adjusting services and, if reasonably available at the time the agreement is executed, the fees that the licensee will charge;
c. the amount of time, estimated in good faith, to achieve the resolution of all enrolled debts;
d. to the extent that the debt adjusting service may include a resolution offer to any of the debtor's creditors:
(1) the amount of money or the percentage of each outstanding debt that the debtor needs to accumulate before the licensee will make a bona fide resolution offer to each of the creditors; and
(2) the date, estimated in good faith, when the licensee will make a bona fide resolution offer to each of the creditors;
e. that debt adjusting may not be suitable for all individuals;
f. to the extent that any aspect of the debt adjusting service relies upon or results in the debtor's failure to make timely payments to creditors, that the failure to pay one's debts will likely adversely affect the debtor's creditworthiness, may result in the debtor being subject to collections efforts, including lawsuits by creditors, and may increase the amount of money the debtor owes due to the accrual of fees and interest;
g. that, unless the debtor is insolvent, if a creditor resolves a debt for less than its full amount, the resolution may result in the creation of taxable income to the debtor, even though the debtor does not receive any money;
h. that specific results cannot be predicted or guaranteed and the licensee cannot require a creditor to negotiate or resolve a debt;
i. that debt adjusting programs require that individuals meet regular savings goals in order to enable resolutions;
j. that the licensee:
(1) does not provide tax, accounting, or legal advice to individuals, unless the licensee is licensed to provide that advice;
(2) is the debtor's advocate and does not receive compensation of any sort from creditors for providing debt adjusting services to the debtor; and
(3) does not make monthly or other payments to the debtor's creditors; and
k. the list of debts covered by the agreement.
6. (New section) The provisions of P.L.1979, c.16 (C.17:16G-1 et seq.) that are applicable to for-profit debt adjusters are only applicable to the extent that they are not in conflict with the provisions of 16 C.F.R. 310.4 or any successor federal law or regulation.
7. This act shall take effect immediately.
STATEMENT
This bill allows certain for-profit debt adjustment companies to conduct business in the State. A debt adjuster is a person or entity who: acts or offers to act for a consideration as an intermediary between a debtor and his creditors for the purpose of settling, compounding, or otherwise altering the terms of payment of any debts of the debtor; or receives money or other property from the debtor, or on behalf of the debtor, for payment to, or distribution among, the creditors of the debtor.
Under New Jersey's current "debt adjusters law," which is administered and enforced by the Department of Banking and Insurance, only nonprofit social service agencies and nonprofit consumer credit counseling agencies may operate debt adjustment services in the State.
The bill would create an exception to the current law to allow for-profit debt adjustment companies to conduct business in the State provided the company (1) does not receive or hold, actually or constructively, consumer funds; and (2) is regulated by the Federal Trade Commission pursuant to the commission's "Telemarketing Sales Rule."
The bill would generally subject for-profit debt adjuster companies to the same rules and restrictions as non-profit entities licensed to operate debt adjustment services, but with certain exceptions. Under the bill, a for-profit debt adjuster would not be required to provide a certification about salaries and expenses as part of its annual audit. The commissioner would be authorized to establish maximum fees that may be charged by for-profit debt adjusters. The bill further provides that the provisions of the debt adjuster act are only applicable to for-profit debt adjusters to the extent that they do not conflict with the federal "Telemarketing Sales Rule."
The bill would provide that for-profit debt adjusters are not subject to the bonding requirements that apply to nonprofit social service agencies and nonprofit consumer credit counseling agencies that perform debt adjuster services in the State.
The bill also requires for-profit debt adjuster licensees that enter into an agreement with a debtor to disclose certain information to the debtor.
Lastly, the bill clarifies language about persons engaged in the practice of law that are not deemed to be debt adjusters.
