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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. Definitions14
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 ENGROSSED
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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) "Principal amount of debt" means the amount of debt outstanding at the23
time of enrollment in the debt relief service.24
(8) "Trust account" means an account held by a provider that is all of the25
following:26
(a) Established in an insured financial institution.27
(b) Held separate from any other accounts of a provider.28 HLS 13RS-219 ENGROSSED
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(c) Designated as a trust account or other account designated to indicate1
clearly that the funds in the account are not the money of the provider.2
(d) Used to hold the funds of one or more individuals for disbursement to the3
creditors of the individual or individuals.4
§1450.2. Registration; bond required; fee5
A. No person shall engage in the business of providing debt relief services6
without having first obtained a registration as a debt relief provider pursuant to this7
Chapter.8
B. An application for registration shall be in the form prescribed by the9
attorney general.10
C. An application for registration as a provider shall be accompanied by all11
of the following:12
(1) A fee not to exceed one thousand five hundred dollars.13
(2) Evidence of a surety bond in the principal sum of fifty thousand dollars14
or the average daily balance of client funds under management for the preceding six15
months, whichever is greater, for the benefit of any individual who is damaged by16
the provider's violation of this Chapter or a breach of a contract for the provision of17
debt relief services or the provider's failure to directly or through a third party18
properly administer funds collected by a provider from an individual or disbursed by19
a provider on an individual's behalf. The attorney general may investigate any20
complaint and make claim on a bond for the benefit of an individual or release the21
bond to an individual to make a claim.22
(a) The surety bond shall be issued by a bonding company or insurance23
company authorized to do business in this state and shall be in a form satisfactory to24
the attorney general.25
(b) The bond shall run to and be deposited with the attorney general for the26
use and benefit of the state and of individuals who reside in the state when they agree27
to receive debt relief services from the provider, as their interests may appear,28 HLS 13RS-219 ENGROSSED
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payment of which is conditioned upon failure of the provider or its agent to comply1
with the provisions of this Chapter.2
(3) Proof that the applicant is authorized by the laws of this state to conduct3
business in this state.4
(4) A statement from the applicant declaring as true any material matter5
pursuant to the application of registration.6
§1450.3. Application7
A. The application form shall include, at a minimum, all of the following:8
(1) A statement informing the applicant that a false or dishonest answer to9
a question may be grounds for denial or subsequent suspension or revocation of the10
applicant's registration.11
(2) The applicant's name, principal business address, telephone number, and12
all other business addresses in the state, electronic mail addresses, and Internet13
website addresses.14
(3) All names under which the applicant, or its affiliates, conduct business15
in the state.16
(4) The address of each location in the state at which the applicant will17
provide debt relief services or a statement that the applicant will have no such18
location.19
(5) A copy of each form of agreement that the applicant will use with20
individuals who reside in the state.21
(6) The schedule of fees and charges that the applicant will use with22
individuals who reside in the state.23
B. An applicant or provider shall notify the attorney general within sixty24
days after a material change in the information provided.25
§1450.4. Certificate of registration; denial26
A. Except as provided in Subsection B of this Section, the attorney general27
shall issue a certificate of registration as a provider to any person that complies with28
the provisions of this Chapter.29 HLS 13RS-219 ENGROSSED
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B. The attorney general may deny the issuance of a registration certificate1
for any of the following reasons:2
(1) The application contains information that is materially erroneous or3
incomplete.4
(2) An officer, director, or owner of the applicant has been convicted of a5
crime or suffered a civil judgment involving dishonesty or the violation of federal6
or state securities laws.7
(3) The application is not accompanied by the fee or the bond required by8
this Chapter.9
C. The attorney general shall approve or deny an initial registration as a10
provider within sixty days after an application is filed. The attorney general may11
extend the sixty-day period for not more than forty-five days. Within seven days12
after denying an application, the attorney general, in writing, shall inform the13
applicant of the reasons for the denial.14
D. If the attorney general denies an application for registration as a provider15
or does not act on an application within the time prescribed in this Section, the16
applicant may appeal the decision of the attorney general pursuant to the17
Administrative Procedure Act and R.S. 51:1450.7.18
E. The certification of registration as a provider issued pursuant to this19
Chapter shall be valid for a one-year period.20
§1450.5. Registration renewal21
A. A provider shall obtain a renewal of its registration annually.22
B. The application for renewal of registration as a provider shall be in a form23
prescribed by the attorney general, and shall meet the following criteria:24
(1) Be filed not less than thirty days nor more than sixty days before the25
registration expires.26
(2) Be accompanied by a fee not to exceed one thousand five hundred27
dollars.28 HLS 13RS-219 ENGROSSED
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(3) Disclose any changes in the information contained in the provider's1
application for registration or its immediately previous application for renewal, as2
applicable.3
(4) Provide any other information that the attorney general reasonably4
requires to perform his duties under this Chapter.5
C. If a provider files a timely and complete application for renewal of6
registration, the registration remains effective until the attorney general notifies the7
applicant of a denial and states the reasons for denial.8
D. If the attorney general denies an application for renewal of registration9
as a provider, the applicant, within thirty days after receiving notice of the denial,10
may appeal the attorney general's decision in accordance with the Administrative11
Procedure Act and R.S. 51:1450.7. While the appeal is pending, the applicant shall12
continue to provide debt relief services to individuals with whom it has agreements13
until, with approval of the attorney general, it transfers the agreements to another14
registered provider.15
§1450.6. Suspension, revocation, or nonrenewal of registration16
A. The attorney general may revoke, suspend, or deny the renewal of a17
registration on any ground on which he may refuse to grant or renew a registration18
or for violation of any provision of this Chapter.19
B. Any order of the attorney general denying renewal, suspending or20
revoking such registration shall state the grounds upon which it is based and shall not21
be effective until twenty days after written notice thereof has been sent by registered22
or certified mail to the applicant or provider at its principal place of business and23
such applicant or provider has failed to timely request an adjudicatory hearing in24
writing.25
C. Such notice of order shall also notify the applicant or provider that it has26
twenty days from the date such notice is sent to make a written request to the27
attorney general for an adjudicatory hearing as provided in Chapter 13-B of Title 4928
of the Louisiana Revised Statutes of 1950, R.S. 49:991 et seq.29 HLS 13RS-219 ENGROSSED
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D. The order of the attorney general shall become final if the applicant or1
provider does not make such request for an adjudicatory hearing.2
§1450.7. Hearings3
Upon receipt of a timely request for an appeal or adjudicatory hearing, the4
attorney general shall promptly forward the request to the division of administrative5
law for an adjudication. The division of administrative law shall give the applicant6
or provider at least twenty days written notice of the time and place of the hearing.7
§1450.8. Debt relief services8
A. Prior to enrolling an individual in debt relief services, the provider shall9
disclose, in a clear and conspicuous manner, the following material information:10
(1) A good faith estimate of the amount of time necessary to achieve the11
represented results, and to the extent that the debt relief services may include a12
settlement offer to any of the individual's creditors or debt collectors for less than the13
principal amount of the debt, a good faith estimate of the time by which the provider14
will make a bona fide settlement offer to the individual's creditors included in the15
settlement plan, and the cost to the individual for providing debt settlement services.16
(2) To the extent that the debt relief services may include a settlement offer17
to any of the individual's creditors or debt collectors, a good faith estimate of the18
amount of money or the percentage of each outstanding debt that the individual shall19
need to accumulate before the provider will make a bona fide settlement offer to one20
or more of such creditors.21
(3) To the extent that any aspect of the debt relief services relies upon or22
results in the individuals failure to make timely payments to creditors or debt23
collectors, that failure to make such payments will likely adversely affect the24
individual's creditworthiness, may result in the individual being subject to collection25
actions or sued by creditors or debt collectors, and may increase the amount of26
money the individual owes due to the accrual of fees and interests.27
(4) To the extent that the provider of debt settlement services requests or28
requires the individual to place funds in a third-party administered account at an29 HLS 13RS-219 ENGROSSED
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insured financial institution, that the individual owns the funds held in the account,1
and that the individual may withdraw from the debt settlement services at any time2
without penalty and, if the individual withdraws, the individual shall receive all3
funds in the account, other than the funds earned by the provider, as specified in the4
account agreement between the individual and the financial institution.5
(5) To the extent that the provider requests or requires the individual to make6
payments to the provider for the purpose of distributing funds to the individual's7
creditors, such funds shall be held by the provider in trust and deposited within five8
business days into a trust account established by the provider for the purpose of9
carrying out the objectives of the debt management plan as provided in Subsection10
E of this Section.11
B. Prior to enrolling an individual in a debt relief service, the provider shall:12
(1) Determine that the individual has a reasonable ability to make payments13
under the proposed debt relief plan based on the information provided by the14
individual.15
(2) Provide a separate written document to the individual in a form the16
individual may keep that clearly and conspicuously contains the following17
statements:18
(a) That debt relief services are not suitable for all individuals and that19
individuals may independently seek information about other ways to deal with20
indebtedness, including bankruptcy.21
(b) That any debt relief services may adversely affect the individual's credit22
rating or credit scores.23
(c) That nonpayment of debt may lead creditors to increase finance and other24
charges or undertake collection activity, including litigation.25
(d) That if the debt relief provider is a nonprofit or tax-exempt organization,26
the provider cannot require donations or contributions.27
(e) That if a debt is settled for less than full balance, the reduction may result28
in tax liability.29 HLS 13RS-219 ENGROSSED
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(f) That, if applicable, some of the provider's funding may come from1
creditor contributions.2
C. In addition to the requirements in Subsection B of this Section, prior to3
enrolling an individual in a debt management plan, the provider shall:4
(1) Provide individualized counseling and educational information that, at5
a minimum, address the topics of managing household finances, managing credit and6
debt, and budgeting.7
(2) Prepare an individualized financial analysis and an initial debt relief plan8
for the individual's debts with specific recommendations regarding actions the9
individual should take.10
(3) Establish a reasonable expectation, provided that the individual has11
provided accurate information to the provider, whether each creditor of the12
individual listed in the debt relief plan will accept payment of the individual's debts13
as provided in the initial plan.14
(4) Prepare, with respect to all creditors identified by the individual or15
identified through additional investigation by the debt relief provider, a written list16
which shall be provided to the individual, in a form the individual may keep, of the17
creditors that the provider reasonably expects to participate in the plan.18
D. A provider shall not misrepresent, directly or by implication, any material19
aspect of any debt relief services, including but not limited to the following:20
(1) The amount of money or the percentage of the debt amount that an21
individual may save by using such service.22
(2) The effect of the service on the individual's creditworthiness.23
(3) The effect of the service on collection efforts of the individual's creditors24
or debt collectors.25
(4) The percentage or number of individuals who attain the represented26
results.27
(5) Whether debt relief services are offered or provided by a nonprofit entity.28 HLS 13RS-219 ENGROSSED
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E. A debt relief provider who enrolls an individual in a debt management1
plan shall:2
(1) Maintain a separate trust account and deposit in the account all payments3
received from the individual for disbursement to creditors under the plan. All4
disbursements, whether to the individual or to the creditors of the individual, shall5
be made from such account, except that disbursements may be made from a trust6
account to an account established solely for the purpose of making disbursements to7
individuals and creditors.8
(2) Maintain separate records of account for each individual to whom the9
provider is furnishing services.10
(3) Disburse any funds paid by or on behalf of an individual to creditors of11
the individual within thirty days after receipt of the funds, or earlier if necessary to12
comply with the due dates established by the agreement between the individual and13
the creditor, unless the reasonable payment of one or more of the individual's14
obligations requires that the funds be held for a longer period so as to accumulate a15
sum certain, or where the individual's payment is returned for insufficient funds or16
other reason that makes the withholding of such payments in the net interest of the17
individual.18
(4) Promptly correct any payments that are not made pursuant to a debt19
management plan or that are misdirected as a result of an error by the provider or20
other person in control of a trust account and reimburse the individual for any costs21
or fees imposed by a creditor as a result of the failure to pay or misdirection.22
(5) Reconcile the trust account at least once a month. The reconciliation23
shall compare the cash balance in the account with the sum of the balances in each24
individual's account. If the provider or its designee has more than one trust account,25
the trust accounts shall be individually reconciled. The trust accounts shall be26
subject to disclosure to and examination by the attorney general upon his written27
request.28 HLS 13RS-219 ENGROSSED
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F.(1) A debt relief provider providing debt management services may charge1
an initial or set-up fee not to exceed seventy-five dollars and a monthly service fee2
not exceeding the greater of fifteen percent of the payments to be disbursed that3
month or seventy-five dollars per month.4
(2) A debt relief provider providing debt management services shall not5
charge a fee in excess of fifty dollars for financial education materials.6
G.(1) A provider shall not receive payment of any fee or consideration for7
any debt relief services under a debt settlement plan unless and until all of the8
following conditions are satisfied:9
(a) The provider has maintained separate records of account for each10
individual to whom the provider is furnishing services.11
(b) The provider has renegotiated, settled, reduced, or otherwise altered the12
terms of at least one debt under the debt settlement plan.13
(c) The individual has made at least one payment to a creditor in furtherance14
of a settlement with a creditor.15
(d) The fee or consideration for settling each individual debt enrolled in a16
debt settlement plan shall be either of the following:17
(i) Bear the same proportional relationship to the total fee for settling the18
entire debt balance as the individual debt amount bears to the entire debt amount.19
The individual debt amount and the entire debt amount are amounts owed at the time20
the debt was enrolled in the debt relief service.21
(ii) Be a percentage of the amount saved as a result of the settlement of each22
debt. The percentage charged shall not change from one individual debt to another.23
The amount saved is the difference between the amount owed at the time the debt24
was enrolled in the debt relief service and the amount actually paid to satisfy the25
debt.26
(2) Nothing in this Subsection prohibits the provider of debt settlement27
services from requesting or requiring the individual to place funds in an account28
administered by a third party to be used for payment of the provider's fees and for29 HLS 13RS-219 ENGROSSED
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payments to creditors or debt collectors in connection with the renegotiation,1
settlement, or reduction of debts included in the settlement plan, provided that all of2
the following conditions are satisfied:3
(a) The funds are held in a specifically designated account at an insured4
financial institution.5
(b) The individual, not the provider, owns and controls the funds held in the6
account and is paid accrued interest on the account, if any.7
(c) The provider does not administer the account and the entity administering8
the account is not owned or controlled by, or an affiliate of, the provider.9
(d) The entity administering the account does not give or accept any money10
or other compensation in exchange for referrals of business by the provider.11
(e) The individual may withdraw from the debt settlement plan at any time12
without penalty, and shall receive all funds in the third-party account, other than13
funds earned by the provider in compliance with this Section, as specified in the14
account agreement between the individual and the financial institution.15
(f) The entity administering a third-party account for debt settlement16
purposes shall reconcile the account at least once a month. The reconciliation shall17
compare the cash balance in the account with the sum of the balances in each18
individual's account, and the results shall be provided to the individual.19
§1450.9. Termination of debt relief services20
A. An individual enrolled in any debt relief service may terminate the service21
at any time, without penalty or obligation, by giving the debt relief provider notice22
of such in writing.23
B. If a provider is not registered pursuant to the provisions of this Chapter24
when an individual assents to an agreement, the agreement is voidable by the25
individual.26
C. The debt relief provider, no later than seven business days after the27
termination, shall ensure the individual receives all money that the provider or third-28
party account administrator received from or on behalf of the individual, other than:29 HLS 13RS-219 ENGROSSED
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(1) An amount properly disbursed to a creditor.1
(2) Fees earned pursuant to this Chapter.2
§1450.10. Prohibited activities3
A debt relief provider may not, directly or indirectly:4
(1) Misappropriate or misapply funds held in trust or in a third-party account.5
(2) Settle a debt on behalf of an individual without the individual's6
agreement to the settlement terms.7
(3) Exercise or attempt to exercise power of attorney after an individual has8
terminated an agreement.9
(4) Initiate a transfer from an individual's trust or third-party account at a10
financial institution unless the transfer is either of the following:11
(a) A return of money to the individual.12
(b) Before termination of an agreement, properly authorized by the13
agreement and the provisions of this Chapter, and for either:14
(i) Payment to one or more creditors pursuant to a plan.15
(ii) Payment of a fee.16
(5) Offer a gift or bonus premium, reward, or other compensation to an17
individual for executing an agreement.18
(6) Offer, pay, or give a gift or bonus, premium, reward, or other19
compensation to a person for referring a prospective customer if the person making20
the referral has a financial interest in the outcome of debt relief services provided to21
the individual.22
(7) Receive a bonus, commission, or other benefit for referring an individual23
to a debt relief provider, except for a sales lead when the person making the referral24
has no financial interest in the outcome of the referred product or service.25
(8) Structure a debt relief plan in a manner that would result in a negative26
amortization of any of an individual's debts, unless a creditor that is owed a27
negatively amortizing debt agrees to refund or waive finance charges and penalties28
upon payment of the principal amount of the debt.29 HLS 13RS-219 ENGROSSED
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(9) Compensate its employees on the basis of a formula that incorporates the1
number of individuals the employee induces to enter into agreements.2
(10) Settle a debt or lead an individual to believe that a payment to a creditor3
is in settlement of a debt to the creditor unless the individual receives, at the time he4
agrees to the terms of the settlement, written assurance from the creditor that upon5
receipt of the final payment made pursuant to the terms of the settlement plan that6
the payment will be considered payment in full settlement of the debt.7
(11) Represent to the individual any of the following:8
(a) That the provider will furnish money to pay bills or prevent attachments.9
(b) That, other than good-faith estimates of the amounts necessary to settle10
debt, payment of a certain amount will permit satisfaction of a certain amount or11
range of indebtedness.12
(c) That participation in a debt relief plan will or may prevent litigation,13
collection activity, garnishment, attachment, repossession, foreclosure, eviction, or14
loss of employment.15
(12) Misrepresent that it is authorized or competent to furnish legal advice16
or perform legal services.17
(13) Represent that it is a not-for-profit entity unless it is organized and18
properly operating as a not-for-profit under the laws of the state in which it was19
formed or that it is a tax exempt entity, unless it has received certification of tax20
exempt status under Section 501(c)(3) of the United States Internal Revenue Code.21
(14) Take a confession of judgment or power of attorney to confess22
judgment against an individual.23
(15) Advise, encourage, or suggest to the individual not to make a payment24
to creditors under the debt relief plan.25
(16) Purchase a debt or obligation of the individual, either directly or through26
an affiliate.27
(17) Receive from or on behalf of the individual any of the following:28 HLS 13RS-219 ENGROSSED
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(a) A promissory note or other negotiable instrument other than a check or1
a demand draft.2
(b) A post-dated check or demand draft.3
(18) Lend money or provide credit to the individual, except as a deferral of4
fees at no additional expense to the individual.5
(19) Obtain a mortgage or other security interest in property from any person6
in connection with the services provided to the individual.7
(20) Disclose the identity or identifying information of the individual or the8
identity of the individual's creditors, except for the following:9
(a) As permitted by federal law.10
(b) Upon proper demand of the attorney general.11
(c) To a creditor of the individual to the extent necessary to secure the12
cooperation of the creditor in a debt relief plan.13
(21) Except as otherwise provided in this Chapter, provide the individual14
with less than the full benefit of a compromise of debt arranged by the provider.15
(22) Charge the individual for or receive compensation for goods or services16
not directly related to debt relief services or educational services concerning personal17
finance. However, offering goods and services intended to improve the individual's18
financial situation on a purely optional basis is not prohibited.19
(23) Furnish legal advice or perform legal services, unless the person20
furnishing the advice or performing those services for the individual is licensed to21
practice law in this state.22
(24) Other than the fees provided for in this Chapter, a provider may not23
receive a gift or bonus, premium, reward, or other compensation, directly or24
indirectly, for advising, arranging, or assisting an individual in connection with25
obtaining an extension of credit or other service from a lender or service provider,26
except for educational or counseling services required in connection with a27
government sponsored program.28 HLS 13RS-219 ENGROSSED
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(25) Unless a person supplies goods, services, or facilities generally and1
supplies them to the provider at a cost no greater than the cost the person generally2
charges to others, a provider may not purchase goods, services, or facilities from the3
person if an employee , or a person that the provider should reasonably know is an4
affiliate of the provider, owns more than ten percent of the person or is an employee5
or affiliate of the person.6
§1450.11. Notification required7
Providers shall notify the attorney general within thirty days of the8
occurrence of any of the following events:9
(1) The provider files for bankruptcy.10
(2) The provider or its affiliate is convicted of a felony.11
(3) The provider discovers that client funds have been embezzled or12
otherwise stolen.13
§1450.12. Exceptions14
This Chapter shall not apply to:15
(1) Situations involving debt relief services provided by an attorney licensed16
or otherwise authorized to practice law in this state which are incidental to that17
attorney's practice.18
(2) Banks and fiduciaries, if duly authorized and admitted to transact19
business in this state and performing credit and financial service in the regular course20
of their principal business.21
(3) Title insurers and abstract companies, while doing an escrow business.22
(4) Any person acting pursuant to any order or judgment of a court.23
(5) Situations involving debt relief incurred incidentally in connection with24
lawful practice as a certified public accountant.25
(6) Bona fide trade or mercantile associations in the course of arranging26
adjustment of debts with business establishments.27
(7) Employers for their employees.28 HLS 13RS-219 ENGROSSED
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(8) Any person who is a creditor of the individual, or an agent of one or more1
creditors of the individual, and whose services in adjusting the individual's debt are2
rendered without cost to the individual.3
§1450.13. Debt relief services free of charge4
Nothing in this Chapter shall be construed to prevent any individual or5
organization from administering a debt relief plan free of charge.6
§1450.14. Rules and regulations7
The attorney general, in accordance with the Administrative Procedure Act,8
may promulgate all rules and regulations necessary to carry out and implement the9
provisions of this Chapter, including but not limited to accreditation and10
certification.11
§1450.15. Violations; penalties12
A. Violation of any provision of this Chapter shall constitute an unfair trade13
practice under the Unfair Trade Practices and Consumer Protection Law and subject14
violators to all fines and penalties, including but not limited to injunctive relief, civil15
penalties, and criminal fines, contained in the Unfair Trade Practices and Consumer16
Protection Law.17
B. The attorney general may enforce the provisions of this Chapter using all18
rights, authority, remedies, and enforcement relief available under and contained in19
the Unfair Trade Practices and Consumer Protection Law, including but not limited20
to restraining prohibited acts, assurances of voluntary compliance, investigatory and21
subpoena authority, and the use of other civil actions.22
Section 2. R.S. 14:331 and R.S. 37:2581 through 2600 are hereby repealed in their23
entirety.24
Section 3. This Act shall become effective on January 1, 2014.25 HLS 13RS-219 ENGROSSED
HB NO. 567
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are additions.
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", "principal amount of debt"
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 $1,500, 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 six months, 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, e-mail address
and Internet website address.
(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 seven days.
Decisions of the attorney general may be appealed in accordance with the APA. HLS 13RS-219 ENGROSSED
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(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 $1,500 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 grant a registration. Allows for appeals of denial within 30
days and in accordance with the APA through the division of administrative law.
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
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 nonpaym ent of debt may lead to increased finance or other
charges or collection activity. HLS 13RS-219 ENGROSSED
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(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:
(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. HLS 13RS-219 ENGROSSED
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(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 seven 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.
(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. HLS 13RS-219 ENGROSSED
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(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.
(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 HLS 13RS-219 ENGROSSED
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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 Jan. 1, 2014.
(Adds R.S. 51:1450.1-1450.15; Repeals R. S. 14:331 and R.S. 37:2581-2600)
Summary of Amendments Adopted by House
Committee Amendments Proposed by House Committee on Commerce to the original
bill.
1. Defined "principal amount of debt".
2. Clarified hearing process for appeals and denial of renewals, suspensions and
revocation. Provides for adjudicatory hearings through the division of
administrative law.
3. Made various technical changes.