Amended IN Senate July 15, 2020 Amended IN Senate July 02, 2020 Amended IN Assembly June 04, 2020 Amended IN Assembly May 12, 2020 CALIFORNIA LEGISLATURE 20192020 REGULAR SESSION Assembly Bill No. 2524Introduced by Assembly Member WicksFebruary 19, 2020 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, of the Financial Code, relating to financial institutions. LEGISLATIVE COUNSEL'S DIGESTAB 2524, as amended, Wicks. Proraters. Check Sellers, Bill Payers and Proraters Law: out-of-state activities.(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 and would specify that these provisions apply to persons who solicit money or evidence 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 persons 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. engaging in the business of selling checks, drafts, or money orders, or of receiving money as an agent of an obligor for the purpose of paying bills, invoices, or accounts of the obligor, or accepting, without direct compensation, money for the purpose of forwarding it to others in payment of utility bills, except in certain circumstances. 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 applicants fingerprints for purposes of obtaining national criminal history records from the Federal Bureau of Investigations Criminal Justice Information Services Division.Existing law prohibits the total charges received by a prorater, or any other person for the proraters 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 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 creditors 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 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 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 201920 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 Bill TextThe 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 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 debtors 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.(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 debtors 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 debtors 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 persons 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)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.(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.(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.(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.(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.(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 creditors committee.(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 persons 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.(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 1. Section 12200.1 of the Financial Code is repealed.SEC. 7.SEC. 2. Section 12200.3 of the Financial Code is repealed.
Amended IN Senate July 15, 2020 Amended IN Senate July 02, 2020 Amended IN Assembly June 04, 2020 Amended IN Assembly May 12, 2020 CALIFORNIA LEGISLATURE 20192020 REGULAR SESSION Assembly Bill No. 2524Introduced by Assembly Member WicksFebruary 19, 2020 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, of the Financial Code, relating to financial institutions. LEGISLATIVE COUNSEL'S DIGESTAB 2524, as amended, Wicks. Proraters. Check Sellers, Bill Payers and Proraters Law: out-of-state activities.(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 and would specify that these provisions apply to persons who solicit money or evidence 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 persons 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. engaging in the business of selling checks, drafts, or money orders, or of receiving money as an agent of an obligor for the purpose of paying bills, invoices, or accounts of the obligor, or accepting, without direct compensation, money for the purpose of forwarding it to others in payment of utility bills, except in certain circumstances. 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 applicants fingerprints for purposes of obtaining national criminal history records from the Federal Bureau of Investigations Criminal Justice Information Services Division.Existing law prohibits the total charges received by a prorater, or any other person for the proraters 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 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 creditors 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 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 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 201920 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
Amended IN Senate July 15, 2020 Amended IN Senate July 02, 2020 Amended IN Assembly June 04, 2020 Amended IN Assembly May 12, 2020
Amended IN Senate July 15, 2020
Amended IN Senate July 02, 2020
Amended IN Assembly June 04, 2020
Amended IN Assembly May 12, 2020
CALIFORNIA LEGISLATURE 20192020 REGULAR SESSION
Assembly Bill
No. 2524
Introduced by Assembly Member WicksFebruary 19, 2020
Introduced by Assembly Member Wicks
February 19, 2020
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, of the Financial Code, relating to financial institutions.
LEGISLATIVE COUNSEL'S DIGEST
## LEGISLATIVE COUNSEL'S DIGEST
AB 2524, as amended, Wicks. Proraters. Check Sellers, Bill Payers and Proraters Law: out-of-state activities.
(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 and would specify that these provisions apply to persons who solicit money or evidence 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 persons 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. engaging in the business of selling checks, drafts, or money orders, or of receiving money as an agent of an obligor for the purpose of paying bills, invoices, or accounts of the obligor, or accepting, without direct compensation, money for the purpose of forwarding it to others in payment of utility bills, except in certain circumstances. 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 applicants fingerprints for purposes of obtaining national criminal history records from the Federal Bureau of Investigations Criminal Justice Information Services Division.Existing law prohibits the total charges received by a prorater, or any other person for the proraters 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 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 creditors 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 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 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 201920 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.
(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 and would specify that these provisions apply to persons who solicit money or evidence 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 persons 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. engaging in the business of selling checks, drafts, or money orders, or of receiving money as an agent of an obligor for the purpose of paying bills, invoices, or accounts of the obligor, or accepting, without direct compensation, money for the purpose of forwarding it to others in payment of utility bills, except in certain circumstances. 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 applicants fingerprints for purposes of obtaining national criminal history records from the Federal Bureau of Investigations Criminal Justice Information Services Division.
Existing law prohibits the total charges received by a prorater, or any other person for the proraters 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 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 creditors 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 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 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 201920 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
## 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 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 debtors 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.(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 debtors 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 debtors 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 persons 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)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.(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.(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.(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.(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.(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 creditors committee.(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 persons 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.(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 1. Section 12200.1 of the Financial Code is repealed.SEC. 7.SEC. 2. Section 12200.3 of the Financial Code is repealed.
The people of the State of California do enact as follows:
## The people of the State of California do enact as follows:
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 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.
(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 debtors 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.
(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 debtors 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.
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.
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 debtors debt with the creditor.
This division does not apply to any of the following:
(a)Any person, or the persons 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)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.
(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.
(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.
(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.
(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.
(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 creditors committee.
(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 persons 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.
(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 1. Section 12200.1 of the Financial Code is repealed.
SEC. 6.SECTION 1. Section 12200.1 of the Financial Code is repealed.
### SEC. 6.SECTION 1.
SEC. 7.SEC. 2. Section 12200.3 of the Financial Code is repealed.
SEC. 7.SEC. 2. Section 12200.3 of the Financial Code is repealed.
### SEC. 7.SEC. 2.