82R2133 T
By: Eltife S.B. No. 141
A BILL TO BE ENTITLED
AN ACT
relating to the regulation of debt management services providers;
providing a penalty.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Chapter 394, Finance Code, is amended by adding
Subchapter D to read as follows:
SUBCHAPTER D. UNIFORM DEBT MANAGEMENT SERVICES ACT
Sec. 394.301. SHORT TITLE. This subchapter may be cited as
the Uniform Debt Management Services Act.
Sec. 394.302. DEFINITIONS. In this subchapter:
(1) "Administrator" means the consumer credit
commissioner.
(2) "Affiliate":
(A) with respect to an individual who is a debt
management services provider, means:
(i) the spouse of the individual provider;
(ii) a sibling of the individual provider
or the spouse of a sibling;
(iii) an individual or the spouse of an
individual who is a lineal ancestor or lineal descendant of the
individual provider or the individual provider's spouse;
(iv) an aunt, uncle, great aunt, great
uncle, first cousin, niece, nephew, grandniece, or grandnephew,
whether related by the whole or the half blood or adoption, or the
spouse of any of them; or
(v) any other individual occupying the
residence of the individual provider; and
(B) with respect to an entity, means:
(i) a person that directly or indirectly
controls, is controlled by, or is under common control with the
entity;
(ii) an officer of, or an individual
performing similar functions with respect to, the entity;
(iii) a director of, or an individual
performing similar functions with respect to, the entity;
(iv) subject to adjustment of the dollar
amount pursuant to Section 394.332(f), a person that receives or
received more than $25,000 from the entity in either the current
year or the preceding year or a person that owns more than 10
percent of, or an individual who is employed by or is a director of,
a person that receives or received more than $25,000 from the entity
in either the current year or the preceding year;
(v) an officer or director of, or an
individual performing similar functions with respect to, a person
described in Subparagraph (i);
(vi) the spouse of, or an individual
occupying the residence of, an individual described in
Subparagraphs (i) through (v); or
(vii) an individual who has the
relationship specified in Paragraph (A)(iv) to an individual
provider or the spouse of an individual described in Subparagraphs
(i) through (v).
(3) "Agreement" means an agreement between a provider
and an individual debtor for the performance of debt management
services.
(4) "Bank" means a financial institution or its agent,
including a commercial bank, savings bank, savings and loan
association, credit union, or trust company, engaged in the
business of banking, chartered under federal or state law, and
regulated by a federal or state banking regulatory authority.
(5) "Business address" means the physical location of
a business, including the name and number of a street.
(6) "Certified counselor" means an individual
certified by a training program or certifying organization,
approved by the administrator, that authenticates the competence of
individuals providing education and assistance to debtors in
connection with debt management services in which an agreement
contemplates that creditors will reduce finance charges or fees for
late payment, default, or delinquency.
(7) "Certified debt specialist" means an individual
certified by a training program or certifying organization,
approved by the administrator, that authenticates the competence of
individuals providing education and assistance to debtors in
connection with debt management services in which an agreement
contemplates that creditors will settle debts for less than the
full principal amount of debt owed.
(8) "Concessions" means assent to repayment of a debt
on terms more favorable to an individual than the terms of the
contract between the individual and a creditor.
(9) "Day" means calendar day.
(10) "Debt management services" means services as an
intermediary between an individual and one or more creditors of the
individual for the purpose of obtaining concessions. The term does
not include:
(A) legal services provided in an
attorney-client relationship by an attorney licensed or otherwise
authorized to practice law in this state;
(B) accounting services provided in an
accountant-client relationship by a certified public accountant
licensed to provide accounting services in this state; or
(C) financial planning services provided in a
financial planner-client relationship by a member of a financial
planning profession whose members the finance commission, by rule,
determines are:
(i) licensed by this state;
(ii) subject to a disciplinary mechanism;
(iii) subject to a code of professional
responsibility; and
(iv) subject to a continuing education
requirement.
(11) "Entity" means a person other than an individual.
(12) "Good faith" means honesty in fact and the
observance of reasonable standards of fair dealing.
(13) "Person" means an individual, corporation,
business trust, estate, trust, partnership, limited liability
company, association, joint venture, or any other legal or
commercial entity. The term does not include a public corporation,
government, or governmental subdivision, agency, or
instrumentality.
(14) "Plan" means a program or strategy in which a
provider furnishes debt management services to an individual and
which includes a schedule of payments to be made by or on behalf of
the individual and used to pay debts owed by the individual.
(15) "Principal amount of the debt" means the amount
of a debt at the time of an agreement.
(16) "Provider" means a person that provides, offers
to provide, or agrees to provide debt management services directly
or through others.
(17) "Record" means information that is inscribed on a
tangible medium or that is stored in an electronic or other medium
and is retrievable in perceivable form.
(18) "Settlement fee" means a charge imposed on or
paid by an individual in connection with a creditor's assent to
accept in full satisfaction of a debt an amount less than the
principal amount of the debt.
(19) "Sign" means, with present intent to authenticate
or adopt a record:
(A) to execute or adopt a tangible symbol; or
(B) to attach to or logically associate with the
record an electronic sound, symbol, or process.
(20) "State" means a state of the United States, the
District of Columbia, Puerto Rico, the United States Virgin
Islands, or any territory or insular possession subject to the
jurisdiction of the United States.
(21) "Trust account" means an account held by a
provider that is:
(A) established in an insured bank;
(B) separate from other accounts of the provider
or its designee;
(C) designated as a trust account or other
account designated to indicate that the money in the account is not
the money of the provider or its designee; and
(D) used to hold money of one or more individuals
for disbursement to creditors of the individuals.
Sec. 394.303. APPLICABILITY. (a) This subchapter does not
apply to an agreement with an individual who the provider has no
reason to know resides in this state at the time of the agreement.
(b) This subchapter does not apply to a provider to the
extent that the provider:
(1) provides or agrees to provide debt management,
educational, or counseling services to an individual who the
provider has no reason to know resides in this state at the time the
provider agrees to provide the services; or
(2) receives no compensation for debt management
services from or on behalf of the individuals to whom it provides
the services or from their creditors.
(c) This subchapter does not apply to the following persons
or their employees when the person or the employee is engaged in the
regular course of the person's business or profession:
(1) a judicial officer, a person acting under an order
of a court or an administrative agency, or an assignee for the
benefit of creditors;
(2) a bank;
(3) an affiliate, as defined in Section
394.302(2)(B)(i), of a bank if the affiliate is regulated by a
federal or state banking regulatory authority; or
(4) a title insurer, title insurance agent, escrow
company, or other person that provides bill-paying services if the
provision of debt management services is incidental to the
bill-paying services or a disbursement, closing, or settlement.
Sec. 394.304. REGISTRATION REQUIRED. (a) Except as
otherwise provided in Subsection (b), a provider may not provide
debt management services to an individual who it reasonably should
know resides in this state at the time it agrees to provide the
services, unless the provider is registered under this subchapter.
(b) If a provider is registered under this subchapter,
Subsection (a) does not apply to an employee or agent of the
provider.
(c) The administrator shall maintain and publicize a list of
the names of all registered providers.
Sec. 394.305. APPLICATION FOR REGISTRATION: FORM, FEE, AND
ACCOMPANYING DOCUMENTS. (a) An application for registration as a
provider must be in a form prescribed by the administrator.
(b) Subject to adjustment of dollar amounts pursuant to
Section 394.332(f), an application for an initial registration must
be accompanied by:
(1) the appropriate fees set by the Finance Commission
of Texas in an amount necessary to recover the costs of
administering this subchapter;
(2) the bond required by Section 394.313;
(3) identification of all trust accounts required by
Section 394.322 and an irrevocable consent authorizing the
administrator to review and examine the trust accounts;
(4) evidence of insurance in the amount of $250,000:
(A) against the risks of dishonesty, fraud,
theft, and other misconduct on the part of the applicant or a
director, employee, or agent of the applicant;
(B) issued by an insurance company authorized to
do business in this state and rated at least A or equivalent by a
nationally recognized rating organization approved by the
administrator;
(C) with a deductible not exceeding $5,000;
(D) payable for the benefit of the applicant,
this state, and individuals who are residents of this state, as
their interests may appear; and
(E) not subject to cancellation by the applicant
or the insurer until 60 days' notice after written notice has been
given to the administrator; and
(5) a certificate of authority to do business in this
state, if applicable.
Sec. 394.306. APPLICATION FOR REGISTRATION: REQUIRED
INFORMATION. (a) An application for registration must be signed
under oath and include:
(1) the applicant's name, principal business address
and telephone number, and all other business addresses in this
state, electronic mail addresses, and Internet website addresses;
(2) all names under which the applicant conducts
business;
(3) the address of each location in this state at which
the applicant will provide debt management services or a statement
that the applicant will have no such location;
(4) the name and home address of each officer and
director of the applicant and each person that owns at least 10
percent of the applicant;
(5) identification of every jurisdiction in which,
during the five years immediately preceding the application:
(A) the applicant or any of its officers or
directors has been licensed or registered to provide debt
management services; or
(B) individuals have resided when they received
debt management services from the applicant;
(6) a statement describing, to the extent it is known
or should be known by the applicant, any material civil or criminal
judgment or litigation and any material administrative or
enforcement action by a governmental agency in any jurisdiction
against the applicant, any of its officers, directors, owners, or
agents, or any person who is authorized to have access to the trust
account required by Section 394.322;
(7) subject to Subsection (b), the applicant's
financial statements, reviewed by an independent accountant
licensed to practice accounting under Chapter 901, Occupations
Code, or licensed in the State of the applicant's principal place of
business, for each of the two years immediately preceding the
application or, if it has not been in operation for the two years
preceding the application, for the period of its existence;
(8) evidence of accreditation by an independent
accrediting organization approved by the administrator;
(9) evidence that, within 12 months after initial
employment, each of the applicant's counselors becomes certified as
a certified counselor or certified debt specialist;
(10) a description of the three most commonly used
educational programs that the applicant provides or intends to
provide to individuals who reside in this state and a copy of any
materials used or to be used in those programs;
(11) a description of the applicant's financial
analysis and initial budget plan, including any form or electronic
model, used to evaluate the financial condition of individuals;
(12) a copy of each form of agreement that the
applicant will use with individuals who reside in this state;
(13) the schedule of fees and charges that the
applicant will use with individuals who reside in this state;
(14) at the applicant's expense, the results of a
criminal records check, including fingerprints, conducted within
the immediately preceding 12 months, covering every officer of the
applicant and every employee or agent of the applicant who is
authorized to have access to the trust account required by Section
394.322;
(15) the names and addresses of all employers of each
director during the 10 years immediately preceding the application;
(16) a description of any ownership interest of at
least 10 percent by a director, owner, or employee of the applicant
in:
(A) any affiliate of the applicant; or
(B) any entity that provides products or services
to the applicant or any individual relating to the applicant's debt
management services;
(17) if the applicant claims nonprofit or tax-exempt
status, or if the applicant's business practices involve holding,
accessing, or directing the funds of an individual, a statement of
the amount of compensation of the applicant's five most highly
compensated employees for each of the three years immediately
preceding the application or, if it has not been in operation for
the three years preceding the application, for the period of its
existence;
(18) the identity of each director who is an
affiliate, as defined in Section 394.302(2)(A) or (B)(i), (ii),
(iv), (v), (vi), or (vii), of the applicant; and
(19) any other information that the administrator
reasonably requires.
(b) If the applicant claims nonprofit or tax-exempt status,
or if the applicant's business practices involve holding,
accessing, or directing the funds of an individual, the applicant's
financial statements required by Subsection (a)(7) must be audited
by an accountant licensed to practice accounting under Chapter 901,
Occupations Code or licensed in the State of the applicant's
principal place of business.
Sec. 394.307. APPLICATION FOR REGISTRATION: OBLIGATION TO
UPDATE INFORMATION. An applicant or registered provider shall
notify the administrator within 10 days after a change in the
information specified in Section 394.305(b)(4) or Section
394.306(a)(1), (3), (6), (12), or (13).
Sec. 394.308. APPLICATION FOR REGISTRATION: PUBLIC
INFORMATION. Except for the information required by Sections
394.306(a)(7), (14), and (17) and the addresses required by Section
394.306(a)(4), the administrator shall make the information in an
application for registration as a provider available to the public.
Sec. 394.309. CERTIFICATE OF REGISTRATION: ISSUANCE OR
DENIAL. (a) Except as otherwise provided in Subsections (c) and
(d), the administrator shall issue a certificate of registration as
a provider to a person that complies with Sections 394.305 and
394.306.
(b) If an applicant has otherwise complied with Sections
394.305 and 394.306, including a timely effort to obtain the
information required by Section 394.306(a)(14), but the
information has not been received, the administrator may issue a
temporary certificate of registration. The temporary certificate
shall expire not later than 180 days after issuance.
(c) The administrator may deny registration if:
(1) the application contains information that is
materially erroneous or incomplete;
(2) an officer, director, or owner of the applicant
has been convicted of a crime, or suffered a civil judgment,
involving dishonesty or the violation of state or federal
securities laws;
(3) the applicant or any of its officers, directors,
or owners has defaulted in the payment of money collected for
others; or
(4) the administrator finds that the financial
responsibility, experience, character, or general fitness of the
applicant or its owners, directors, employees, or agents does not
warrant belief that the business will be operated in compliance
with this subchapter.
(d) The administrator shall deny registration with respect
to an applicant that claims nonprofit or tax-exempt status if the
applicant's board of directors is not independent of the
applicant's employees and agents.
(e) Subject to adjustment of the dollar amount pursuant to
Section 394.332(f), a board of directors is not independent for
purposes of Subsection (d) if more than one-fourth of its members:
(1) are affiliates of the applicant, as defined in
Section 394.302(2)(A) or (B)(i), (ii), (iv), (v), (vi), or (vii);
or
(2) in the 10 years before initially becoming a
director of the applicant, were employed by or directors of a person
that received from the applicant more than $25,000 in either the
current year or the preceding year.
Sec. 394.310. CERTIFICATE OF REGISTRATION: TIMING.
(a) The administrator shall approve or deny an initial
registration as a provider not later than the 60th day after the
date on which the completed application, including all required
documents and payments, is filed. The administrator shall inform
the applicant in writing of the reasons for the denial.
(b) If the administrator denies an application for
registration as a provider, the applicant may appeal and request a
hearing pursuant to Chapter 2001, Government Code. The applicant
may appeal and request a hearing on the question of the applicant's
qualifications for initial registration as a provider if the
administrator has notified the applicant in a record that the
initial application has been denied. A request for a hearing may
not be made after the 30th day after the date the administrator
mails a notice to the applicant stating that the application has
been denied and stating the reasons for the denial.
(c) A registration as a provider is valid for one year.
Sec. 394.311. RENEWAL OF REGISTRATION. (a) A provider
must obtain a renewal of its registration annually.
(b) An application for renewal of registration as a provider
must be in a form prescribed by the administrator, signed under
oath, and:
(1) be filed not less than 30 days or more than 60 days
before the registration expires;
(2) be accompanied by the fee established by the
Finance Commission of Texas and the bond required by Section
394.313;
(3) subject to Subsection (b-1), contain the matters
required for initial registration as a provider by Sections
394.306(a)(8) and (9) and a financial statement for the applicant's
fiscal year immediately preceding the application;
(4) disclose any changes in the information contained
in the applicant's application for registration or its immediately
previous application for renewal, as applicable;
(5) supply evidence of insurance in an amount equal to
the larger of $250,000 or the highest daily balance in the trust
account required by Section 394.322 during the six-month period
immediately preceding the application:
(A) against risks of dishonesty, fraud, theft,
and other misconduct on the part of the applicant or a director,
employee, or agent of the applicant;
(B) issued by an insurance company authorized to
do business in this state and rated at least A or equivalent by a
nationally recognized rating organization approved by the
administrator;
(C) with a deductible not exceeding $5,000;
(D) payable for the benefit of the applicant,
this state, and individuals who are residents of this state, as
their interests may appear; and
(E) not subject to cancellation by the applicant
or the insurer until 60 days after written notice has been given to
the administrator;
(6) disclose the total amount of money received by the
applicant pursuant to plans during the preceding 12 months from or
on behalf of individuals who reside in this state and the total
amount of money distributed to creditors of those individuals
during that period;
(7) disclose, to the best of the applicant's
knowledge, the gross amount of money accumulated during the
preceding 12 months pursuant to plans by or on behalf of individuals
who reside in this state and with whom the applicant has agreements;
and
(8) provide any other information that the
administrator reasonably requires to perform the administrator's
duties under this section.
(b-1) If the provider claims nonprofit or tax-exempt
status, or if a provider's business practices involve holding,
accessing, or directing the funds of an individual, the provider's
financial statement required by Subsection (b)(3) must be audited
by an accountant licensed to practice accounting under Chapter 901,
Occupations Code or licensed in the State of the applicant's
principal place of business.
(c) Except for the information required by Sections
394.306(a)(7), (14), and (17), the information required by Section
394.306(a)(6) with respect to for-profit entities, and the
addresses required by Section 394.306(a)(4), the administrator
shall make the information in an application for renewal of
registration as a provider available to the public.
(d) If a registered provider files a timely and complete
application for renewal of registration, the registration remains
effective until the administrator, in a record, notifies the
applicant of a denial and states the reasons for the denial.
(d-1) If an application is otherwise complete and the
applicant has made a timely effort to obtain the information
required by Section 394.306(a)(14) but the information has not been
received, the administrator may issue a temporary renewal of
registration. The temporary renewal shall expire not later than
180 days after issuance.
(e) If the administrator denies an application for renewal
of registration as a provider, the applicant, within 30 days after
receiving notice of the denial, may appeal and request a hearing
pursuant to Chapter 2001, Government Code. Subject to Section
394.334, while the appeal is pending the applicant shall continue
to provide debt management services to individuals with whom it has
agreements. If the denial is affirmed, subject to the
administrator's order and Section 394.334, the applicant shall
continue to provide debt management services to individuals with
whom it has agreements until, with the approval of the
administrator, it transfers the agreements to another registered
provider or returns to the individuals all unexpended money that is
under the applicant's control.
Sec. 394.312. REGISTRATION IN ANOTHER STATE. If a provider
holds a license or certificate of registration in another state
authorizing it to provide debt management services, the provider
may submit a copy of that license or certificate and the application
for it instead of an application in the form prescribed by Sections
394.305 and 394.306 or by Section 394.311. The administrator shall
accept the application and the license or certificate from the
other state as an application for registration as a provider or for
renewal of registration as a provider, as appropriate, in this
state if:
(1) the application in the other state contains
information substantially similar to or more comprehensive than
that required in an application submitted in this state;
(2) the applicant provides the information required by
Sections 394.306(a)(1), (3), (10), (12), and (13); and
(3) the applicant, under oath, certifies that the
information contained in the application is current or, to the
extent it is not current, supplements the application to make the
information current.
Sec. 394.313. BOND REQUIRED. (a) Except as otherwise
provided in Section 394.314, a provider that is required to be
registered under this subchapter shall file a surety bond with the
administrator, which must:
(1) be in effect during the period of registration and
for two years after the provider ceases providing debt management
services to individuals in this state; and
(2) run to this state for the benefit of this state and
of individuals who reside in this state when they agree to receive
debt management services from the provider, as their interests may
appear.
(b) Subject to adjustment of the dollar amount pursuant to
Section 394.332(f), a surety bond filed pursuant to Subsection (a)
must:
(1) be in the amount of $50,000 or other larger or
smaller amount that the administrator determines is warranted by
the financial condition and business experience of the provider,
the history of the provider in performing debt management services,
the risk to individuals, and any other factor the administrator
considers appropriate;
(2) be issued by a bonding, surety, or insurance
company authorized to do business in this state and rated at least A
by a nationally recognized rating organization; and
(3) have payment conditioned on noncompliance of the
provider or its agent with this subchapter.
(c) If the principal amount of a surety bond is reduced by
payment of a claim or a judgment, the provider shall immediately
notify the administrator and, within 30 days after notice by the
administrator, file a new or additional surety bond in an amount set
by the administrator. The amount of the new or additional bond must
be at least the amount of the bond immediately before payment of the
claim or judgment. If for any reason a surety terminates a bond,
the provider shall immediately file a new surety bond in the amount
of $50,000 or other amount determined pursuant to Subsection (b).
(d) The administrator or an individual may obtain
satisfaction out of the surety bond procured pursuant to this
section if:
(1) the administrator assesses expenses under Section
394.332(b)(1), issues a final order under Section 394.333(b)(2), or
recovers a final judgment under Section 394.333(b)(4) or (5) or
394.333(e); or
(2) an individual recovers a final judgment pursuant
to Section 394.335(a), 394.335(b), or 394.335(c)(1), (2), or (4).
(e) If claims against a surety bond exceed or are reasonably
expected to exceed the amount of the bond, the administrator, on the
initiative of the administrator or on petition of the surety,
shall, unless the proceeds are adequate to pay all costs,
judgments, and claims, distribute the proceeds in the following
order:
(1) to satisfaction of a final order or judgment under
Section 394.333(b)(2), (4), or (5) or 394.333(e);
(2) to final judgments recovered by individuals
pursuant to Section 394.335(a), 394.335(b), or 394.335(c)(1), (2),
or (4), pro rata;
(3) to claims of individuals established to the
satisfaction of the administrator, pro rata; and
(4) if a final order or judgment is issued under
Section 394.333(b), to the expenses charged pursuant to Section
394.332(b)(1).
Sec. 394.314. BOND REQUIRED; SUBSTITUTE. (a) Instead of
the bond required by Section 394.313, a provider may deliver to the
administrator a substitute provided by this section. The
substitute must be in the amount required by Section 394.313(b)
and, except as otherwise provided in Subdivision (2)(A), payable or
available to this state and to individuals who reside in this state
when they agree to receive debt management services from the
provider, as their interests may appear, if the provider or its
agent does not comply with this subchapter. On satisfying the
requirements of this subsection, a provider may deliver to the
administrator one of the following substitutes:
(1) a certificate of insurance:
(A) issued by an insurance company authorized to
do business in this state and rated at least A or equivalent by a
nationally recognized rating organization approved by the
administrator; and
(B) with no deductible, or, if the provider
supplies a bond in the amount of $5,000, a deductible not exceeding
$5,000; or
(2) with the approval of the administrator:
(A) an irrevocable letter of credit, issued or
confirmed by a bank approved by the administrator, payable on
presentation of a certificate by the administrator stating that the
provider or its agent has not complied with this subchapter; or
(B) bonds or other obligations of the United
States or guaranteed by the United States or bonds or other
obligations of this state or a political subdivision of this state,
to be deposited and maintained with a bank approved by the
administrator for this purpose.
(b) If a provider furnishes a substitute pursuant to
Subsection (a), Sections 394.313(a), (c), (d), and (e) apply to the
substitute.
Sec. 394.315. REQUIREMENT OF GOOD FAITH. A provider shall
act in good faith in all matters under this subchapter.
Sec. 394.316. CUSTOMER SERVICE. A provider that is
required to be registered under this chapter shall maintain a
toll-free communication system, staffed at a level that reasonably
permits an individual to speak to a certified counselor, certified
debt specialist, or customer service representative, as
appropriate, during ordinary business hours.
Sec. 394.317. PREREQUISITES FOR PROVIDING DEBT MANAGEMENT
SERVICES. (a) Before providing debt management services, a
registered provider shall give the individual an itemized list of
goods and services and the charges for each. The list must be clear
and conspicuous, be in a record the individual may keep whether or
not the individual assents to an agreement, and describe the goods
and services the provider offers:
(1) free of additional charge if the individual enters
into an agreement;
(2) for a charge if the individual does not enter into
an agreement; and
(3) for a charge if the individual enters into an
agreement using the following terminology, as applicable, and
format:
Setup fee ___________________________ (dollar amount of fee)
Monthly service fee ___________ (dollar amount of fee or method of
determining amount)
Settlement fee ________ (dollar amount of fee or method of
determining amount)
Goods and services in addition to those provided in connection with
a plan:
______ (item) _____ (dollar amount or method of determining amount)
_____ (item) ______ (dollar amount or method of determining
amount).
(b) A provider may not furnish debt management services
unless the provider, through the services of a certified counselor
or certified debt specialist:
(1) provides the individual with reasonable education
about the management of personal finance;
(2) has prepared a financial analysis; and
(3) if the individual is to make regular periodic
payments to a creditor or provider:
(A) has prepared a plan for the individual;
(B) has made a determination, based on the
provider's analysis of the information provided by the individual
and otherwise available to it, that the plan is suitable for the
individual and the individual will be able to meet the payment
obligations under the plan; and
(C) believes that each creditor of the individual
listed as a participating creditor in the plan will accept payment
of the individual's debts as provided in the plan.
(c) Before an individual assents to an agreement to engage
in a plan, a provider shall:
(1) provide the individual with a copy of the analysis
and plan required by Subsection (b) in a record that identifies the
provider and that the individual may keep whether or not the
individual assents to the agreement; and
(2) inform the individual of the availability, at the
individual's option, of assistance by a toll-free communication
system or in person to discuss the financial analysis and plan
required by Subsection (b).
(d) Before an individual assents to an agreement, the
provider shall inform the individual, in a separate record that the
individual may keep whether or not the individual assents to the
agreement:
(1) of the name and business address of the provider;
(2) that plans are not suitable for all individuals
and the individual may ask the provider about other ways, including
bankruptcy, to deal with indebtedness;
(3) that establishment of a plan may adversely affect
the individual's credit rating or credit scores;
(4) that nonpayment of debt may lead creditors to
increase finance and other charges or undertake collection
activity, including litigation;
(5) unless it is not true, that the provider may
receive compensation from the creditors of the individual; and
(6) that, unless the individual is insolvent, if a
creditor settles for less than the full amount of the debt, the plan
may result in the creation of taxable income to the individual, even
though the individual does not receive any money.
(e) If a provider may receive payments from an individual's
creditors and the plan contemplates that the individual's creditors
will reduce finance charges or fees for late payment, default, or
delinquency, the provider may comply with Subsection (d) by
providing the following disclosure, surrounded by black lines:
IMPORTANT INFORMATION FOR YOU TO CONSIDER
(1) Debt management plans are not right for all individuals, and
you may ask us to provide information about other ways, including
bankruptcy, to deal with your debts.
(2) Using a debt management plan may make it harder for you to
obtain credit.
(3) We may receive compensation for our services from your
creditors.
_______________________________________
Name and business address of provider
(f) If a provider will not receive payments from an
individual's creditors and the plan contemplates that the
individual's creditors will reduce finance charges or fees for late
payment, default, or delinquency, a provider may comply with
Subsection (d) by providing the following disclosure, surrounded by
black lines:
IMPORTANT INFORMATION FOR YOU TO CONSIDER
(1) Debt management plans are not right for all individuals, and
you may ask us to provide information about other ways, including
bankruptcy, to deal with your debts.
(2) Using a debt management plan may make it harder for you to
obtain credit.
______________________________________
Name and business address of provider
(g) If a plan contemplates that creditors will settle debts
for less than the full principal amount of debt owed, a provider may
comply with Subsection (d) by providing the following disclosure,
surrounded by black lines:
IMPORTANT INFORMATION FOR YOU TO CONSIDER
(1) Our program is not right for all individuals, and you may ask
us to provide information about bankruptcy and other ways to deal
with your debts.
(2) Nonpayment of your debts under our program may:
(A) hurt your credit rating or credit scores;
(B) lead your creditors to increase finance and other
charges; and
(C) lead your creditors to undertake activity, including
lawsuits, to collect the debts.
(3) Reduction of debt under our program may result in taxable
income to you, even though you will not actually receive any money.
_________________________________________
Name and business address of provider
Sec. 394.318. COMMUNICATION BY ELECTRONIC OR OTHER MEANS.
(a) In this section:
(1) "Federal act" means the Electronic Signatures in
Global and National Commerce Act, 15 U.S.C. Section 7001 et seq.
(2) "Consumer" means an individual who seeks or
obtains goods or services that are used primarily for personal,
family, or household purposes.
(b) A provider may satisfy the requirements of Section
394.317, 394.319, or 394.327 by means of the Internet or other
electronic means if the provider obtains a consumer's consent in
the manner provided by Section 101(c)(1) of the federal act.
(c) The disclosures and materials required by Sections
394.317, 394.319, and 394.327 shall be presented in a form that is
capable of being accurately reproduced for later reference.
(d) With respect to disclosure by means of an Internet
website, the disclosure of the information required by Section
394.317(d) must appear on one or more screens that:
(1) contain no other information; and
(2) the individual must see before proceeding to
assent to formation of an agreement.
(e) At the time of providing the materials and agreement
required by Sections 394.317(c) and (d), 394.319, and 394.327, a
provider shall inform the individual that on electronic,
telephonic, or written request, it will send the individual a
written copy of the materials, and shall comply with a request as
provided in Subsection (f).
(f) If a provider is requested, before the expiration of 90
days after an agreement is completed or terminated, to send a
written copy of the materials required by Sections 394.317(c) and
(d), or by Section 394.319 or 394.327, the provider shall send them
at no charge within three business days after the request is
received, but the provider need not comply with a request more than
once per calendar month or if it reasonably believes the request is
made for purposes of harassment. If a request is made more than 90
days after an agreement is completed or terminated, the provider
shall send within a reasonable time a written copy of the materials
requested.
(g) A provider that maintains an Internet website shall
disclose on the home page of its website or on a page that is clearly
and conspicuously connected to the home page by a link that clearly
reveals its contents:
(1) its name and all names under which it does
business;
(2) its principal business address, telephone number,
and electronic mail address, if any; and
(3) the names of its principal officers.
(h) Subject to Subsection (i), if a consumer who has
consented to electronic communication in the manner provided by
Section 101 of the federal act withdraws consent as provided in the
federal act, a provider may terminate its agreement with the
consumer.
(i) If a provider wishes to terminate an agreement with a
consumer pursuant to Subsection (h), it shall notify the consumer
that it will terminate the agreement unless the consumer, within 30
days after receiving the notification, consents to electronic
communication in the manner provided in Section 101(c) of the
federal act. If the consumer consents, the provider may terminate
the agreement only as permitted by Section 394.319(a)(6)(F).
Sec. 394.319. FORM AND CONTENTS OF AGREEMENT. (a) An
agreement must:
(1) be in a record;
(2) be dated and signed by the provider and the
individual;
(3) include the name of the individual and the address
where the individual resides;
(4) include the name, business address, and telephone
number of the provider;
(5) be delivered to the individual immediately on
formation of the agreement; and
(6) disclose:
(A) the services to be provided;
(B) the amount, or method of determining the
amount, of all fees, individually itemized, to be paid by the
individual;
(C) the schedule of payments to be made by or on
behalf of the individual, including the amount of each payment, the
date on which each payment is due, and an estimate of the date of the
final payment;
(D) if a plan provides for regular periodic
payments to creditors:
(i) each creditor of the individual to
which payment will be made, the amount owed to each creditor, and
any concessions the provider reasonably believes each creditor will
offer;
(ii) the schedule of expected payments to
each creditor, including the amount of each payment and the date on
which it will be made; and
(iii) each creditor that the provider
believes will not participate in the plan and to which the provider
will not direct payment;
(E) how the provider will comply with its
obligations under Section 394.327;
(F) that the provider may terminate the agreement
for good cause, on return of unexpended money of the individual;
(G) that the individual may cancel the agreement
as provided in Section 394.320;
(H) that the individual may contact the
administrator with any questions or complaints regarding the
provider; and
(I) the address, telephone number, and Internet
address or website of the administrator.
(b) For purposes of Subsection (a)(5), delivery of an
electronic record occurs when it is made available in a format in
which the individual may retrieve, save, and print, and the
individual is notified that it is available.
(c) If the administrator supplies the provider with any
information required under Subsection (a)(6)(I), the provider may
comply with that requirement only by disclosing the information
supplied by the administrator.
(d) An agreement must provide that:
(1) the individual has a right to terminate the
agreement at any time, without penalty or obligation, by giving the
provider written or electronic notice, in which event:
(A) the provider will refund all unexpended money
that the provider or its agent has received from or on behalf of the
individual for the reduction or satisfaction of the individual's
debt;
(B) with respect to an agreement that
contemplates that creditors will settle debts for less than the
principal amount of debt, the provider will refund 65 percent of any
portion of the setup fee that has not been credited against the
settlement fee; and
(B) all powers of attorney granted by the
individual to the provider are revoked and ineffective;
(2) the individual authorizes any bank in which the
provider or its agent has established a trust account to disclose to
the administrator any financial records relating to the trust
account; and
(3) if a plan provides for regular periodic payments
to creditors, the provider will notify the individual within five
days after learning of a creditor's decision to reject or withdraw
from a plan and that this notice will include:
(A) the identity of the creditor; and
(B) the right of the individual to modify or
terminate the agreement.
(e) An agreement may confer on a provider a power of
attorney to settle the individual's debt for not more than 50
percent of the outstanding amount of the debt owed at the time of
settlement. An agreement may not confer a power of attorney to
settle a debt for more than 50 percent of that amount, but may
confer a power of attorney to negotiate with creditors of the
individual on behalf of the individual. An agreement must provide
that the provider will obtain the assent of the individual after a
creditor has assented to a settlement for more than 50 percent of
the outstanding amount of the debt owed at the time of settlement.
(f) An agreement may not:
(1) provide for application of the law of any
jurisdiction other than the United States and this state;
(2) except as permitted by Section 2 of the Federal
Arbitration Act, 9 U.S.C. Section 2, contain a provision that
modifies or limits otherwise available forums or procedural rights,
including the right to trial by jury, that are generally available
to the individual under law other than this subchapter;
(3) contain a provision that restricts the
individual's remedies under this subchapter or law other than this
subchapter; or
(4) contain a provision that:
(A) limits or releases the liability of any
person for not performing the agreement or for violating this
subchapter; or
(B) indemnifies any person for liability arising
under the agreement or this subchapter.
(g) All rights and obligations specified in Subsection (e)
and Section 394.320 exist even if not provided in the agreement. A
provision in an agreement which violates Subsection (d), (e), or
(f) is void.
Sec. 394.320. CANCELLATION OF AGREEMENT; WAIVER. (a) An
individual may cancel an agreement before midnight of the third
business day after the individual assents to it, unless the
agreement does not comply with Section 394.319(b) or Section
394.328, in which event the individual may cancel the agreement
within 30 days after the individual assents to it. To exercise the
right to cancel, the individual must give notice in a record to the
provider. Notice by mail is given when mailed.
(b) An agreement must be accompanied by a form that contains
in bold-faced type, surrounded by bold black lines:
Notice of Right to Cancel
You may cancel this agreement, without any penalty or obligation,
at any time before midnight of the third business day that begins
the day after you agree to it by electronic communication or by
signing it.
To cancel this agreement during this period, send an e-mail to
____________________ [e-mail address of provider] or mail or
deliver a signed, dated copy of this notice, or any other written
notice to ____________________ [name of provider] at
____________________ [address of provider] before midnight on the
third business day after you execute the agreement.
If you cancel this agreement within the three-day period, we will
refund all money you already have paid us.
You also may terminate this agreement at any later time, but we are
not required to refund fees you have paid us.
I cancel this agreement,
__________________________ [Printed name]
__________________________ [Signature]
__________________________ [Date]
(c) If a personal financial emergency necessitates the
disbursement of an individual's money to one or more of the
individual's creditors before the expiration of three days after an
agreement is signed, an individual may waive the right to cancel.
To waive the right, the individual must send or deliver a signed,
dated statement in the individual's own words describing the
circumstances that necessitate a waiver. The waiver must
explicitly waive the right to cancel. A waiver by means of a
standard form record is void.
Sec. 394.321. REQUIRED LANGUAGE. Unless the Finance
Commission of Texas, by rule, provides otherwise, the disclosures
and documents required by this subchapter must be in English. If a
provider communicates with an individual primarily in a language
other than English, the provider must furnish a translation into
the other language of the disclosures and documents required by
this subchapter.
Sec. 394.322. TRUST ACCOUNT. (a) All money paid to a
provider by or on behalf of an individual pursuant to a plan for
distribution to creditors is held in trust. Within two business
days after receipt, the provider shall deposit the money in a trust
account established for the benefit of individuals to whom the
provider is furnishing debt management services.
(b) Money held in trust by a provider is not property of the
provider or its designee. The money is not available to creditors
of the provider or designee, except an individual from whom or on
whose behalf the provider received money, to the extent that the
money has not been disbursed to creditors of the individual.
(c) A provider shall:
(1) maintain separate records of account for each
individual to whom the provider is furnishing debt management
services;
(2) disburse money paid by or on behalf of the
individual to creditors of the individual as disclosed in the
agreement, except that:
(A) the provider may delay payment to the extent
that a payment by the individual is not final; and
(B) if a plan provides for regular periodic
payments to creditors, the disbursement must comply with the due
dates established by each creditor; and
(3) promptly correct any payments that are not made or
that are misdirected as a result of an error by the provider or
other person in control of the trust account and reimburse the
individual for any costs or fees imposed by a creditor as a result
of the failure to pay or misdirection.
(d) A provider may not commingle money in a trust account
established for the benefit of individuals to whom the provider is
furnishing debt management services with money of other persons.
(e) A trust account must at all times have a cash balance
equal to the sum of the balances of each individual's account.
(f) If a provider has established a trust account pursuant
to Subsection (a), the provider shall reconcile the trust account
at least once a month. The reconciliation must compare the cash
balance in the trust account with the sum of the balances in each
individual's account. If the provider or its designee has more than
one trust account, each trust account must be individually
reconciled.
(g) If a provider discovers, or has a reasonable suspicion
of, embezzlement or other unlawful appropriation of money held in
trust, the provider immediately shall notify the administrator by a
method approved by the administrator. Unless the Finance
Commission of Texas by rule provides otherwise, within five days
thereafter, the provider shall give notice to the administrator
describing the remedial action taken or to be taken.
(h) If an individual terminates an agreement or it becomes
reasonably apparent to a provider that a plan has failed, the
provider shall promptly refund to the individual all money paid by
or on behalf of the individual which has not been paid to creditors,
less fees that are payable to the provider under Section 394.323.
(i) Before relocating a trust account from one bank to
another, a provider shall inform the administrator of the name,
business address, and telephone number of the new bank. As soon as
practicable, the provider shall inform the administrator of the
account number of the trust account at the new bank.
Sec. 394.323. FEES AND OTHER CHARGES. (a) A provider may
not impose directly or indirectly a fee or other charge on an
individual or receive money from or on behalf of an individual for
debt management services except as permitted by this section.
(b) A provider may not impose charges or receive payment for
debt management services until the provider and the individual have
signed an agreement that complies with Sections 394.319 and
394.328.
(c) If an individual assents to an agreement, a provider may
not impose a fee or other charge for educational or counseling
services, or the like, except as otherwise provided in this
subsection and Section 394.328(d). The administrator may authorize
a provider to charge a fee based on the nature and extent of the
educational or counseling services furnished by the provider.
(d) Subject to adjustment of dollar amounts pursuant to
Section 394.332(f), fees and other charges must meet the following
requirements:
(1) If an individual assents to a plan that
contemplates that creditors will reduce finance charges or fees for
late payment, default, or delinquency, the provider may charge:
(A) a fee not to exceed $50 for consultation,
obtaining a credit report, setting up an account, and the like; and
(B) a monthly service fee, not to exceed $10
times the number of accounts remaining in a plan at the time the fee
is assessed, but not more than $50 in any month.
(2) If an individual assents to a plan that
contemplates that creditors will settle debts for less than the
principal amount of the debt, the provider may charge:
(A) subject to Section 394.319(d), a fee for
consultation, obtaining a credit report, setting up an account, and
the like, in an amount not to exceed the lesser of $400 or four
percent of the debt in the plan at the inception of the plan; and
(B) a monthly service fee, not to exceed $10
times the number of accounts remaining in the plan at the time the
fee is assessed, but not more than $50 in any month; and
(C) a fee as permitted in subdivision (f).
(3) A provider may not impose or receive fees under
both Subdivisions (1) and (2).
(4) Except as otherwise provided in Section
394.328(d), if an individual does not assent to an agreement, a
provider may receive for educational and counseling services it
provides to the individual a fee not to exceed $100 or, with the
approval of the administrator, a larger amount. The administrator
may approve a fee in an amount greater than $100 if the nature and
extent of the educational and counseling services warrant the
larger fee.
(e) If, before the expiration of 90 days after the
completion or termination of educational or counseling services, an
individual assents to an agreement, the provider shall refund to
the individual any fee paid pursuant to Subsection (d)(4).
(f) Except as otherwise provided in Subsections (c) and (d),
if an agreement contemplates that creditors will settle an
individual's debts for less than the principal amount of the debt,
compensation for services in connection with settling debt may not
exceed one of the following applicable settlement fee limits in
Subdivision (1), (2), or (3) the terms of which shall be clearly
disclosed in the agreement.
(1) With respect to agreements in which a flat fee is
charged based on the overall amount of included debt and collected
in equal payments, the total aggregate amount of fees charged to any
individual under this chapter, including fees charged under
Subsections (d)(2)(A) and (B), may not exceed 17 percent of the
principal amount of debt included in the agreement at the
agreement's inception. The flat fee authorized under this
subchapter shall be assessed in equal monthly payments over not
less than the length of the plan, as estimated at the plan's
inception, unless:
(A) voluntarily accelerated by the individual in
a separate record; and
(B) offers of settlement by creditors have been
obtained on at least half of the outstanding debt included in the
agreement.
(2) With respect to agreements in which fees are
calculated as a percentage of the amount saved by an individual in
addition to fees under Subsections (d)(2)(A) and (B), a settlement
fee may not exceed 30 percent of the excess of the outstanding
amount of each debt over the amount actually paid to the creditor,
as calculated at the time of settlement. Settlement fees
authorized under this subsection shall become billable only as
debts are settled, and the total aggregate amount of fees charged to
any individual under this subchapter, including fees charged under
Subsections (d)(2)(A) and (B), may not exceed 20 percent of the
principal amount of debt included in the agreement at the
agreement's inception.
(3) With respect to agreements in which no fees are
charged or collected until the time a settlement agreement is
reached with a creditor and at least one payment has been made
towards such agreement by the individual, a settlement fee must be a
reasonable amount, the amount or calculation of which must be
disclosed at the time of the inception of the agreement between the
provider and the individual per Sec. 394.319. The fee must:
(i) bear the same proportional relationship
to the total fee for renegotiating, settling, reducing, or altering
the terms of the entire debt balance as the individual debt amount
bears to the entire debt amount based on the time the debt was
enrolled in the service; or
(ii) be a percentage of the amount saved as
a result of the renegotiation, settlement, reduction, or
alteration. The percentage charged cannot change from one
individual debt to another.
(4) A provider may only impose on or receive from any
individual or agreement fees under one of the fee structures listed
in Subdivisions (1), (2) and (3).
(g) Subject to adjustment of the dollar amount pursuant to
Section 394.332(f), if a payment to a provider by an individual
under this subchapter is dishonored, a provider may impose a
reasonable charge on the individual not to exceed the lesser of $25
or the amount permitted by law other than this subchapter.
(h) The finance commission may establish maximum fair and
reasonable fees under this section.
Sec. 394.324. VOLUNTARY CONTRIBUTIONS. A provider may not
solicit a voluntary contribution from an individual or an affiliate
of the individual for any service provided to the individual. A
provider may accept voluntary contributions from an individual but,
until 30 days after completion or termination of a plan, the
aggregate amount of money received from or on behalf of the
individual may not exceed the total amount the provider may charge
the individual under Section 394.323.
Sec. 394.325. VOIDABLE AGREEMENTS. (a) If a provider
imposes a fee or other charge or receives money or other payments
not authorized by Section 394.323 or 394.324, the individual may
void the agreement and recover as provided in Section 394.335.
(b) If a provider is not registered as required by this
subchapter when an individual assents to an agreement, the
agreement is voidable by the individual.
(c) If an individual voids an agreement under Subsection
(b), the provider does not have a claim against the individual for
breach of contract or for restitution.
Sec. 394.326. TERMINATION OF AGREEMENTS. (a) If an
individual who has entered into an agreement fails for 60 days to
make payments required by the agreement, a provider may terminate
the agreement.
(b) If a provider or an individual terminates an agreement,
the provider shall immediately return to the individual:
(1) any money of the individual held in trust for the
benefit of the individual; and
(2) 65 percent of any portion of the setup fee received
pursuant to Section 394.323(d)(2) which has not been credited
against settlement fees.
Sec. 394.327. PERIODIC REPORTS AND RETENTION OF RECORDS.
(a) A provider shall provide the accounting required by Subsection
(b):
(1) on cancellation or termination of an agreement;
and
(2) before cancellation or termination of any
agreement:
(A) at least once each month; and
(B) within five business days after a request by
an individual, but the provider does not need to comply with more
than one request in any calendar month.
(b) A provider, in a record, shall provide each individual
for whom it has established a plan an accounting of the following
information:
(1) the amount of money received from the individual
since the last report;
(2) the amounts and dates of disbursement made on the
individual's behalf, or by the individual on the direction of the
provider, since the last report to each creditor listed in the plan;
(3) the amounts deducted from the amount received from
the individual;
(4) the amount held in reserve; and
(5) if, since the last report, a creditor has agreed to
accept as payment in full an amount less than the principal amount
of the debt owed by the individual:
(A) the total amount and terms of the settlement;
(B) the amount of the debt when the individual
assented to the plan;
(C) the amount of the debt when the creditor
agreed to the settlement; and
(D) the calculation of a settlement fee.
(c) A provider shall maintain records for each individual
for whom it provides debt management services for five years after
the final payment made by the individual and produce a copy of the
records to the individual within a reasonable time after a request
for them. The provider may use electronic or other means of storage
for the records.
Sec. 394.328. PROHIBITED ACTS AND PRACTICES. (a) A
provider may not, directly or indirectly:
(1) misappropriate or misapply money held in trust;
(2) settle a debt on behalf of an individual for more
than 50 percent of the outstanding amount of the debt owed a
creditor unless the individual assents to the settlement after the
creditor has assented;
(3) take a power of attorney that authorizes it to
settle a debt, unless the power of attorney expressly limits the
provider's authority to settle debts for not more than 50 percent of
the actual outstanding balance of the debt owed a creditor;
(4) exercise or attempt to exercise a power of
attorney after an individual has terminated an agreement;
(5) initiate a transfer from an individual's account
at a bank or with another person unless the transfer is:
(A) a return of money to the individual; or
(B) before termination of an agreement, properly
authorized by the agreement and this subchapter, and for:
(i) payment to one or more creditors
pursuant to a plan; or
(ii) payment of a fee;
(6) offer a gift or bonus, premium, reward, or other
compensation to an individual for executing an agreement;
(7) offer, pay, or give a gift or bonus, premium,
reward, or other compensation to a person for referring a
prospective customer, if the person making the referral has a
financial interest in the outcome of debt management services
provided to the customer, unless neither the provider nor the
person making the referral communicates to the prospective customer
the identity of the source of the referral;
(8) receive a bonus, commission, or other benefit for
referring an individual to a person;
(9) structure a plan in a manner that would result in a
negative amortization of any of an individual's debts, unless a
creditor that is owed a negatively amortizing debt agrees to refund
or waive the finance charge on payment of the principal amount of
the debt;
(10) compensate its employees on the basis of a
formula that incorporates the number of individuals the employee
induces to enter into agreements;
(11) settle a debt or lead an individual to believe
that a payment to a creditor is in settlement of a debt to the
creditor unless, at the time of settlement, the individual receives
a certification by the creditor that the payment is in full
settlement of the debt or is part of a payment plan, the terms of
which are included in the certification, that on completion will
lead to full settlement of the debt;
(12) make a representation that:
(A) the provider will furnish money to pay bills
or prevent attachments;
(B) payment of a certain amount will permit
satisfaction of a certain amount or range of indebtedness; or
(C) participation in a plan will or may prevent
litigation, garnishment, attachment, repossession, foreclosure,
eviction, or loss of employment;
(13) misrepresent that it is authorized or competent
to furnish legal advice or perform legal services;
(14) represent in its agreements, disclosures
required by this subchapter, advertisements, or Internet website
that it is:
(A) a nonprofit entity unless it is organized and
properly operating as a nonprofit entity under the laws of the state
in which it was formed; or
(B) a tax-exempt entity unless it has received
certification of tax-exempt status from the Internal Revenue
Service and is properly operating as a nonprofit entity under the
laws of the state in which it was formed;
(15) take a confession of judgment or power of
attorney to confess judgment against an individual; or
(16) employ an unfair, unconscionable, or deceptive
act or practice, including the knowing omission of any material
information.
(b) If a provider furnishes debt management services to an
individual, the provider may not, directly or indirectly or through
an affiliate:
(1) purchase a debt or obligation of the individual;
(2) receive from or on behalf of the individual:
(A) a promissory note or other negotiable
instrument other than a check or a demand draft; or
(B) a postdated check or demand draft;
(3) lend money or provide credit to the individual,
except as a deferral of a settlement fee at no additional expense to
the individual;
(4) obtain a mortgage or other security interest from
any person in connection with the services provided to the
individual;
(5) except as permitted by federal law, disclose the
identity or identifying information of the individual or the
identity of the individual's creditors, except to:
(A) the administrator or the attorney general, on
proper demand;
(B) a creditor of the individual, to the extent
necessary to secure the cooperation of the creditor in a plan; or
(C) the extent necessary to administer the plan;
(6) except as otherwise provided in Section
394.323(f), provide the individual less than the full benefit of a
compromise of a debt arranged by the provider;
(7) charge the individual for or provide credit or
other insurance, coupons for goods or services, membership in a
club, access to computers or the Internet, or any other matter not
directly related to debt management services or educational
services concerning personal finance, except to the extent such
services are expressly authorized by the administrator;
(8) furnish legal advice or perform legal services,
unless the person furnishing that advice to or performing those
services for the individual is licensed to practice law; or
(9) receive compensation for referring, directing, or
negotiating a loan or extension of credit on behalf of the
individual.
(c) This subchapter does not authorize any person to engage
in the practice of law.
(d) A provider may not receive a gift or bonus, premium,
reward, or other compensation, directly or indirectly, for
advising, arranging, or assisting an individual in connection with
obtaining an extension of credit or other service unrelated to debt
management services from a lender or service provider, except for
educational or counseling services required in connection with a
government program or as expressly approved by the administrator.
(e) Unless a person supplies goods, services, or facilities
generally and supplies them to the provider at a cost not greater
than the cost the person generally charges to others, a provider may
not purchase goods, services, or facilities from the person if an
employee or a person that the provider should reasonably know is an
affiliate of the provider:
(1) owns more than 10 percent of the person; or
(2) is an employee or affiliate of the person.
Sec. 394.329. NOTICE OF LITIGATION. Not later than 30 days
after a provider has been served with notice of a civil action for
violation of this subchapter by or on behalf of an individual who
resides in this state at either the time of an agreement or the time
the notice is served, the provider shall notify the administrator
in a record that it has been sued.
Sec. 394.330. ADVERTISING. (a) If the agreements of a
provider contemplate that creditors will reduce finance charges or
fees for late payment, default, or delinquency and the provider
advertises debt management services, it shall disclose, in an
easily comprehensible manner, that using a debt management plan may
make it harder for the individual to obtain credit.
(b) If the agreements of a provider contemplate that
creditors will settle for less than the full principal amount of
debt and the provider advertises debt management services, it shall
disclose, in an easily comprehensible manner, the information
specified in Sections 394.317(d)(3) and (4).
Sec. 394.331. LIABILITY FOR CONDUCT OF OTHER PERSONS. If a
provider delegates any of its duties or obligations under an
agreement or this subchapter to a third-party agent, including an
independent contractor, the provider is liable for the person's
conduct which, if done by the provider, would violate the agreement
or this subchapter.
Sec. 394.332. POWERS OF ADMINISTRATOR. (a) The
administrator may receive complaints, act on its own initiative or
in response to complaints, take action to obtain voluntary
compliance with this subchapter, and seek or provide remedies as
provided in this subchapter or Chapter 14.
(b) The administrator or the administrator's representative
may investigate and examine, in this state or elsewhere, by
subpoena or otherwise, the activities, books, accounts, and records
of a person that provides or offers to provide debt management
services, or a person to whom a provider has delegated its
obligations under an agreement or this subchapter, to determine
compliance with this subchapter. Information that identifies
individuals who have agreements with the provider may not be
disclosed to the public. In connection with the investigation, the
administrator may:
(1) charge the person the reasonable expenses
necessarily incurred to conduct the examination;
(2) require or permit a person to file a statement
under oath as to all the facts and circumstances of a matter to be
investigated or examined; and
(3) seek a court order authorizing seizure from a bank
at which the person maintains a trust account required by Section
394.322, any or all money, books, records, accounts, and other
property of the provider that is in the control of the bank and
relates to individuals who reside in this state.
(c) The Finance Commission of Texas may adopt rules to
implement this subchapter in accordance with Chapter 2001,
Government Code.
(d) The administrator may enter into cooperative
arrangements with any other federal or state agency having
authority over providers and may exchange with any of those
agencies information about a provider, including information
obtained during an examination of the provider.
(e) The Finance Commission of Texas by rule shall establish
reasonable fees to be paid by providers for the expense of
administering this subchapter.
(f) The administrator shall compute and publish the dollar
amounts instead of those specified in Sections 394.302, 394.305,
394.309, 394.313, 394.323, 394.333, and 394.335 to reflect
inflation, as measured by the United States Bureau of Labor
Statistics Consumer Price Index for All Urban Consumers or, if that
index is not available, another index adopted by finance commission
rule. The administrator shall adopt a base year and adjust the
dollar amounts, effective on July 1 of each year, if the change in
the index from the base year, as of December 31 of the preceding
year, is at least 10 percent. The dollar amount must be rounded to
the nearest $100, except that the amounts in Section 394.323 must be
rounded to the nearest dollar.
(g) The administrator shall notify registered providers of
any change in dollar amounts made pursuant to Subsection (f) and
make that information available to the public.
(h) Information obtained under an examination is
confidential.
Sec. 394.333. ADMINISTRATIVE REMEDIES. (a) For purposes
of enforcing this subchapter, the administrator:
(1) has the powers granted to the administrator under
Chapter 14;
(2) may exercise those powers in the same manner as
those powers may be exercised under:
(A) Chapters 14 and 392; and
(B) Subtitle B, Title 4; and
(3) has any authority granted to the administrator by
other law.
(b) The administrator may enforce this subchapter and rules
adopted under this subchapter by taking one or more of the following
actions:
(1) ordering a provider or a director, employee, or
other agent of a provider to cease and desist from any violations;
(2) ordering a provider or a person that has caused a
violation to correct the violation, including making restitution of
money or property to a person aggrieved by a violation;
(3) subject to adjustment of the dollar amount
pursuant to Section 394.332(f), imposing against a provider or a
person that has caused a violation a civil penalty in an amount not
to exceed $10,000 for each violation;
(4) prosecuting a civil action to:
(A) enforce an order; or
(B) obtain restitution or an injunction or other
equitable relief, or both; or
(5) intervening in an action brought under Section
394.335.
(c) Subject to adjustment of the dollar amount pursuant to
Section 394.332(f), if a person violates or knowingly authorizes,
directs, or aids in the violation of a final order issued under
Subsection (b)(1) or (2), the administrator may assess an
administrative penalty in an amount not to exceed $20,000 for each
violation.
(d) The administrator may maintain an action to enforce this
subchapter in any county at the administrator's sole discretion.
(e) The administrator may recover the reasonable costs of
enforcing this subchapter under Subsections (b) and (d), including
attorney's fees based on the hours reasonably expended and the
hourly rates for attorneys of comparable experience in the
community.
(f) In determining the amount of an administrative penalty
to impose under Subsection (b) or (c), the administrator shall
consider:
(1) the seriousness of the violation;
(2) the good faith of the violator;
(3) any previous violations by the violator;
(4) the deleterious effect of the violation on the
public; and
(5) any other factor the administrator considers
relevant to the determination of the penalty.
Sec. 394.334. SUSPENSION, REVOCATION, OR NONRENEWAL OF
REGISTRATION. (a) In this section, "insolvent" means:
(1) having generally ceased to pay debts in the
ordinary course of business other than as a result of a good faith
dispute;
(2) being unable to pay debts as they become due; or
(3) being insolvent within the meaning of federal
bankruptcy law, 11 U.S.C. Section 101 et seq.
(b) The administrator may suspend, revoke, or deny renewal
of a provider's registration if:
(1) a fact or condition exists that, if it had existed
when the registrant applied for registration as a provider, would
have been a reason for denying registration;
(2) the provider has committed a material violation of
this subchapter or a rule or order of the administrator under this
subchapter;
(3) the provider is insolvent;
(4) the provider or an employee or affiliate of the
provider has refused to permit the administrator to make an
examination authorized by this subchapter, failed to comply with
Section 394.332(b)(2) within 15 days after request, or made a
material misrepresentation or omission in complying with Section
394.332(b)(2); or
(5) the provider has not responded within a reasonable
time and in an appropriate manner to communications from the
administrator.
(c) If a provider does not comply with Section 394.322(f) or
if the administrator otherwise finds that the public health or
safety or general welfare requires emergency action, the
administrator may order a summary suspension of the provider's
registration, effective on the date specified in the order.
(d) If the administrator suspends, revokes, or denies the
renewal of the registration of a provider, the administrator may
seek a court order authorizing seizure of any or all of the money in
a trust account required by Section 394.322, books, records,
accounts, and other property of the provider that are located in
this state.
(e) If the administrator suspends or revokes a provider's
registration, the provider may appeal and request a hearing
pursuant to Chapter 2001, Government Code.
Sec. 394.335. PRIVATE ENFORCEMENT. (a) In addition to the
recovery under Subsection (b)(3), if an individual voids an
agreement under Section 394.325(a) or (b), the individual may
recover in a civil action all money paid or deposited by or on
behalf of the individual under the agreement, other than amounts
paid to creditors.
(b) An individual with respect to whom a provider violates
this subchapter or a rule adopted under this subchapter or commits
any unfair or deceptive act may recover in a civil action from the
provider and any third party that caused the violation or committed
the act or practice, not including a provider's officers,
directors, employees, or investors:
(1) actual damages for injury caused by the violation
or conduct;
(2) punitive damages not to exceed three times actual
damages only upon a finding of unconscionable conduct relating to a
violation of this subchapter or a rule adopted under this
subchapter; and
(3) reasonable attorney's fees and costs.
(c) In addition to the remedy available under Subsection
(b), if a provider violates an individual's rights under Section
394.320, the individual may recover in a civil action all money paid
or deposited by or on behalf of the individual under the agreement,
except for amounts paid to creditors.
(d) A provider is not liable under this section for a
violation of this subchapter if the provider proves that the
violation was not intentional and resulted from a good faith error,
notwithstanding the maintenance of reasonable procedures adopted
to avoid the error. An error of legal judgment with respect to a
provider's obligations under this subchapter is not a good faith
error. If, in connection with a violation, the provider has
received more money than authorized by an agreement or this
subchapter, the defense provided by this subsection is not
available unless the provider refunds the excess amount not later
than the seventh calendar day after the date of learning of the
violation.
(e) The administrator shall assist an individual in
enforcing a judgment against the surety bond or other security
provided under Section 394.313 or 394.314.
(f) An administrative penalty or fine under this title or
federal law that is assessed by or agreed to with an administrative
agency or the attorney general shall be considered and applied as a
bar or credit to recovery of further fines, penalties, or enhanced
damages for substantially the same act, practice, or violation in a
suit or other proceeding brought by a private litigant under this
title, the Business & Commerce Code, or other applicable law of this
state. This subsection and Subsection (g) do not apply to a claim
for restitution for unreimbursed actual damages.
(g) A suit or other proceeding by a private litigant does
not affect or restrict any state or federal agency from pursuing a
person for any administrative remedy, including an administrative
penalty. An administrative agency of this state, however, shall
consider as a mitigating factor any relief recovered in a private
suit or proceeding when the agency determines an administrative
remedy.
Sec. 394.336. VIOLATION OF DECEPTIVE TRADE PRACTICES ACT.
If an act or practice of a provider violates both this subchapter
and Chapter 17, Business & Commerce Code, an individual may not
recover under both for the same act or practice.
Sec. 394.337. STATUTE OF LIMITATIONS. (a) An action or
proceeding brought pursuant to Section 394.333(a), (b), or (c) must
be commenced within four years after the conduct that is the basis
of the administrator's complaint.
(b) An action brought under Section 394.335 must be
commenced within two years after the latest of:
(1) the individual's last transmission of money to a
provider;
(2) the individual's last transmission of money to a
creditor at the direction of the provider;
(3) the provider's last disbursement to a creditor of
the individual;
(4) the provider's last accounting to the individual
pursuant to Section 394.327;
(5) the date on which the individual discovered or
reasonably should have discovered the facts giving rise to the
individual's claim; or
(6) termination of actions or proceedings by the
administrator with respect to a violation of this subchapter.
(c) The period prescribed in Subsection (b)(5) is tolled
during any period in which the provider or, if different, the
defendant has materially and willfully misrepresented information
required by this subchapter to be disclosed to the individual, if
the information so misrepresented is material to the establishment
of the liability of the defendant under this subchapter.
Sec. 394.338. UNIFORMITY OF APPLICATION AND CONSTRUCTION.
In applying and construing this subchapter, consideration must be
given to the need to promote uniformity of the law with respect to
the subject matter of this subchapter among states that have
enacted a law substantially similar to this subchapter.
Sec. 394.339. RELATION TO ELECTRONIC SIGNATURES IN GLOBAL
AND NATIONAL COMMERCE ACT. This subchapter modifies, limits, and
supersedes the federal Electronic Signatures in Global and National
Commerce Act (15 U.S.C. Section 7001 et seq.) but does not modify,
limit, or supersede 15 U.S.C. Section 7001(c) or authorize
electronic delivery of any of the notices described in 15 U.S.C.
Section 7003(b).
SECTION 2. Subchapter C, Chapter 394, Finance Code, is
repealed.
SECTION 3. A transaction entered into before the effective
date of this Act and the rights, duties, and interests resulting
from the transaction may be completed, terminated, or enforced as
required or permitted by a law amended, repealed, or modified by
this Act as though the amendment, repeal, or modification had not
occurred.
SECTION 4. This Act takes effect January 1, 2012.