Bill Text: OH HB173 | 2013-2014 | 130th General Assembly | Engrossed

Bill Title: To regulate providers of debt settlement services.

Spectrum: Moderate Partisan Bill (Republican 12-2)

Status: (Engrossed - Dead) 2013-12-05 - To Insurance & Financial Institutions [HB173 Detail]

Download: Ohio-2013-HB173-Engrossed.html
As Passed by the House

130th General Assembly
Regular Session
Sub. H. B. No. 173

Representatives Terhar, Mallory 

Cosponsors: Representatives Grossman, Brenner, Blair, Beck, Bishoff, Buchy, Butler, Hackett, Hagan, C., Retherford, Ruhl Speaker Batchelder 

To amend sections 4710.01 and 4710.03 and to enact 1
sections 4710.20 to 4710.32 of the Revised Code to 2
regulate providers of debt settlement services.3


       Section 1. That sections 4710.01 and 4710.03 be amended and 4
sections 4710.20, 4710.21, 4710.22, 4710.23, 4710.24, 4710.25, 5
4710.26, 4710.27, 4710.28, 4710.29, 4710.30, 4710.31, and 4710.32 6
of the Revised Code be enacted to read as follows:7

       Sec. 4710.01.  As used in this chaptersections 4710.01 to 8
4710.04 of the Revised Code:9

       (A) "Person" includes individuals, partnerships, 10
associations, corporations, trusts, and other legal entities.11

       (B)(1) "Debt adjusting" means doing business in debt 12
adjusting, budget counseling, debt management, or debt pooling 13
service, or holding oneself out, by words of similar import, as 14
providing services to debtors in the management of their debts, to 15
do either of the following:16

       (1)(a) To effect the adjustment, compromise, or discharge of 17
any account, note, or other indebtedness of the debtor;18

       (2)(b) To receive from the debtor and disburse to the 19
debtor's creditors any money or other thing of value.20

       (2) "Debt adjusting" does not include debt settlement 21
services as defined in section 4710.20 of the Revised Code.22

       (C) "Resides" means to live in a particular place on a 23
temporary or a permanent basis.24

       Sec. 4710.03. Nothing in this chaptersections 4710.01 to 25
4710.04 of the Revised Code applies to any of the following:26

       (A) The federal national mortgage association; the federal 27
home loan mortgage corporation; a bank, bank holding company, 28
trust company, savings and loan association, credit union, savings 29
bank, or credit card bank, that is regulated by the office of the 30
comptroller of currency, office of thrift supervision, federal 31
reserve, federal deposit insurance corporation, national credit 32
union administration, or division of financial institutions; or to 33
subsidiaries of any of these entities;34

       (B) Debt adjusting incurred in the practice of law in this 35

       (C) A person that incidentally engages in debt adjusting to 37
adjust the indebtedness owed to that person;38

       (D) A registrant as defined in section 1321.51 of the Revised 39

       (E) A registrant or licensee as both are defined in section 41
1322.01 of the Revised Code.42

       Sec. 4710.20.  As used in sections 4710.20 to 4710.32 of the 43
Revised Code:44

       (A) "Affiliate" means any of the following:45

       (1) A person that controls, is controlled by, or is under 46
common control with a provider. 47

       (2) An executive officer or director of a provider or any 48
individual performing functions similar to an executive officer or 49

       (3) An executive officer or director of a person described in 51
division (A)(1) of this section or any individual performing 52
functions similar to an executive officer or director.53

       (B) "Concessions" means assent to repayment of a debt on 54
terms more favorable to a debtor than the terms of the contract 55
between the debtor and a creditor.56

       (C) "Control" means the right to control at least ten per 57
cent of the voting power of another person.58

       (D) "Day" means a calendar day.59

       (E) "Debtor" means an individual to whom a provider furnishes 60
debt settlement services.61

       (F) "Debt settlement services agreement" means an agreement 62
between a provider and a debtor for the furnishing of debt 63
settlement services.64

       (G)(1) "Debt settlement services" means the services as an 65
intermediary between a debtor and one or more unsecured creditors 66
of the debtor for the purpose of obtaining concessions with 67
respect to the debtor's unsecured debt, which concessions may 68
include a reduction in the principal amount of the debt.69

       (2) "Debt settlement services" does not include any of the 70

       (a) Accounting services provided in an accountant-client 72
relationship by a certified public accountant licensed to provide 73
accounting services in this state;74

       (b) Financial planning services provided in a financial 75
planner-client relationship by a licensed member of a financial 76
planning profession;77

       (c) The collection of debts by a debt collector as defined in 78
the federal "Fair Debt Collection Practices Act," 91 Stat. 875 79
(1977), 15 U.S.C. 1692a, as amended.80

       (H) "Financial institution" means any national bank, any bank 81
doing business under authority granted by the superintendent of 82
financial institutions or the regulatory authority of another 83
state, any federal savings association, any savings and loan 84
association or savings bank doing business under authority granted 85
by the superintendent or the regulatory authority of another 86
state, any trust company, or any credit union regulated by a state 87
or federal regulatory authority.88

       (I) "Good faith" means honesty in fact and the observance of 89
reasonable standards of fair dealing.90

       (J) "Person" means an individual, corporation, business 91
trust, estate, trust, partnership, limited liability company, 92
association, joint venture, or any other legal or commercial 93
entity. The term does not include a public corporation, 94
government, or governmental subdivision, agency, or 95

       (K) "Principal amount of the debt" means the amount of a debt 97
at the time of the execution of a debt settlement services 98

       (L) "Program" means a program or strategy in which a provider 100
furnishes debt settlement services.101

       (M) "Provider" means a person that furnishes, offers to 102
furnish, or agrees to furnish debt settlement services.103

       (N) "Record" means information that is inscribed on a 104
tangible medium or that is stored in an electronic or other medium 105
and is retrievable in a perceivable form.106

       (O) "State" means the state of Ohio, except when the context 107
indicates the term is referring to another state of the United 108
States, the District of Columbia, Puerto Rico, the United States 109
Virgin Islands, or any territory or insular possession subject to 110
the jurisdiction of the United States. 111

       (P) "Superintendent of financial institutions" includes the 112
deputy superintendent for consumer finance as provided in section 113
1181.21 of the Revised Code.114

       Sec. 4710.21.  (A) A provider shall not furnish debt 115
settlement services to a debtor who the provider reasonably should 116
know resides in this state at the time the debt settlement 117
services agreement is entered into, except as provided in sections 118
4710.20 to 4710.32 of the Revised Code.119

       (B) Sections 4710.20 to 4710.32 of the Revised Code do not 120
apply to the following persons or their employees when the person 121
or the employee is engaged in the regular course of the person's 122
business or profession:123

       (1) A judicial officer, a person acting under an order of a 124
court or an administrative agency, or an assignee for the benefit 125
of creditors;126

       (2) A financial institution or an affiliate or agency of a 127
financial institution if the affiliate or agent is subject to 128
examination by a federal or state banking regulatory authority;129

       (3) A title insurer, escrow company, or other person that 130
provides bill-paying services if the furnishing of debt settlement 131
services is incidental to the bill-paying services;132

       (4) An attorney licensed or otherwise authorized to practice 133
law in this state who furnishes debt settlement services directly 134
to a client as part of a lawyer-client relationship and does not 135
have a business relationship with a provider that is in any way 136
related to the furnishing of debt settlement services;137

       (5) A registrant as defined in section 1321.51 of the Revised 138

       Sec. 4710.22.  A provider, prior to offering to furnish or 140
furnishing debt settlement services to a debtor who the provider 141
reasonably should know resides in this state at the time the debt 142
settlement services agreement is entered into, shall submit all of 143
the following to the department of commerce:144

       (A) Evidence that the provider has a resident agent in this 145
state recorded with the secretary of state;146

       (B) Proof of a bond in effect meeting the requirements of 147
section 4710.23 of the Revised Code;148

       (C) Proof that the provider is authorized by the laws of this 149
state to conduct business in this state.150

       Sec. 4710.23.  (A) A provider shall obtain and maintain in 151
effect at all times a corporate surety bond issued by a bonding 152
company or insurance company authorized to do business in this 153
state that meets all of the following conditions:154

       (1) The bond is in favor of the superintendent of financial 155

       (2) The bond is for the exclusive benefit of any debtor 157
located in this state, and of the state for the benefit of any 158
debtor, who is injured by a failure to comply with any provision 159
of sections 4710.20 to 4170.32 of the Revised Code.160

       (3) The bond is in the amount of fifty thousand dollars.161

       (B) Any debtor claiming against the bond for a failure to 162
comply with any provision of sections 4710.20 to 4710.32 of the 163
Revised Code may maintain an action at law against the provider 164
and against the corporate surety. The aggregate liability of the 165
corporate surety for any and all breaches of the conditions of the 166
bond shall not exceed the penal sum of the bond.167

       (C) Whenever the penal sum of the bond is reduced by one or 168
more recoveries or payments, the provider shall furnish a new or 169
additional bond under this section, so that the total or aggregate 170
penal sum of the bond or bonds equals the sum required by this 171
section, or shall furnish an endorsement executed by the corporate 172
surety reinstating the bond to the required penal sum.173

       (D) The bond shall not be canceled by the provider or by the 174
corporate surety, except upon notice to the superintendent by 175
certified mail, return receipt requested. The cancellation shall 176
not be effective prior to thirty days after the superintendent 177
receives the notice.178

       Sec. 4710.24.  A provider shall do all of the following:179

       (A) Act in good faith in all matters relating to the 180
furnishing of debt settlement services;181

       (B) Maintain a toll-free communication system, staffed at a 182
level that reasonably permits a debtor to speak to a customer 183
service representative, as appropriate, during ordinary business 184

       (C) Provide all disclosures required by sections 4710.20 to 186
4710.32 of the Revised Code in English and in any other language 187
the provider will use primarily to communicate with a debtor.188

       Sec. 4710.25.  (A) Before a debtor consents to pay the fees 189
for the goods and services offered by the provider, the provider 190
shall disclose, in a clear and conspicuous manner, all of the 191
following material information:192

       (1) A good faith estimate of the amount of time necessary to 193
achieve the represented results and, to the extent that the debt 194
settlement services may include a settlement offer to any of the 195
debtor's creditors, a good faith estimate of the time by which the 196
provider will start to make bona fide settlement offers to the 197
debtor's creditors, and the cost to the debtor for furnishing the 198
debt settlement services;199

       (2) To the extent that the debt settlement services may 200
include a settlement offer to any of the debtor's creditors, a 201
good faith estimate of the amount of money, or the percentage of 202
each outstanding debt, that the debtor will be required to 203
accumulate before the provider makes a bona fide settlement offer;204

       (3) To the extent that any aspect of the debt settlement 205
services relies upon or results in the debtor's failure to make 206
timely payments to creditors, that the use of the debt settlement 207
services will likely adversely affect the debtor's 208
creditworthiness, may result in the debtor being subject to 209
collection actions or sued by creditors, and may increase the 210
amount of money the debtor owes due to the accrual of fees and 211

       (4) To the extent that the provider requests or requires the 213
debtor to place funds in an account at a financial institution, 214
that the debtor owns the funds held in the account;215

       (5) That the debtor may withdraw from the debt settlement 216
services agreement at any time without penalty;217

       (6) That the use of the debt settlement services may result 218
in the creation of taxable income to the debtor and, if any debt 219
is cancelled, that the debtor will receive from the creditor the 220
United States internal revenue service form 1099 necessary for the 221
debtor in filing federal taxes pursuant to the "Internal Revenue 222
Code of 1986," 100 Stat. 2085, 26 U.S.C. 1 et seq., as amended.223

       (B) A provider shall not misrepresent, directly or by 224
implication, any material aspect of the debt settlement services, 225
including, but not limited to, any of the following:226

       (1) The amount of money or the percentage of the debt amount 227
that a debtor may save by entering into the debt settlement 228
services agreement;229

       (2) The effect of debt settlement services on the debtor's 230
creditworthiness and on the collection efforts of the debtor's 231

       (3) The percentage or number of debtors who attain the 233
represented results; 234

       (4) Whether debt settlement services are being offered or 235
furnished by a nonprofit entity.236

       (C) Prior to entering into a debt settlement services 237
agreement, a provider shall prepare a financial analysis with 238
respect to the income and debts of the debtor seeking the debt 239
settlement services and provide the debtor with a copy of the 240
financial analysis.241

       Sec. 4710.26.  A provider shall not impose fees or receive 242
payment for debt settlement services unless all of the following 243
conditions are met:244

       (A) The provider has renegotiated, settled, reduced, or 245
otherwise altered the terms of at least one debt under a debt 246
settlement program.247

       (B) The debtor has made at least one payment to a creditor in 248
furtherance of a settlement with that creditor;249

       (C) The fee for settling each individual debt enrolled in a 250
debt settlement program shall do either of the following:251

       (1) Bear the same proportional relationship to the total fees 252
for settling the entire debt balance as the individual debt amount 253
bears to the entire debt amount. For purposes of division (C)(1) 254
of this section, "individual debt amount" and "entire debt amount" 255
mean the amounts owed at the time the debt was enrolled in the 256

       (2) Represent a percentage of the amount saved as a result of 258
the settlement. The percentage charged shall not change from one 259
individual debt to another. For purposes of division (C)(2) of 260
this section, the "amount saved" means the difference between the 261
amount owed at the time the debt was enrolled in the program and 262
the amount actually paid to satisfy the debt.263

       Sec. 4710.27.  (A) A provider shall not hold a debtor's funds 264
intended for distribution to creditors.265

       (B) Nothing in this section prohibits a provider from 266
requesting or requiring the debtor to place funds in an account to 267
be used for payment of the provider's fees and for payments to 268
creditors in connection with a renegotiation, settlement, 269
reduction, or other alteration of the terms of payment or other 270
terms of debt, provided that all of the following conditions are 271

       (1) The funds are held in a specifically designated account 273
at a financial institution.274

       (2) The debtor owns and controls the funds held in the 275
account and is paid accrued interest on the account, if any.276

       (3) The entity administering the account is not owned or 277
controlled by, or an affiliate of, the provider.278

       (4) The entity administering the account does not give or 279
accept any money or other compensation in exchange for referrals 280
of business by the provider.281

       (5) The debtor may terminate the debt settlement services 282
agreement at any time without penalty, and must receive all funds 283
in the account, other than funds earned by the provider in 284
accordance with sections 4710.20 to 4710.32 of the Revised Code, 285
within seven business days after the debtor's request.286

       Sec. 4710.28.  If a provider enters into a debt settlement 287
services agreement without complying with sections 4710.20 to 288
4710.32 of the Revised Code, the debtor may void the agreement.289

       Sec. 4710.29.  (A) The superintendent of financial 290
institutions may investigate an alleged failure to comply with any 291
provision of sections 4710.20 to 4710.32 of the Revised Code or 292
any complaints concerning such a failure.293

       (B) As often as the superintendent considers it necessary, 294
the superintendent may investigate and examine, in or outside this 295
state, the activities and the books, accounts, papers, records, 296
and other documents of a provider or of any person to which a 297
provider has delegated its obligations under an agreement or under 298
sections 4710.20 to 4710.32 of the Revised Code. In connection 299
with the investigation, the superintendent may charge the provider 300
the reasonable expenses necessarily incurred to conduct the 301

       (C) In conducting any investigation pursuant to this section, 303
the superintendent may compel, by subpoena, witnesses to testify 304
in relation to any matter over which the superintendent has 305
jurisdiction and may require the production of any book, account, 306
paper, record, or other document pertaining to that matter. If a 307
person fails to file any statement or report, obey any subpoena, 308
give testimony, produce any book, account, paper, record, or other 309
document as required by a subpoena, or permit photocopying of any 310
book, account, paper, record, or other document subpoenaed, the 311
court of common pleas of any county in this state, upon 312
application made to it by the superintendent, shall compel 313
obedience by attachment proceedings for contempt, as in the case 314
of disobedience of the requirements of a subpoena issued from the 315
court or a refusal to testify therein.316

       (D) Examination or investigation information that identifies 317
debtors who have debt settlement services agreements with a 318
provider shall not be disclosed to the public.319

       Sec. 4710.30.  If the superintendent of financial 320
institutions determines that a person is engaged in or is believed 321
to be engaged in activities that may constitute a failure to 322
comply with any provision of sections 4710.20 to 4710.32 of the 323
Revised Code, the superintendent, after notice and a hearing 324
conducted in accordance with Chapter 119. of the Revised Code, may 325
do any of the following:326

       (A) Issue a cease and desist order. Such an order shall be 327
enforceable in the court of common pleas.328

       (B) Seek and obtain civil penalties in an amount not to 329
exceed one thousand dollars for each failure to comply.330

       (C) Order the person to correct or remedy the conditions 331
resulting from the failure to comply, including by making 332
restitution. Such an order shall be enforceable in the court of 333
common pleas.334

       Sec. 4710.31.  Any violation of sections 4710.20 to 4710.32 335
of the Revised Code is deemed an unfair or deceptive act or 336
practice in violation of section 1345.02 of the Revised Code. A 337
debtor injured by such a violation has a cause of action and is 338
entitled to the same relief available to a consumer under section 339
1345.09 of the Revised Code, and all powers and remedies available 340
to the attorney general to enforce sections 1345.01 to 1345.13 of 341
the Revised Code are available to the attorney general to enforce 342
sections 4710.20 to 4710.32 of the Revised Code.343

       Sec. 4710.32.  Sections 4710.20 to 4710.31 of the Revised 344
Code modify, limit, and supersede the federal "Electronic 345
Signatures in Global and National Commerce Act," 114 Stat. 464, 15 346
U.S.C. 7001 et seq., as amended, but do not modify, limit, or 347
supersede section 101(c) of that act or authorize electronic 348
delivery of any of the notices described in section 103(b) of that 349

       Section 2.  That existing sections 4710.01 and 4710.03 of the 351
Revised Code are hereby repealed.352