HF 2500

as introduced - 87th Legislature (2011 - 2012) Posted on 04/18/2012 10:10am

A bill for an act
relating to commerce; changing laws relating to debt settlement services
agreements; amending Minnesota Statutes 2010, sections 332B.06, subdivisions
2, 5, 8; 332B.07, subdivisions 1, 4; 332B.09, subdivision 1; 332B.10; 332B.13,
subdivision 3; repealing Minnesota Statutes 2010, section 332B.09, subdivisions
2, 3.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2010, section 332B.06, subdivision 2, is amended to read:

Subd. 2.

Actions prior to executing a written agreement.

No person may provide
debt settlement services for a debtor or execute a debt settlement services agreement
unless the person first has:

(1) informed the debtor, in writing, that debt settlement is not appropriate for all
debtors and that there are other ways to deal with debt, including using credit counseling
or debt management services, or filing bankruptcy;

(2) prepared in writing and provided to the debtor, in a form the debtor may keep,
an individualized financial analysis of the debtor's financial circumstances, including
income and liabilities, and made a determination supported by the individualized financial
analysis that:

(i) the debt settlement plan proposed for addressing the debt is suitable for the
individual debtor;

(ii) the debtor can reasonably meet the requirements of the proposed debt settlement
services plan; and

(iii) based on the totality of the circumstances, there is a net tangible benefit to the
debtor of entering into the proposed debt settlement services plan; and

(3) provided, on a document separate from any other document, the total amount and
an itemization of fees deleted text begin , including any origination fees, monthly fees, deleted text end and settlement fees
reasonably anticipated to be paid by the debtor over the term of the agreement.

Sec. 2.

Minnesota Statutes 2010, section 332B.06, subdivision 5, is amended to read:

Subd. 5.

Required terms.

(a) Each debt settlement services agreement must contain
on the front page of the agreement, segregated by bold lines from all other information
on the page and disclosed prominently and clearly in bold print, the total amount and an
itemization of fees deleted text begin , including any origination fees, monthly fees, deleted text end and settlement fees
reasonably anticipated to be paid by the debtor over the term of the agreement.

(b) Each debt settlement services agreement must also contain the following:

(1) a prominent statement describing the terms upon which the debtor may cancel
the contract as set forth in section 332B.07;

(2) a detailed description of all services to be performed by the debt settlement
services provider for the debtor;

(3) the debt settlement services provider's refund policy;

(4) the debt settlement services provider's principal business address, which must
not be a post office box, and the name and address of its agent in this state authorized to
receive service of process; and

(5) the name of each creditor the debtor has listed and the aggregate debt owed to
each creditor that will be the subject of settlement.

Sec. 3.

Minnesota Statutes 2010, section 332B.06, subdivision 8, is amended to read:

Subd. 8.

deleted text begin Funds held in trust deleted text end new text begin Holding funds prohibited new text end .

new text begin (a) No debt settlement
services provider shall hold a debtor's funds intended for distribution to creditors.
new text end

new text begin (b) This subdivision does not prohibit requesting or requiring the debtor to place
funds in an account to be used for the debt settlement provider's fees and for payments to
creditors or debt collectors in connection with the renegotiation, settlement, reduction, or
other alteration of the terms of payment or other terms of a debt, provided that:
new text end

new text begin (1) the funds are held in an account at an insured financial institution;
new text end

new text begin (2) the debtor owns the funds held in the account and is paid accrued interest on
the account, if any;
new text end

new text begin (3) the entity administering the account is not owned or controlled by, or in any way
affiliated with, the debt settlement service;
new text end

new text begin (4) the entity administering the account does not give or accept any money or
other compensation in exchange for referrals of business involving the debt settlement
service; and
new text end

new text begin (5) the debtor may withdraw from the debt settlement service at any time without
penalty, and must receive all funds in the account, other than funds paid to the entity
administering the account or earned by the debt settlement service in compliance with
section 332B.07.
new text end

new text begin (c) new text end Debtor funds may be held in trust for the purpose of writing exchange checks for
no longer than 42 days. If the registrant holds debtor funds, the registrant must maintain a
separate trust account, except that the registrant may commingle debtor funds with the
registrant's own funds, in the form of an imprest fund, to the extent necessary to ensure
maintenance of a minimum balance, if the financial institution at which the trust account is
held requires a minimum balance to avoid the assessment of fees or penalties for failure
to maintain a minimum balance.

Sec. 4.

Minnesota Statutes 2010, section 332B.07, subdivision 1, is amended to read:

Subdivision 1.

Debtor's right to cancel.

(a) A debtor has the right to cancel a debt
settlement services agreement without cause at any time upon ten days' written notice
to the debt settlement services provider.

(b) In the event of cancellation, the debt settlement services provider must, within
ten days of the cancellation, notify the debtor's creditors with whom the debt settlement
services provider is or has been, under the terms of the debt settlement agreement, in
communication, of the cancellation and immediately refund all fees paid by the debtor to
the debt settlement services provider that exceed the fees allowed under section 332B.09.

deleted text begin (c) Upon cancellation, the debt settlement services provider must cease collection of
any monthly fees beginning in the month following cancellation.
deleted text end

deleted text begin (d) Notwithstanding paragraph (c), a debt settlement services provider is entitled to
the full amount of the fees provided for in the debt settlement services agreement if the
provider can show that:
deleted text end

deleted text begin (1) the provider obtained a settlement offer from the creditor or creditors in
accordance with the debt settlement services agreement;
deleted text end

deleted text begin (2) the debtor rejected the settlement offer; or
deleted text end

deleted text begin (3) within the period contemplated in the debt settlement services agreement, the
debtor entered into a settlement agreement with the same creditor or creditors for an
amount equal to or lower than the settlement offer obtained by the provider.
deleted text end

Sec. 5.

Minnesota Statutes 2010, section 332B.07, subdivision 4, is amended to read:

Subd. 4.

Debt settlement services provider's right to cancel.

(a) A debt settlement
services provider may cancel a debt settlement services agreement with good cause upon
30 days' written notice to the debtor.

(b) Within ten days after the cancellation, the debt settlement services provider
must notify the debtor's creditors with whom the debt settlement services provider is or
has been, under the terms of the debt settlement services agreement, in communication,
of the cancellation.

deleted text begin (c) Upon cancellation, the debt settlement services provider must cease collection of
any monthly fees beginning in the month following cancellation.
deleted text end

Sec. 6.

Minnesota Statutes 2010, section 332B.09, subdivision 1, is amended to read:

Subdivision 1.

deleted text begin Choice of fee structure deleted text end new text begin Fees permitted new text end .

deleted text begin A debt settlement services
provider may calculate fees on a percentage of debt basis or on a percentage of savings
basis. The fee structure shall be clearly disclosed and explained in the debt settlement
services agreement. deleted text end new text begin A debt settlement provider may not request or receive payment of any
fee or consideration for any debt settlement service until and unless:
new text end

new text begin (1) a debt is renegotiated, settled, reduced, or otherwise altered pursuant to a
settlement agreement, or other such valid contractual agreement executed by the customer;
new text end

new text begin (2) the debtor has made at least one payment pursuant to that settlement agreement,
or other valid contractual agreement between the debtor and the creditor or debt collector;
and
new text end

new text begin (3) to the extent that debts enrolled in a service are renegotiated, settled, reduced, or
otherwise altered individually, the fee or consideration either:
new text end

new text begin (i) bears the same proportional relationship to the total fee for renegotiating, settling,
reducing, or altering the terms of the entire debt balance as the individual debt amount
bears to the entire debt amount. The individual debt amount and the entire debt amount
are those owed at the time the debt was enrolled in the service; or
new text end

new text begin (ii) is 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. The amount saved is the difference between the amount owed at the time the
debt was enrolled in the service and the amount actually paid to satisfy the debt.
new text end

Sec. 7.

Minnesota Statutes 2010, section 332B.10, is amended to read:

332B.10 PROHIBITIONS.

No debt settlement services provider shall:

(1) engage in any activity, act, or omission prohibited under section 332A.14;

(2) promise, guarantee, or directly or indirectly imply, infer, or in any manner
represent that any debt will be settled prior to the presentation to the debtor of an offer
by the creditors participating in the debt settlement services plan to settle new text begin , except as
required by law new text end ;

(3) misrepresent the timing of negotiations with creditors;

(4) imply, infer, or in any manner represent that:

(i) fees, interest, and other charges will not continue to accrue prior to the time
debts are settled;

(ii) wages or bank accounts are not subject to garnishment;

(iii) creditors will not continue to contact the debtor;

(iv) the debtor is not subject to legal action; and

(v) the debtor will not be subject to tax consequences for the portion of any debts
forgiven;

(5) execute a power of attorney or any other agreement, oral or written, express
or implied, that extinguishes or limits the debtor's right at any time to contract or
communicate with any creditor or the creditor's right at any time to communicate with
the debtor;

(6) exercise or attempt to exercise a power of attorney after an individual has
terminated an agreement;

(7) state, imply, infer, or, in any other manner, indicate that entering into a debt
settlement services agreement or settling debts will either have no effect on, or improve,
the debtor's credit, credit rating, and credit score;

(8) challenge a debt without the written consent of the debtor;

(9) make any false or misleading claim regarding a creditor's right to collect a debt;

(10) falsely represent that the debt settlement services provider can negotiate better
settlement terms with a creditor than the debtor alone can negotiate;

(11) provide or offer to provide legal advice or legal services unless the person
providing or offering to provide legal advice is licensed to practice law in the state;

(12) misrepresent that it is authorized or competent to furnish legal advice or
perform legal services; and

(13) 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 from the creditor that the payment is in full settlement of the debt new text begin or part of
a payment plan that upon completion will lead to full settlement of the debt new text end .

Sec. 8.

Minnesota Statutes 2010, section 332B.13, subdivision 3, is amended to read:

Subd. 3.

Injunctive relief.

(a) A debtor may sue a debt settlement services provider
for temporary or permanent injunctive or other appropriate equitable relief to prevent
violations of any provision of this chapter. A court must grant injunctive relief on a
showing that the debt settlement services provider has new text begin materially new text end violated any provision of
this chapter, or in the case of a temporary injunction, on a showing that the debtor is likely
to prevail on allegations that the debt settlement services provider new text begin materially new text end violated any
provision of this chapter.

(b) A debtor may sue a lead generator for temporary or permanent injunctive or other
appropriate equitable relief to prevent violations of section 332B.11. A court must grant
injunctive relief on a showing that the lead generator has violated section 332B.11, or in
the case of a temporary injunction, on a showing that the debtor is likely to prevail on
allegations that the lead generator violated section 332B.11.

Sec. 9. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2010, section 332B.09, subdivisions 2 and 3, new text end new text begin are repealed.
new text end

Sec. 10. new text begin EFFECTIVE DATE.
new text end

new text begin Sections 1 to 9 are effective for debt settlement services agreements entered into on
or after August 1, 2012.
new text end