HLS 13RS-219 ORIGINAL
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Regular Session, 2013
HOUSE BILL NO. 567
BY REPRESENTATIVE PONTI
Prefiled pursuant to Article III, Section 2(A)(4)(b)(i) of the Constitution of Louisiana.
FINANCIAL PLANNING: Provides relative to debt relief services
AN ACT1
To enact Chapter 13-C of Title 51 of the Louisiana Revised Statutes of 1950, to be2
comprised of R.S. 51:1450.1 through 1450.15, and to repeal R. S. 14:331 and R.S.3
37:2581 through 2600, relative to debt management and debt settlement services; to4
provide for definitions; to provide for registration, bonds and fees; to provide for5
debt relief services; to provide for termination of services; to provide for prohibited6
activities; to provide for notification requirements; to provide exceptions; to provide7
for rules and regulations; to provide for violations, enforcement and penalties; and8
to provide for related matters.9
Be it enacted by the Legislature of Louisiana:10
Section 1. Chapter 13-C of Title 51 of the Louisiana Revised Statutes of 1950,11
comprised of R.S. 51:1450.1 through 1450.15, is hereby enacted to read as follows:12
CHAPTER 13-C. DEBT MANAGEMENT AND DEBT SETTLEMENT SERVI CES13
§1450.1. Definitions.14
As used in this Chapter, the following words shall have the following15
meanings, unless the context clearly indicates otherwise:16
(1) "Affiliate" means any of the following:17
(a) A person that directly controls, is controlled by or is under common18
control with a provider.19 HLS 13RS-219 ORIGINAL
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(b) An officer or director of, or individual performing similar functions with1
respect to a person that directly controls, is controlled by or under common control2
with a provider.3
(c) An officer or director of, or individual performing similar functions with4
respect to the provider.5
(2) "Control" means the right to control ten percent or more of the voting6
power of another person.7
(3) "Debt management plan" means a written agreement or contract between8
a debt relief provider and an individual whereby the provider, in return for payment9
by the individual, will provide debt relief services that contemplate that creditors will10
reduce finance charges or fees for late payment, default, or delinquency.11
(4) "Debt relief provider" or "provider" means a person who provides or12
offers to provide debt relief services for a consideration.13
(5) "Debt relief services" means any program or service represented, directly14
or by implication, to renegotiate, settle, or in any way alter the terms of payment or15
other terms of the debt between an individual and one or more unsecured creditors16
or debt collectors, including but not limited to, a reduction in the balance, interest17
rate, or fees owed by a person to an unsecured creditor or debt collector.18
(6) "Debt settlement plan" means a written agreement or contract between19
a debt relief provider and an individual whereby the provider, in return for payment20
by the individual, will provide debt relief services that contemplate that creditors will21
settle debts for less than the principal amount of debt.22
(7) "Trust account" means an account held by a provider that is all of the23
following:24
(a) Established in an insured financial institution.25
(b) Held separate from any other accounts of a provider.26
(c) Designated as a trust account or other account designated to indicate27
clearly that the funds in the account are not the money of the provider.28 HLS 13RS-219 ORIGINAL
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(d) Used to hold the funds of one or more individuals for disbursement to the1
creditors of the individual or individuals. 2
§1450.2. Registration; bond required; fee3
A. No person shall engage in the business of providing debt relief services4
without having first obtained a registration as a debt relief provider pursuant to this5
Chapter.6
B. An application for registration shall be in the form prescribed by the7
attorney general.8
C. An application for registration as a provider shall be accompanied by all9
of the following:10
(1) A fee not to exceed one thousand five hundred dollars.11
(2) Evidence of a surety bond in the principal sum of fifty thousand or the12
average daily balance of client funds under management for the preceding six13
months, whichever is greater, for the benefit of any individual who is damaged by14
the provider's breach of a contract for the provision of debt relief service or the15
provider's failure to directly or through a third party properly administer funds16
collected by a provider from an individual or disbursed by a provider on an17
individual's behalf. The attorney general may investigate any complaint and make18
claim on a bond for the benefit of an individual or release the bond to an individual19
to make a claim.20
(a) The surety bond shall be issued by a bonding company or insurance21
company authorized to do business in this state and shall be in a form satisfactory to22
the attorney general.23
(b) The bond shall run to and be deposited with the attorney general for the24
use and benefit of the state and of individuals who reside in the state when they agree25
to receive debt relief services from the provider, as their interests may appear,26
payment of which is conditioned upon failure of the provider or its agent to comply27
with the provisions of this Chapter.28 HLS 13RS-219 ORIGINAL
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(3) Proof that the applicant is authorized by the laws of this state to conduct1
business in this state.2
(4) A statement from the applicant declaring as true any material matter3
pursuant to the application of registration.4
§1450.3. Application5
A. The application form shall include, at a minimum, all of the following:6
(1) A statement informing the applicant that a false or dishonest answer to7
a question may be grounds for denial or subsequent suspension or revocation of the8
applicant's registration.9
(2) The applicant's name, principal business address, telephone number, and10
all other business addresses in the state, electronic mail addresses, and internet11
website addresses.12
(3) All names under which the applicant conducts business in the state.13
(4) The address of each location in the state at which the applicant will14
provide debt relief services or a statement that the applicant will have no such15
location.16
(5) A copy of each form of agreement that the applicant will use with17
individuals who reside in the state.18
(6) The schedule of fees and charges that the applicant will use with19
individuals who reside in the state.20
B. An applicant or provider shall notify the attorney general within sixty21
days after a material change in the information provided.22
§1450.4. Certificate of registration; denial23
A. Except as provided in Subsection B of this Section, the attorney general24
shall issue a certificate of registration as a provider to any person that complies with25
the provisions of this Chapter.26
B. The attorney general may deny the issuance of a registration certificate27
for any of the following reasons:28 HLS 13RS-219 ORIGINAL
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(1) The application contains information that is materially erroneous or1
incomplete.2
(2) An officer, director, or owner of the applicant has been convicted of a3
crime or suffered a civil judgment involving dishonesty or the violation of federal4
or state securities laws.5
(3) The application is not accompanied by the fee or the bond required by6
this Chapter.7
C. The attorney general shall approve or deny an initial registration as a8
provider within sixty days after an application is filed. The attorney general may9
extend the sixty-day period for not more than forty-five days. Within seven days10
after denying an application, the attorney general, in writing, shall inform the11
applicant of the reasons for the denial.12
D. If the attorney general denies an application for registration as a provider13
or does not act on an application within the time prescribed in this Section, the14
applicant may appeal the decision of the attorney general pursuant to the15
Administrative Procedure Act.16
E. The certification of registration as a provider issued pursuant to this17
Chapter shall be valid for a one year period.18
§1450.5. Registration renewal19
A. A provider shall obtain a renewal of its registration annually.20
B. The application for renewal of registration as a provider shall be in a form21
prescribed by the attorney general, and shall meet the following criteria:22
(1) Be filed not less than thirty days nor more than sixty days before the23
registration expires.24
(2) Be accompanied by a fee not to exceed one thousand five hundred25
dollars.26
(3) Disclose any changes in the information contained in the provider's27
application for registration or its immediately previous application for renewal, as28
applicable.29 HLS 13RS-219 ORIGINAL
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(4) Provide any other information that the attorney general reasonably1
requires to perform his duties under this Chapter.2
C. If a provider files a timely and complete application for renewal of3
registration, the registration remains effective until the attorney general notifies the4
applicant of a denial and states the reasons for denial.5
D. If the attorney general denies an application for renewal of registration6
as a provider, the applicant, within thirty days after receiving notice of the denial,7
may appeal the attorney general's decision in accordance with the Administrative8
Procedure Act. While the appeal is pending, the applicant shall continue to provide9
debt relief services to individuals with whom it has agreements until, with approval10
of the attorney general, it transfers the agreements to another registered provider.11
§1450.6. Suspension, revocation, or nonrenewal of registration12
The attorney general shall revoke, suspend or deny the renewal of a13
registration on any ground on which he may refuse to grant or renew a registration14
or for a violation of any provision of this Chapter.15
§1450.7. Hearings16
A. No registration shall be denied or revoked except after a hearing thereon.17
The attorney general shall give the applicant or registered provider at least twenty18
days written notice of the time and place of the hearing. The notice shall be by19
registered or certified mail addressed to the principal place of business of such20
applicant or registered provider.21
B. Any order of the attorney general denying or revoking such registration22
shall state the grounds upon which it is based and shall not be effective until twenty23
days after written notice thereof has been sent by registered or certified mail to the24
applicant or provider at such principal place of business.25
§1450.8. Debt relief services26
A. Prior to enrolling an individual in debt relief services, the provider shall27
disclose, in a clear and conspicuous manner, the following material information:28 HLS 13RS-219 ORIGINAL
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(1) A good faith estimate of the amount of time necessary to achieve the1
represented results, and to the extent that the debt relief services may include a2
settlement offer to any of the individual's creditors or debt collectors for less than the3
principal amount of the debt, a good faith estimate of the time by which the provider4
will make a bona fide settlement offer to the individual's creditors, and the cost to the5
individual for providing debt settlement services.6
(2) To the extent that the debt relief services may include a settlement offer7
to any of the individual's creditors or debt collectors, a good faith estimate of the8
amount of money or the percentage of each outstanding debt that the individual shall9
accumulate before the provider will make a bona fide settlement offer to one or more10
of such creditors.11
(3) To the extent that any aspect of the debt relief services relies upon or12
results in the individuals failure to make timely payments to creditors or debt13
collectors, that failure to make such payments will likely adversely affect the14
individual's creditworthiness, may result in the individual being subject to collection15
actions or sued by creditors or debt collectors, and may increase the amount of16
money the individual owes due to the accrual of fees and interests.17
(4) To the extent that the provider of debt settlement services requests or18
requires the individual to place funds in an account at an insured financial institution,19
that the individual owns the funds held in the account, and that the individual may20
withdraw from the debt settlement services at any time without penalty and, if the21
individual withdraws, the individual shall receive all funds in the account, other than22
the funds earned by the provider, as specified in the account agreement between the23
individual and the financial institution.24
(5) To the extent that the provider requests or requires the individual to make25
payments to the provider for the purpose of distributing funds to the individual's26
creditors, such funds shall be held by the provider in trust and deposited within five27
business days into a trust account established by the provider for the purpose of28 HLS 13RS-219 ORIGINAL
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carrying out the objectives of the debt management plan as provided in Subsection1
E of this Section.2
B. Prior to enrolling an individual in a debt relief service, the provider shall:3
(1) Determine that the individual has a reasonable ability to make payments4
under the proposed debt relief plan based on the information provided by the5
individual.6
(2) Provide a separate written document to the individual in a form the7
individual may keep that clearly and conspicuously contains the following8
statements:9
(a) That debt relief services are not suitable for all individuals and that10
individuals may independently seek information about other ways to deal with11
indebtedness, including bankruptcy.12
(b) That any debt relief services may adversely affect the individual's credit13
rating or credit scores.14
(c) That nonpayment of debt may lead creditors to increase finance and other15
charges or undertake collection activity, including litigation.16
(d) That if the debt relief provider is a nonprofit or tax-exempt organization,17
the provider cannot require donations or contributions.18
(e) That if a debt is settled for less than full balance, the reduction may result19
in tax liability.20
(f) That, if applicable, some of the provider's funding may come from21
creditor contributions.22
C. In addition to the requirements in Subsection B of this Section, prior to23
enrolling an individual in a debt management plan, the provider shall:24
(1) Provide individualized counseling and educational information that, at25
a minimum, address the topics of managing household finances, managing credit and26
debt, and budgeting.27 HLS 13RS-219 ORIGINAL
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(2) Prepare an individualized financial analysis and an initial debt relief plan1
for the individual's debts with specific recommendations regarding actions the2
individual should take.3
(3) Establish a reasonable expectation, provided that the individual has4
provided accurate information to the provider, whether each creditor of the5
individual listed in the debt relief plan will accept payment of the individual's debts6
as provided in the initial plan.7
(4) Prepare, with respect to all creditors identified by the individual or8
identified through additional investigation by the debt relief provider, a written list9
which shall be provided to the individual, in a form the individual may keep, of the10
creditors that the provider reasonably expects to participate in the plan.11
D. A provider shall not misrepresent, directly or by implication, any material12
aspect of any debt relief services, including but not limited to the following:13
(1) The amount of money or the percentage of the debt amount that an14
individual may save by using such service.15
(2) The effect of the service on the individual's creditworthiness.16
(3) The effect of the service on collection efforts of the individual's creditors17
or debt collectors.18
(4) The percentage or number of individuals who attain the represented19
results.20
(5) Whether debt relief services are offered or provided by a nonprofit entity.21
E. A debt relief provider who enrolls an individual in a debt management22
plan shall:23
(1) Maintain a separate trust account and deposit in the account all payments24
received from the individual for disbursement to creditors under the plan. All25
disbursements, whether to the individual or to the creditors of the individual, shall26
be made from such account, except that disbursements may be made from a trust27
account to an account established solely for the purpose of making disbursements to28
individuals and creditors.29 HLS 13RS-219 ORIGINAL
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(2) Maintain separate records of account for each individual to whom the1
provider is furnishing services.2
(3) Disburse any funds paid by or on behalf of an individual to creditors of3
the individual within thirty days after receipt of the funds, or earlier if necessary to4
comply with the due dates established by the agreement between the individual and5
the creditor, unless the reasonable payment of one or more of the individual's6
obligations requires that the funds be held for a longer period so as to accumulate a7
sum certain, or where the individual's payment is returned for insufficient funds or8
other reason that makes the withholding of such payments in the net interest of the9
individual.10
(4) Promptly correct any payments that are not made pursuant to a debt11
management plan or that are misdirected as a result of an error by the provider or12
other person in control of a trust account and reimburse the individual for any costs13
or fees imposed by a creditor as a result of the failure to pay or misdirection.14
(5) Reconcile the trust account at least once a month. The reconciliation15
shall compare the cash balance in the account with the sum of the balances in each16
individual's account. If the provider or its designee has more than one trust account,17
the trust accounts shall be individually reconciled. The trust accounts shall be18
subject to disclosure to and examination by the attorney general upon his written19
request.20
F.(1) A debt relief provider providing debt management services may charge21
an initial or set-up fee not to exceed seventy-five dollars and a monthly service fee22
not exceeding the greater of fifteen percent of the payments to be disbursed that23
month or seventy-five dollars per month.24
(2) A debt relief provider providing debt management services shall not25
charge a fee in excess of fifty dollars for financial education materials.26
G.(1) A provider shall not receive payment of any fee or consideration for27
any debt relief services under a debt settlement plan unless and until all of the28
following conditions are satisfied:29 HLS 13RS-219 ORIGINAL
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(a) The provider has maintained separate records of account for each1
individual to whom the provider is furnishing services.2
(b) The provider has renegotiated, settled, reduced, or otherwise altered the3
terms of at least one debt under the debt settlement plan.4
(c) The individual has made at least one payment to a creditor in furtherance5
of a settlement with a creditor.6
(d) The fee or consideration for settling each individual debt enrolled in a7
debt settlement plan shall be either of the following:8
(i) Bear the same proportional relationship to the total fee for settling the9
entire debt balance as the individual debt amount bears to the entire debt amount.10
The individual debt amount and the entire debt amount are amounts owed at the time11
the debt was enrolled in the debt relief service.12
(ii) Be a percentage of the amount saved as a result of the settlement of each13
debt. The percentage charged shall not change from one individual debt to another.14
The amount saved is the difference between the amount owed at the time the debt15
was enrolled in the debt relief service and the amount actually paid to satisfy the16
debt.17
(2) Nothing in this Subsection prohibits the provider of debt settlement18
services from requesting or requiring the individual to place funds in a third party19
account to be used for payment of the provider's fees and for payments to creditors20
or debt collectors in connection with the renegotiation, settlement, reduction, or21
debts included in the settlement plan, provided that all of the following conditions22
are satisfied:23
(a) The funds are held in a specifically designated account at an insured24
financial institution.25
(b) The individual, not the provider, owns and controls the funds held in the26
account and is paid accrued interest on the account, if any.27
(c) The provider does not administer the account and the entity administering28
the account is not owned or controlled by, or an affiliate of, the provider.29 HLS 13RS-219 ORIGINAL
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(d) The entity administering the account does not give or accept any money1
or other compensation in exchange for referrals of business by the provider.2
(e) The individual may withdraw from the debt settlement plan at any time3
without penalty, and shall receive all funds in the third party account, other than4
funds earned by the provider in compliance with this Section, as specified in the5
account agreement between the individual and the financial institution.6
(f) The entity administering a third party account for debt settlement7
purposes shall reconcile the account at least once a month. The reconciliation shall8
compare the cash balance in the account with the sum of the balances in each9
individual's account and the results shall be provided to the individual.10
§1450.9. Termination of debt relief services11
A. An individual enrolled in any debt relief service may terminate the service12
at any time, without penalty or obligation, by giving the debt relief provider notice13
of such in writing.14
B. If a provider is not registered pursuant to the provisions of this Chapter15
when an individual assents to an agreement, the agreement is voidable by the16
individual.17
C. The debt relief provider, no later than seven business days after the18
termination, shall ensure the individual receives all money that the provider or third19
party account administrator received from or on behalf of the individual, other than:20
(1) An amount properly disbursed to a creditor.21
(2) Fees earned pursuant to this Chapter.22
§1450.10. Prohibited activities23
A debt relief provider may not, directly or indirectly:24
(1) Misappropriate or misapply funds held in trust or a third party account.25
(2) Settle a debt on behalf of an individual without the individual's26
agreement to the settlement terms.27
(3) Exercise or attempt to exercise power of attorney after an individual has28
terminated an agreement.29 HLS 13RS-219 ORIGINAL
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(4) Initiate a transfer from an individual's trust or third party account at a1
financial institution unless the transfer is either of the following:2
(a) A return of money to the individual.3
(b) Before termination of an agreement, properly authorized by the4
agreement and the provisions of this Chapter, and for either:5
(i) Payment to one or more creditors pursuant to a plan.6
(ii) Payment of a fee.7
(5) Offer a gift or bonus premium, reward, or other compensation to an8
individual for executing an agreement.9
(6) Offer, pay, or give a gift or bonus, premium, reward, or other10
compensation to a person for referring a prospective customer if the person making11
the referral has a financial interest in the outcome of debt relief services provided to12
the individual.13
(7) Receive a bonus, commission, or other benefit for referring an individual14
to a debt relief provider, except for a sales lead when the person making the referral15
has no financial interest in the outcome of the referred product or service.16
(8) Structure a debt relief plan in a manner that would result in a negative17
amortization of any of an individual's debts, unless a creditor that is owed a18
negatively amortizing debt agrees to refund or waive finance charges and penalties19
upon payment of the principal amount of the debt.20
(9) Compensate its employees on the basis of a formula that incorporates the21
number of individuals the employee induces to enter into agreements.22
(10) Settle a debt or lead an individual to believe that a payment to a creditor23
is in settlement of a debt to the creditor unless the individual receives, at the time he24
agrees to the terms of the settlement, written assurance from the creditor that upon25
receipt of the final payment made pursuant to the terms of the settlement plan that26
the payment will be considered payment in full settlement of the debt.27
(11) Represent to the individual any of the following:28
(a) That the provider will furnish money to pay bills or prevent attachments.29 HLS 13RS-219 ORIGINAL
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(b) That, other than good-faith estimates of the amounts necessary to settle1
debt, payment of a certain amount will permit satisfaction of a certain amount or2
range of indebtedness.3
(c) That participation in a debt relief plan will or may prevent litigation,4
collection activity, garnishment, attachment, repossession, foreclosure, eviction, or5
loss of employment.6
(12) Misrepresent that it is authorized or competent to furnish legal advice7
or perform legal services.8
(13) Represent that it is a not-for-profit entity unless it is organized and9
properly operating as a not for profit under the laws of the state in which it was10
formed or that it is a tax exempt entity, unless it has received certification of tax11
exempt status under Section 501(c)(3) of the United States Internal Revenue Code.12
(14) Take a confession of judgment or power of attorney to confess13
judgment against an individual.14
(15) Advise, encourage, or suggest to the individual not to make a payment15
to creditors under the debt relief plan.16
(16) Purchase a debt or obligation of the individual, either directly or through17
an affiliate.18
(17) Receive from or on behalf of the individual any of the following:19
(a) A promissory note or other negotiable instrument other than a check or20
a demand draft.21
(b) A post dated check or demand draft.22
(18) Lend money or provide credit to the individual, except as a deferral of23
fees at no additional expense to the individual.24
(19) Obtain a mortgage or other security interest in property from any person25
in connection with the services provided to the individual.26
(20) Disclose the identity or identifying information of the individual or the27
identity of the individual's creditors, except for the following:28
(a) As permitted by federal law.29 HLS 13RS-219 ORIGINAL
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(b) Upon proper demand of the attorney general.1
(c) To a creditor of the individual to the extent necessary to secure the2
cooperation of the creditor in a debt relief plan.3
(21) Except as otherwise provided in this Chapter, provide the individual4
with less than the full benefit of a compromise of debt arranged by the provider.5
(22) Charge the individual for or receive compensation for goods or services6
not directly related to debt relief services or educational services concerning personal7
finance. However, offering goods and services which may likely improve the8
individual's financial situation given on a purely voluntary basis is not prohibited.9
(23) Furnish legal advice or perform legal services, unless the person10
furnishing the advice or performing those services for the individual is licensed to11
practice law.12
(24) Other than the fees provided for in this Chapter, a provider may not13
receive a gift or bonus, premium, reward, or other compensation, directly or14
indirectly, for advising, arranging, or assisting an individual in connection with15
obtaining an extension of credit or other service from a lender or service provider,16
except for educational or counseling services required in connection with a17
government sponsored program.18
(25) Unless a person supplies goods, services, or facilities generally and19
supplies them to the provider at a cost no greater than the cost the person generally20
charges to others, a provider may not purchase goods, services, or facilities from the21
person if an employee, or a person that the provider should reasonably know is an22
affiliate of the provider, owns more than ten percent of the person or is an employee23
or affiliate of the person.24
§1450.11. Notification required25
Providers shall notify the attorney general within thirty days of the26
occurrence of any of the following events:27
(1) The provider files for bankruptcy.28
(2) The provider or its affiliate is convicted of a felony.29 HLS 13RS-219 ORIGINAL
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(3) The provider discovers that client funds have been embezzled or1
otherwise stolen.2
§1450.12. Exceptions3
This Chapter shall not apply to:4
(1) Situations involving debt relief services provided by an attorney licensed5
or otherwise authorized to practice law in this state which are incidental to that6
attorney's practice.7
(2) Banks and fiduciaries, if duly authorized and admitted to transact8
business in this state and performing credit and financial service in the regular course9
of their principal business.10
(3) Title insurers and abstract companies, while doing an escrow business.11
(4) Any person acting pursuant to any order or judgment of a court.12
(5) Situations involving debt relief incurred incidentally in connection with13
lawful practice as a certified public accountant.14
(6) Bona fide trade or mercantile associations in the course of arranging15
adjustment of debts with business establishments.16
(7) Employers for their employees.17
(8) Any person who is a creditor of the individual, or an agent of one or more18
creditors of the individual, and whose services in adjusting the individual's debt are19
rendered without cost to the individual.20
§1450.13. Debt relief services free of charge21
Nothing in this Chapter shall be construed to prevent any individual or22
organization from administering a debt relief plan free of charge.23
§1450.14. Rules and regulations24
The attorney general, in accordance with the Administrative Procedure Act,25
may promulgate all rules and regulations necessary to carry out and implement the26
provisions of this Chapter, including but not limited to accreditation and27
certification.28 HLS 13RS-219 ORIGINAL
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§1450.15. Violations; penalties1
A. Violation of any provision of this Chapter shall constitute an unfair trade2
practice under the Unfair Trade Practices and Consumer Protection Law and subject3
violators to all fines and penalties, including but not limited to injunctive relief, civil4
penalties, and criminal fines, contained in the Unfair Trade Practices and Consumer5
Protection Law.6
B. The attorney general may enforce the provisions of this Chapter using all7
rights, authority, remedies, and enforcement relief available under and contained in8
the Unfair Trade Practices and Consumer Protection Law, including but not limited9
to restraining prohibited acts, assurances of voluntary compliance, investigatory and10
subpoena authority, and the use of other civil actions.11
Section 2. R.S. 14:331 and R.S. 37:2581 through 2600 are hereby repealed in their12
entirety.13
Section 3. This Act shall become effective on January 1, 2014.14
DIGEST
The digest printed below was prepared by House Legislative Services. It constitutes no part
of the legislative instrument. The keyword, one-liner, abstract, and digest do not constitute
part of the law or proof or indicia of legislative intent. [R.S. 1:13(B) and 24:177(E)]
Ponti HB No. 567
Abstract: Allows debt management and debt settlement services in the state and provides
for registration and regulation by the office of the attorney general.
Proposed law provides relative to debt relief services as follows:
(1)Defines "affiliate", "control", "debt management plan", "debt relief provider" or
"provider", "debt relief services", "debt settlement plan", and "trust account".
(2)Prohibits anyone from engaging in the business of providing debt relief services
without first being registered by the attorney general. Requires the application to be
accompanied by a fee of $1500, evidence of a surety bond with the principal amount
the greater of $50,000 or the average daily balance of client funds under management
for the preceding 6 mons., proof of authority to conduct business, and a statement
declaring material matter on the application as true.
(3)Requires the application to require at a minimum:
(a)A statement informing the applicant that a false or dishonest answer may be
ground for denial or suspension or revocation.
(b)The applicant's name, business address, telephone number, email address and
internet website address. HLS 13RS-219 ORIGINAL
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are additions.
(c)All names under which applicant conducts business in the state.
(d)The address of each location in the state where debt relief services will be
provided.
(e)A copy of each form of agreement that the applicant will use with clients in
the state.
(f)The schedule of fees and charges that will be used.
(4)Allows the attorney general to deny the issuance of a registration certificate for any
of the following:
(a)The application contains information that is materially erroneous or
incomplete.
(b)An officer, director or owner has been convicted for a crime or has a civil
judgment involving dishonesty or a violation of federal or state securities
law.
(c)The application does not include the required fee or bond.
(5)Requires the attorney general to approve or deny an application within 60 days of
filing, although allows an extension of 45 days. Requires the attorney general to
inform an applicant of denial and reasons for such in writing and within 7 days.
Decisions of the attorney general may be appealed in accordance with the APA.
(6)Provides that registrations are valid for one year and requires annual renewal meeting
the following criteria:
(a)Filed not less than 30 days nor more than 60 days before expiration.
(b)Accompanied by $1500 fee.
(c)Discloses any changes in information in prior registration.
(d)Provides any other information that the attorney general requests.
(7)Requires the attorney general to notify of denial of renewal and reasons for such.
Requires the attorney general to revoke, suspend or deny renewals on any ground on
which he may refuse to grand a registration. Allows for appeals of denial within 30
days and in accordance with the APA. Allows the applicant to continue providing
debt relief services while pending an appeal.
(8)Prohibits the attorney general from denying or revoking registration without a
hearing. Requires at least 20 days written notice of the time and place of the hearing.
Requires the order to state the grounds upon which the denial or revocation was
based.
(9)Requires a provider to disclose the following information prior to enrolling an
individual in debt relief services:
(a)A good faith estimate of the amount of time necessary to achieve the
represented results and the cost of providing the services.
(b)A good faith estimate of the amount of money or percentage of each
outstanding debt that the individual must accumulate before the provider is
able to make a settlement offer to creditors, if the debt relief service may
include a settlement offer to creditors.
(c)That failure to make timely payments to creditors, if any extent of the debt
relief service relies on or results in the individual's failure to make such
payments, will likely adversely affect creditworthiness and may result in
collection actions or suit and may increase the amount of money owed due
to the accrual of fees and interest.
(d)That the individual owns the funds held in an account, if any extent of the
service requires the individual to place funds in an account, and that the HLS 13RS-219 ORIGINAL
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are additions.
individual may withdraw from services at any time without a penalty and that
all funds in the account, minus those earned by the provider, will be returned
to the individual.
(e)That funds held by the provider, if any extent of the service requests or
requires the individual to make payments to the provider for the purpose of
distributing funds to creditors, will be placed in a trust account for that
purpose.
(10)Requires the provider, prior to enrolling an individual in a debt relief service, to:
(a)Determine that the individual has a reasonable ability to make payments
under the proposed plan.
(b)Provide a separate written document to the individual that clearly and
conspicuously states:
(I)That debt relief services are not suitable for all individuals and that
the individual may seek independent information about other ways
to deal with indebtedness.
(ii)That debt relief services may adversely affect credit ratings or scores.
(iii)That nonpayment of debt may lead to increased finance or other
charges or collection activity.
(iv)That if the provider is a nonprofit or tax-exempt organization, the
provider cannot require donations or contributions.
(v)That if a debt is settled for less than full balance, the reduction may
result in tax liability.
(vi)That, if applicable, some of the provider's funding may come from
creditor contributions.
(11)Requires those providing debt management services, prior to enrolling an individual,
to:
(a)Provide individualized counseling and educational information.
(b)Prepare an individualized financial analysis and specific debt relief plan.
(c)Establish a reasonable expectation whether each creditor will accept payment
as provided in the plan.
(d)Prepare a written list provided to the individual of the creditors reasonably
expected to participate in the plan.
(12)Prohibits a provider from misrepresenting any material aspect of any debt relief
service.
(13)Requires a provider who enrolls an individual in a debt management plan to:
(a)Maintain a separate trust account depositing all payments received from the
individual for disbursement to creditors under the plan.
(b)Maintain separate records of account for each individual.
(c)Disburse funds to creditors within 30 days of receipt or earlier if necessary
to comply with the due dates established by agreement with the creditor.
(d)Promptly correct any payments not made or misdirected.
(e)Reconcile trust accounts at least once a month.
(14)Allows a provider providing debt management services to charge a set-up fee not
to exceed $75 and a monthly service fee not exceeding the greater of 15% of the
payments to be disbursed or $75 per month.
(15)Prohibits a provider providing debt settlement services from receiving any fee for
services until all the following are satisfied: HLS 13RS-219 ORIGINAL
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(a)Provider has maintained separate records of account for each individual.
(b)Provider has renegotiated, settled, reduced or altered the terms of at least one
debt under the plan.
(c)Individual has made at least one payment to a creditor in furtherance of a
settlement.
(d)Consideration or fee for settling each individual debt shall either:
(i)Bear the same proportional relationship to the total fee for settling the
entire debt balance as the individual debt amount bears to the entire
debt amount.
(ii)Be a percentage of the amount saved as a result of the settlement of
each debt.
(16)Allows a provider of debt settlement services to place funds in a third party account
to be used for the payment of provider fees and payments to creditors if:
(a)The funds are held in a specifically designated account at an insured financial
institution.
(b)The individual, not the provider, owns and controls the funds in the account
and is paid the accrued interest, if any.
(c)The provider does not administer the account and the entity administering the
account is not owned or controlled by, or an affiliate of, the provider.
(d)The entity administering the account does not give or accept any
compensation in exchange for referrals of business by the provider.
(e)The individual may withdraw from the settlement plan at any time without
penalty and shall receive all funds in the third party account, other than funds
earned by the provider and as specified in the account agreement.
(f)The entity administering the account shall reconcile the account at least once
a month.
(17)Allows the individual enrolled in any debt relief service to terminate the service at
any time without penalty by giving notice to the provider in writing.
(18)Specifies that if an individual assents to an agreement with a provider not registered
as required by this Chapter, the agreement is voidable by the individual. Requires
the provider to, after termination and within 7 days, ensure the individual receives
all money received from or on behalf of the individual other than amounts properly
disbursed to creditors and fees earned as provided.
(19)Prohibits a debt relief provider, directly or indirectly, from:
(a)Misappropriating funds held in trust or third party accounts.
(b)Settling debt on behalf of an individual without his agreement to the
settlement terms.
(c)Exercising or attempting to exercise power of attorney after termination of
an agreement.
(d)Initiating a transfer from a trust or third party account to a financial
institution unless it is a return of money to the individual or, before the
termination, it is for payment to a creditor pursuant to a plan or for payment
of a fee.
(e)Offering a gift or other compensation to an individual for executing an
agreement.
(f)Offering or giving a gift of other compensation to a person for referring a
prospective customer if the person making the referral has a financial interest
in the outcome of the services provided to the individual.
(g)Receiving a bonus, commission, or other benefit for referring an individual,
except for a sales lead when the person making the referral has no financial
interest in the outcome of the services provided. HLS 13RS-219 ORIGINAL
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(h)Structuring a debt relief plan in a manner that would result in a negative
amortization of an individuals debts, unless a creditor agrees to refund or
waive finance charges and penalties upon payment of the principal debt.
(I)Compensating employees on the basis of a formula incorporating the number
of individuals induced to enter into agreements.
(j)Settling a debt unless the individual receives written assurance from the
creditor that upon final payment the debt will be paid in full.
(k)Representing any of the following:
(I)That the provider will furnish money to pay bills or prevent
attachments.
(ii)That the payment of a certain amount will permit satisfaction of a
certain range of indebtedness.
(iii)That participation in a debt relief plan will or may prevent litigation,
collection, garnishment, attachment, repossession, foreclosure,
eviction or loss of employment.
(l)Misrepresenting that it can furnish or perform legal advise or services.
(m)Representing that it is a not-for-profit entity, unless it is such under the US
Internal Revenue Code.
(n)Taking a confession of judgment against an individual.
(o)Advising an individual not to make a payment to creditors under a debt relief
plan.
(p)Purchasing debt or obligations of clients, either directly or through an
affiliate.
(q)Receiving from or on behalf of the individual a promissory note or a post
dated check.
(r)Lending money or providing credit to the individual, except as a deferral of
fees at no additional expense.
(s)Obtaining a mortgage or other security interest.
(t)Disclosing the identity of the individual or his creditors except as permitted
by federal law, upon proper demand by the attorney general, and to a creditor
to the extent necessary for cooperation in the debt relief plan.
(u)Providing the individual with less than the full benefit of a compromise of
debt.
(v)Charging the individual for or receiving compensation for goods or services
not directly related to debt relief or educational services. Allows for the offer
of goods and services that may likely improve the individual's financial
situation if given on a purely voluntary basis.
(w)Furnishing legal advise or performing legal services unless licensed to
practice law.
(x)Receiving, other than allowable fees, compensation directly or indirectly for
assisting an individual in obtaining an extension of credit or other services
from a lender, except for educational or counseling services required in
connection with a government sponsored program.
(y)Purchasing goods or services from an employee or affiliate, unless such
person supplies goods or services generally and supplies them to the provider
at a cost no greater than the cost generally charged to others.
(20)Requires notification to the attorney general within 30 days of any of the following:
(a)The provider files for bankruptcy.
(b)The provider or its affiliate is convicted of a felony.
(c)The provider discovers that client funds have been embezzled or stolen.
(21)Provides the Chapter shall not apply to:
(a)Situations involving debt relief services provided by a licensed attorney
incidental to that practice.
(b)Banks and fiduciaries.
(c)Title insurers and abstract companies. HLS 13RS-219 ORIGINAL
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(d)Persons acting pursuant to a court order.
(e)Situations involving debt relief services provided by a CPA incidental to that
practice.
(f)Bona fide trade or mercantile associations in the course of arranging
adjustment of debt with business establishments.
(g)Employers for their employees.
(h)Any person who is a creditor of the individual adjusting the individual's debt
without cost to the individual.
(22)Allows for any individual or organization to administer a debt relief plan free of
charge.
(23)Allows the attorney general to promulgate rules and regulations pursuant to the APA,
including but not limited to accreditation and certification.
(24)Provides any violation as constituting an unfair trade practice under the Unfair Trade
Practices and Consumer Protection Law and subjects violators to all fines and
penalties contained therein. Allows the attorney general to enforce this Chapter
using all rights, authority, remedies and enforcement relief available and contained
in the Unfair Trace Practices and Consumer Protection Law.
(25)Repeals present law provisions in the criminal statutes prohibiting debt adjusting
when conducted for profit.
(26)Repeals present law provisions regulating financial planning and management
services by the director of occupational standards.
Effective January 1, 2014.
(Adds R.S. 51:1450.1-1450.15; Repeals R. S. 14:331 and R.S. 37:2581-2600)