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HF 694

1st Engrossment - 88th Legislature (2013 - 2014) Posted on 05/10/2013 02:09pm

KEY: stricken = removed, old language.
underscored = added, new language.

Bill Text Versions

Engrossments
Introduction Posted on 02/18/2013
1st Engrossment Posted on 04/02/2013

Current Version - 1st Engrossment

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A bill for an act
relating to debt management and debt settlement; clarifying exemption for
attorneys at law; modifying regulation of debt settlement services; amending
Minnesota Statutes 2012, sections 332A.02, subdivision 8, by adding a
subdivision; 332B.02, subdivision 13, by adding a subdivision; 332B.06,
subdivisions 1, 4; 332B.09.

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

Section 1.

Minnesota Statutes 2012, section 332A.02, subdivision 8, is amended to read:


Subd. 8.

Debt management services provider.

"Debt management services
provider" means any person offering or providing debt management services to a debtor
domiciled in this state, regardless of whether or not a fee is charged for the services and
regardless of whether the person maintains a physical presence in the state. This term
includes any person to whom debt management services are delegated, and does not
include services performed by the following when engaged in the regular course of their
respective businesses and professions:

(1) new text beginexempt new text endattorneys at law, escrow agents, accountants, broker-dealers in securities;

(2) state or national banks, credit unions, trust companies, savings associations,
title insurance companies, insurance companies, and all other lending institutions duly
authorized to transact business in Minnesota;

(3) persons who, as employees on a regular salary or wage of an employer not
engaged in the business of debt management, perform credit services for their employer;

(4) public officers acting in their official capacities and persons acting as a debt
management services provider pursuant to court order;

(5) any person while performing services incidental to the dissolution, winding up,
or liquidation of a partnership, corporation, or other business enterprise;

(6) the state, its political subdivisions, public agencies, and their employees;

(7) collection agencies, provided that the services are provided to a creditor;

(8) "qualified organizations" designated as representative payees for purposes of the
Social Security and Supplemental Security Income Representative Payee System and the
federal Omnibus Budget Reconciliation Act of 1990, Public Law 101-508;

(9) accelerated mortgage payment providers. "Accelerated mortgage payment
providers" are persons who, after satisfying the requirements of sections 332.30 to 332.303,
receive funds to make mortgage payments to a lender or lenders, on behalf of mortgagors,
in order to exceed regularly scheduled minimum payment obligations under the terms of
the indebtedness. The term does not include: (i) persons or entities described in clauses (1)
to (8); (ii) mortgage lenders or servicers, industrial loan and thrift companies, or regulated
lenders under chapter 56; or (iii) persons authorized to make loans under section 47.20,
subdivision 1
. For purposes of this clause and sections 332.30 to 332.303, "lender" means
the original lender or that lender's assignee, whichever is the current mortgage holder;

(10) trustees, guardians, and conservators; and

(11) debt settlement services providers.

Sec. 2.

Minnesota Statutes 2012, section 332A.02, is amended by adding a subdivision
to read:


new text begin Subd. 10a. new text end

new text begin Exempt attorney at law. new text end

new text begin "Exempt attorney at law" means an attorney
licensed or otherwise authorized to practice law in this state:
new text end

new text begin (1) whose exclusive or principal practice does not involve the provision of debt
management services; and
new text end

new text begin (2) who does not have a business relationship with a debt management services
provider that involves the provision of debt management services.
new text end

Sec. 3.

Minnesota Statutes 2012, section 332B.02, subdivision 13, is amended to read:


Subd. 13.

Debt settlement services provider.

"Debt settlement services provider"
means any person offering or providing debt settlement services to a debtor domiciled
in this state, regardless of whether or not a fee is charged for the services and regardless
of whether the person maintains a physical presence in the state. The term includes any
person to whom debt settlement services are delegated. The term shall not includenew text begin an
exempt attorney at law and
new text end persons listed in section 332A.02, subdivision 8, clauses deleted text begin(1)
deleted text endnew text begin (2)new text end to (10), or a debt management services provider.

Sec. 4.

Minnesota Statutes 2012, section 332B.02, is amended by adding a subdivision
to read:


new text begin Subd. 13a. new text end

new text begin Exempt attorney at law. new text end

new text begin "Exempt attorney at law" means an attorney
licensed or otherwise authorized to practice law in this state:
new text end

new text begin (1) whose exclusive or principal practice does not involve the provision of debt
settlement services; and
new text end

new text begin (2) who does not have a business relationship with a debt settlement services
provider that involves the provision of debt settlement services.
new text end

Sec. 5.

Minnesota Statutes 2012, section 332B.06, subdivision 1, is amended to read:


Subdivision 1.

Written agreement required.

(a) A debt settlement services
provider may not perform, or impose any charges or receive any payment for, any debt
settlement services until the provider and the debtor have executed a debt settlement
services agreement that contains all terms of the agreement between the debt settlement
services provider and the debtor, and the provider complies with all the applicable
requirements of this chapter.

(b) A debt settlement services agreement must:

(1) be in writing, dated, and signed by the debt settlement services provider and
the debtor;

(2) conspicuously indicate whether or not the debt settlement services provider is
registered with the Minnesota Department of Commerce and include any registration
number; and

(3) be written in the debtor's primary language if the debt settlement services provider
advertises in that languagenew text begin, or in the language in which the agreement was negotiated,
regardless of whether the debt settlement services provider advertises in that language
new text end.

(c) The registrant must furnish the debtor with a copy of the signed contract upon
execution.

Sec. 6.

Minnesota Statutes 2012, section 332B.06, subdivision 4, is amended to read:


Subd. 4.

Disclosures.

(a) A person offering to provide or providing debt settlement
services must disclose both orally and in writing whether or not the person is registered
with the Minnesota Department of Commerce and any registration number.

(b) No person may provide debt settlement services unless the person first has
provided, both orally and in writing, on a single sheet of paper, separate from any other
document or writing, the following verbatim notice:

CAUTION

We CANNOT GUARANTEE that you will successfully reduce or eliminate your
debt.

If you stop paying your creditors, there is a strong likelihood some or all of the
following may happen:

? YOUR WAGES OR BANK ACCOUNT MAY STILL BE GARNISHED.

? YOU MAY STILL BE CONTACTED BY CREDITORS.

? YOU MAY STILL BE SUED BY CREDITORS for the money you owe.

? FEES, INTEREST, AND OTHER CHARGES WILL CONTINUE TO MOUNT
UP DURING THE (INSERT NUMBER) MONTHS THIS PLAN IS IN EFFECT.

Even if we do settle your debt, YOU MAY STILL HAVE TO PAY TAXES on
the amount forgiven.

Your credit rating may be adversely affected.

(c) The heading, "CAUTION," must be in bold, underlined, 28-point type, and the
remaining text must be in 14-point type, with a double space between each statement.

(d) The disclosures and notices required under this subdivision must be provided in
the debtor's primary language if the debt settlement services provider advertises in that
languagenew text begin, or in the language in which the agreement was negotiated, regardless of whether
the debt settlement services provider advertises in that language
new text end.

Sec. 7.

Minnesota Statutes 2012, section 332B.09, is amended to read:


332B.09 FEES; WITHDRAWAL OF CREDITORS; NOTIFICATION TO
DEBTOR OF SETTLEMENT OFFER.

Subdivision 1.

Choice of fee structure.

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.

Subd. 2.

deleted text beginFees as a percentage of debtdeleted text endnew text begin Calculation of feesnew text end.

(a) The total amount of
the fees claimed, demanded, charged, collected, or received under deleted text beginthis subdivisiondeleted text endnew text begin a debt
settlement services agreement
new text end shall be deleted text begincalculated as 15 percent of the aggregate debt. A
debt settlement services provider that calculates fees as a percentage of debt may
deleted text end:

deleted text begin (1) charge an origination fee, which may be designated by the debt settlement
services provider as nonrefundable, of:
deleted text end

deleted text begin (i) $200 on aggregate debt of less than $20,000; or
deleted text end

deleted text begin (ii) $400 on aggregate debt of $20,000 or more;
deleted text end

deleted text begin (2) charge a monthly fee of:
deleted text end

deleted text begin (i) no greater than $50 per month on aggregate debt of less than $40,000; and
deleted text end

deleted text begin (ii) no greater than $60 per month on aggregate debt of $40,000 or more; and
deleted text end

deleted text begin (3) charge a settlement fee for the remainder of the allowable fees, which may be
demanded and collected no earlier than upon delivery to the debt settlement services
provider by a creditor of a bona fide written settlement offer consistent with the terms of
the debt settlement services agreement. A settlement fee may be assessed for each debt
settled, but the sum total of the origination fee, the monthly fee, and the settlement fee
may not exceed 15 percent of the aggregate debt.
deleted text end

deleted text begin (b) The collection of monthly fees shall cease under this subdivision when the
total monthly fees and the origination fee equals 40 percent of the total fees allowable
under this subdivision.
deleted text end

deleted text begin (c) In no event may more than 40 percent of the total amount of fees allowable be
claimed, demanded, charged, collected, or received by a debt settlement services provider
any earlier than upon delivery to the debt settlement services provider by a creditor of
a bona fide written settlement offer consistent with the terms of the debt settlement
services agreement.
deleted text end

new text begin (1) for fees calculated on a percentage of debt basis, no greater than 15 percent of
the aggregate debt; and
new text end

new text begin (2) for fees calculated on a percentage of savings basis, no greater than 30 percent
of the savings actually negotiated by the debt settlement services provider. The savings
shall be calculated as the difference between the aggregate debt that is stated in the debt
settlement services agreement at the time of its execution and the total amount that
the debtor actually pays to settle all the debts included in the debt settlement services
agreement, provided that only savings resulting from concessions actually negotiated by
the debt settlement services provider may be counted.
new text end

Subd. 3.

deleted text beginFees as a percentage of savingsdeleted text endnew text begin Collection of feesnew text end.

deleted text begin (a) The total amount
of the fees claimed, demanded, charged, collected, or received under this subdivision
shall be calculated as 30 percent of the savings actually negotiated by the debt settlement
services provider. The savings shall be calculated as the difference between the aggregate
debt that is stated in the debt settlement services agreement at the time of its execution
and total amount that the debtor actually pays to settle all the debts stated in the debt
settlement services agreement, provided that only savings resulting from concessions
actually negotiated by the debt settlement services provider may be counted. A debt
settlement services provider that calculates fees as a percentage of savings may:
deleted text end

deleted text begin (1) charge an origination fee, which may be designated by the debt settlement
services provider as nonrefundable, of:
deleted text end

deleted text begin (i) $300 on aggregate debt of less than $20,000; or
deleted text end

deleted text begin (ii) $500 on aggregate debt of $20,000 or more;
deleted text end

deleted text begin (2) charge a monthly fee of:
deleted text end

deleted text begin (i) no greater than $65 on aggregate debt of less than $40,000; and
deleted text end

deleted text begin (ii) no greater than $75 on aggregate debt of $40,000 or more; and
deleted text end

deleted text begin (3) charge a settlement fee for the remainder of the allowable fees, which may be
demanded and collected no earlier than upon delivery to the debt settlement services
provider by a creditor of a bona fide, final written settlement offer consistent with the
terms of the debt settlement services agreement. A settlement fee may be assessed for each
debt settled, but the sum total of the origination fee, the monthly fee, and the settlement
fee may not exceed 30 percent of the savings, as calculated under paragraph (a).
deleted text end

deleted text begin (b) The collection of monthly fees shall cease under this subdivision when the
total of monthly fees and the origination fee equals 50 percent of the total fees allowable
under this subdivision. For the purposes of this subdivision, 50 percent of the total fees
allowable shall assume a settlement of 50 cents on the dollar.
deleted text end

deleted text begin (c) In no event may more than 50 percent of the total amount of fees allowable be
claimed, demanded, charged, collected, or received by a debt settlement services provider
any earlier than upon delivery to the debt settlement services provider by a creditor of a
bona fide, final written settlement offer consistent with the terms of the debt settlement
services agreement.
deleted text end

new text begin A debt settlement services provider may not impose or collect any payment pursuant
to a debt settlement services agreement before the debt settlement service provider has
fully performed all of the following:
new text end

new text begin (1) the debt settlement services contained in the agreement; and
new text end

new text begin (2) any additional services the debt settlement services provider has agreed to
perform.
new text end

new text begin If more than one debt is the subject of the debt settlement services agreement, a
debt settlement services provider may only charge or collect that proportion of total fees
allowable under this section that equals the proportion of the aggregate debt the individual
settled debt represents.
new text end

Subd. 4.

Fees exclusive.

No fees, charges, assessments, or any other compensation
may be claimed, demanded, charged, collected, or received other than the fees allowed
under this section. Any fees collected in excess of those allowed under this section must
be immediately returned to the debtor.

Subd. 5.

Withdrawal of creditor.

Whenever a creditor withdraws from a debt
settlement services plan, the debt settlement services provider must promptly notify the
debtor of the withdrawal, identify the creditor, and inform the debtor of the right to modify
the debt settlement services agreement, unless at least 50 percent of the listed creditors
withdraw, in which case the debt settlement services provider must notify the debtor of the
debtor's right to cancel. In no case may this notice be provided more than 15 days after the
debt settlement services provider learns of the creditor's decision to withdraw from a plan.

Subd. 6.

Timely notification of settlement offer.

A debt settlement services
provider must make all reasonable efforts to notify the debtor within 24 hours of a
settlement offer made by a creditor.

Sec. 8. new text beginEFFECTIVE DATE.
new text end

new text begin Sections 5 to 7 are effective for debt settlement service agreements entered into on
or after August 1, 2013.
new text end