HF 1515

as introduced - 85th Legislature (2007 - 2008) Posted on 12/15/2009 12:00am

A bill for an act
relating to commerce; regulating the business of credit counseling and debt
management services; providing remedies and criminal penalties; appropriating
money; amending Minnesota Statutes 2006, section 325E.311, subdivision 6;
proposing coding for new law as Minnesota Statutes, chapter 332A; repealing
Minnesota Statutes 2006, sections 332.12; 332.13; 332.14; 332.15; 332.16;
332.17; 332.18; 332.19; 332.20; 332.21; 332.22; 332.23; 332.24; 332.25; 332.26;
332.27; 332.28; 332.29.

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

Section 1.

Minnesota Statutes 2006, section 325E.311, subdivision 6, is amended to
read:

Subd. 6.

Telephone solicitation.

"Telephone solicitation" means any voice
communication over a telephone line for the purpose of encouraging the purchase or
rental of, or investment in, property, goods, or services, whether the communication is
made by a live operator, through the use of an automatic dialing-announcing device as
defined in section 325E.26, subdivision 2, or by other means. Telephone solicitation
does not include communications:

(1) to any residential subscriber with that subscriber's prior express invitation or
permission; or

(2) by or on behalf of any person or entity with whom a residential subscriber has a
prior or current business or personal relationship.

Telephone solicitation also does not include communications if the caller is identified by a
caller identification service and the call is:

(i) by or on behalf of an organization that is identified as a nonprofit organization
under state or federal law new text begin , unless the organization is a debt management service provider
defined in section 332A.02 new text end ;

(ii) by a person soliciting without the intent to complete, and who does not in
fact complete, the sales presentation during the call, but who will complete the sales
presentation at a later face-to-face meeting between the solicitor who makes the call
and the prospective purchaser; or

(iii) by a political party as defined under section 200.02, subdivision 6.

Sec. 2.

new text begin [332A.01] DECLARATION OF POLICY.
new text end

new text begin The business of rendering credit counseling and debt management services by
compromising, settling, adjusting, prorating, or liquidating the indebtedness of a debtor is
a matter of public interest and concern and is subject to rules and control in the public
interest.
new text end

Sec. 3.

new text begin [332A.02] DEFINITIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Scope. new text end

new text begin Unless a different meaning is clearly indicated by the context,
for the purposes of this chapter the terms defined in this section have the meanings given
them.
new text end

new text begin Subd. 2. new text end

new text begin Accreditation. new text end

new text begin "Accreditation" means certification as an accredited
credit counseling provider by the International Standards Organization or the Council on
Accreditation.
new text end

new text begin Subd. 3. new text end

new text begin Attorney general. new text end

new text begin "Attorney general" means the attorney general of the
state of Minnesota.
new text end

new text begin Subd. 4. new text end

new text begin Commissioner. new text end

new text begin "Commissioner" means commissioner of commerce.
new text end

new text begin Subd. 5. new text end

new text begin Controlling or affiliated party. new text end

new text begin "Controlling or affiliated party" means
any parent or controlling entity of a debt management services provider, or any partially
or wholly owned subsidiary of the debt management services provider, or any officer,
director, executive manager, partner, or owner of a ten percent or more interest in the
debt management service provider or in any parent or controlling entity of the debt
management service provider, or any other debt management services provider in this or
any other state which has any officer, director, executive manager, partner, or owner of a
ten percent or more interest in common with the debt management services provider or in
any parent or controlling entity of the debt management services provider.
new text end

new text begin Subd. 6. new text end

new text begin Debt management services agreement. new text end

new text begin "Debt management services
agreement" means the written contract between the debt management service provider
and the debtor.
new text end

new text begin Subd. 7. new text end

new text begin Debt management services plan. new text end

new text begin "Debt management services plan"
means the debtor's individualized package of debt management services set forth in the
debt management services agreement.
new text end

new text begin Subd. 8. new text end

new text begin Debt management services provider. new text end

new text begin "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 does
not include services performed by the following when engaged in the regular course of
their respective businesses and professions:
new text end

new text begin (1) attorneys at law, escrow agents, accountants, broker-dealers in securities;
new text end

new text begin (2) banks, state or national, trust companies, savings associations, title insurance
companies, insurance companies, and all other lending institutions duly authorized to
transact business in Minnesota, provided no fee is charged for the service;
new text end

new text begin (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;
new text end

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

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

new text begin (6) the state, its political subdivisions, public agencies, and their employees;
new text end

new text begin (7) credit unions, provided no fee is charged for the service;
new text end

new text begin (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; and
new text end

new text begin (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.
new text end

new text begin Subd. 9. new text end

new text begin Debt prorating management services. new text end

new text begin "Debt prorating management
services" means the provision of any one or more of the following:
new text end

new text begin (a) managing the financial affairs of an individual by distributing income or money
to the individual's creditors;
new text end

new text begin (b) receiving funds for the purpose of distributing the funds among creditors in
payment or partial payment of obligations of a debtor; or
new text end

new text begin (c) settling, adjusting, prorating, pooling, or liquidating the indebtedness of a debtor.
Any person so engaged or holding out as so engaged is deemed to be engaged in debt
prorating regardless of whether or not a fee is charged for such services.
new text end

new text begin Subd. 10. new text end

new text begin Debtor. new text end

new text begin "Debtor" means the person for whom the debt prorating service
is performed.
new text end

new text begin Subd. 11. new text end

new text begin Licensee. new text end

new text begin "Licensee" means any person licensed by the commissioner
pursuant to this chapter and, where used in conjunction with an act or omission required or
prohibited by this chapter, shall mean any person performing debt prorating services.
new text end

new text begin Subd. 12. new text end

new text begin Person. new text end

new text begin "Person" means any individual, firm, partnership, association,
or corporation.
new text end

Sec. 4.

new text begin [332A.03] REQUIREMENT OF LICENSE.
new text end

new text begin On or after August 1, 2007, it is unlawful for any person, whether or not located in
this state, to operate a debt management service provider or provide debt management
services, including but not limited to offering, advertising, or executing or causing to
be executed any debt management services or debt management services agreement,
except as authorized by law without first having obtained a license as provided in this
chapter. A person who possesses a valid license as a debt prorater that was issued by the
commissioner before August 1, 2007, is deemed to be licensed as a debt management
service provider until the date the debt prorater license expires, at which time the licensee
must obtain a renewal as a debt management service provider in compliance with this
chapter. Debt proraters who were not required to be licensed as debt proraters before
August 1, 2007, may continue to provide debt management services without complying
with this chapter to those debtors who entered into a contract to participate in a debt
management plan before August 1, 2007, except that the debt prorater must comply with
section 332A.13, subdivision 2.
new text end

Sec. 5.

new text begin [332A.04] LICENSE.
new text end

new text begin Subdivision 1. new text end

new text begin Form. new text end

new text begin Application for a license to operate as a debt management
service provider in this state must be made in writing to the commissioner, under oath, in
the form prescribed by the commissioner, and must contain:
new text end

new text begin (1) the full name and address of the applicant;
new text end

new text begin (2) identification of the trust account required under section 332A.13;
new text end

new text begin (3) consent to the jurisdiction of the courts of this state;
new text end

new text begin (4) the name and address of the registered agent authorized to accept service of
process on behalf of the applicant or appointment of the commissioner as the applicant's
agent for purposes of accepting service of process;
new text end

new text begin (5) a description of the applicant's corporate structure, including parent companies,
subsidiaries, and affiliates, and, if applicable, proof of incorporation in this state and other
states in which the provider does business;
new text end

new text begin (6) if the applicant is a partnership or association, of every member of the partnership
or association and, if a corporation, of each officer, director, and shareholder owning or
controlling, directly or indirectly, more than a ten percent interest in the applicant's debt
management service provider's business;
new text end

new text begin (7) the name of any person with whom the applicant has a contractual relationship or
business relationship to provide debt management services, a description of the business
relationship between the applicant and the person, and a copy of the contract;
new text end

new text begin (8) disclosure of:
new text end

new text begin (i) whether any controlling or affiliated party has ever been convicted of a crime
or found civilly liable for an offense involving moral turpitude, including forgery,
embezzlement, obtaining money under false pretenses, larceny, extortion, conspiracy to
defraud, or any other similar offense or violation, or any violation of a federal or state law
or regulation in connection with activities relating to the rendition of debt management
services or involving any consumer fraud, false advertising, deceptive trade practices, or
similar consumer protection law;
new text end

new text begin (ii) any judgments, private or public litigation, tax liens, written complaints,
administrative actions, or investigations by any government agency against the applicant
or any officer, director, manager, or shareholder owning more than five percent interest in
the applicant, unresolved or otherwise, filed within the preceding ten years;
new text end

new text begin (iii) whether the applicant or any person employed by the applicant has had a record
of having defaulted in the payment of money collected for others, including the discharge
of debts through bankruptcy proceedings; and
new text end

new text begin (iv) whether the applicant's license or registration to provide debt management
services in any other state has ever been revoked or suspended;
new text end

new text begin (9) a copy of the applicant's standard debt management services agreement that the
applicant intends to execute with debtors;
new text end

new text begin (10) a description of the applicant's individualized counseling program and copies
of educational materials;
new text end

new text begin (11) proof of accreditation of:
new text end

new text begin (i) the debt management service provider; and
new text end

new text begin (ii) all individuals employed by, under contract with, or otherwise agents of the
provider who offer to provide or provide debt management services;
new text end

new text begin (12) proof that no member of the board of directors of the debt management service
provider has a conflict of interest concerning, is affiliated with the management of, or
is the owner of, a direct or indirect pecuniary interest in, the debt management service
provider; and
new text end

new text begin (13) any other information and material as the commissioner may require.
new text end

new text begin Subd. 2. new text end

new text begin Term and scope of license. new text end

new text begin The license must remain in full force and
effect for one calendar year or until it is surrendered by the licensee or revoked or
suspended by the commissioner. The license is limited solely to the business of providing
debt management services.
new text end

new text begin Subd. 3. new text end

new text begin Fees. new text end

new text begin The license application must be accompanied by payment of
$1,000 as a license fee. If the application is denied, the license fee must be returned to
the applicant.
new text end

new text begin Subd. 4. new text end

new text begin Bond. new text end

new text begin The license application must be accompanied by payment of a
surety bond in which the applicant shall be the obligor, in a sum to be determined by the
commissioner but not less than $5,000, and in which an insurance company, which is
duly authorized by the state of Minnesota to transact the business of fidelity and surety
insurance, shall be a surety. However, the commissioner may accept a deposit in cash,
or securities that may legally be purchased by savings banks or for trust funds of an
aggregate market value equal to the bond requirement, in lieu of the surety bond. The
cash or securities must be deposited with the commissioner of finance. The commissioner
may also require a fidelity bond in an appropriate amount covering employees of any
applicant. Each branch office or additional place of business of an applicant must be
bonded as provided in this subdivision. In determining the bond amount necessary
for the maintenance of any office whether it is a surety bond, fidelity bond, or both,
the commissioner shall consider the financial responsibility, experience, character, and
general fitness of the agency and its operators and owners; the volume of business handled
or proposed to be handled; the location of the office and the geographical area served or
proposed to be served; and other information the commissioner may deem pertinent based
upon past performance, previous examinations, annual reports, and manner of business
conducted in other states.
new text end

new text begin Subd. 5. new text end

new text begin Condition of bond. new text end

new text begin The applicant shall be the obligor. The bond must
run to the state of Minnesota for the use of the state and of any person or persons who
may have a cause of action against the obligor arising out of the obligor's activities as a
debt management service provider. The bond must be conditioned that the obligor will not
commit any fraudulent act and will faithfully conform to and abide by the provisions of this
chapter and of all rules lawfully made by the commissioner hereunder and pay to the state
and to any such person or persons any and all money that may become due or owing to the
state or to such person or persons from the obligor under and by virtue of this chapter.
new text end

new text begin Subd. 6. new text end

new text begin Right of action on bond. new text end

new text begin If the licensee has failed to account to a debtor
or distribute to the debtor's creditors the amounts required by this chapter and the debt
management services agreement between the debtor and licensee, the debtor or the
debtor's legal representative or receiver, the commissioner, or the attorney general, shall
have, in addition to all other legal remedies, a right of action in the name of the debtor
on the bond or the security given pursuant to this section, for loss suffered by the debtor,
not exceeding the face of the bond or security, and without the necessity of joining the
licensee in such suit or action.
new text end

new text begin Subd. 7. new text end

new text begin Licensee list. new text end

new text begin The commissioner must maintain a list of licensed debt
management service providers. The list must be made available to the public in written
form and on the Department of Commerce Web site.
new text end

Sec. 6.

new text begin [332A.05] NONASSIGNMENT OF LICENSE.
new text end

new text begin A license must not be transferred or assigned without the consent of the
commissioner.
new text end

Sec. 7.

new text begin [332A.06] RENEWAL OF LICENSE.
new text end

new text begin Each year, each licensee under the provisions of this chapter must, not more than
60 nor less than 30 days before its license is to expire, apply to the commissioner for
renewal of its license on a form prescribed by the commissioner. The application must
be signed by the licensee under penalty of perjury, contain current information on all
matters required in the original application, and be accompanied by a payment of $250.
The licensee must maintain a continuous surety bond that satisfies the requirements of
section 332A.04, subdivision 4, provided that the commissioner may require a different
amount that is at least equal to the largest amount that has accrued in the trust account
during the previous year. The renewal is effective for one year.
new text end

Sec. 8.

new text begin [332A.07] OTHER DUTIES OF LICENSEE.
new text end

new text begin Subdivision 1. new text end

new text begin Requirement to update information. new text end

new text begin A licensee must update any
information required by this section provided in its original or renewal application not
later than 90 days after the date the events precipitating the update occurred.
new text end

new text begin Subd. 2. new text end

new text begin Inspection of debtor of license. new text end

new text begin Each licensee must maintain a copy of its
license in its files. The licensee must allow a debtor, upon request, to inspect the license.
new text end

Sec. 9.

new text begin [332A.08] DENIAL OF LICENSE.
new text end

new text begin The commissioner, with notice to the applicant by certified mail sent to the address
listed on the application, may deny an application for a license upon finding that applicant:
new text end

new text begin (1) has submitted an application required under section 332A.04 that contains
incorrect, misleading, incomplete, or materially untrue information. An application is
incomplete if it does not include all the information required in section 332A.04;
new text end

new text begin (2) has failed to pay any fee or pay or maintain any bond required by this chapter, or
failed to comply with any order, decision, or finding of the commissioner made pursuant
to and within the authority of this chapter;
new text end

new text begin (3) has violated any provision of this chapter or any rule or direction lawfully made
by the commissioner under and within the authority of this chapter;
new text end

new text begin (4) or any controlling or affiliated party has ever been convicted of a crime or found
civilly liable for an offense involving moral turpitude, including forgery, embezzlement,
obtaining money under false pretenses, larceny, extortion, conspiracy to defraud, or any
other similar offense or violation, or any violation of a federal or state law or regulation
in connection with activities relating to the rendition of debt management services or
any consumer fraud, false advertising, deceptive trade practices, or similar consumer
protection law;
new text end

new text begin (5) has had a registration or license previously revoked or suspended in this state or
any other state or the applicant or licensee has been permanently or temporarily enjoined
by any court of competent jurisdiction from engaging in or continuing any conduct
or practice involving any aspect of the debt management service provider business; or
any controlling or affiliated party has been an officer, director, manager, or shareholder
owning more than a ten percent interest in a debt management service provider whose
registration has previously been revoked or suspended in this state or any other state, or
who has been permanently or temporarily enjoined by any court of competent jurisdiction
from engaging in or continuing any conduct or practice involving any aspect of the debt
management service provider business;
new text end

new text begin (6) has made any false statement or representation to the commissioner;
new text end

new text begin (7) is insolvent;
new text end

new text begin (8) refuses to fully comply with an investigation or examination of the debt
management service provider by the commissioner;
new text end

new text begin (9) has improperly withheld, misappropriated, or converted any money or properties
received in the course of doing business;
new text end

new text begin (10) has failed to have a trust account with an actual cash balance equal to or greater
than the sum of the escrow balances of each debtor's account;
new text end

new text begin (11) has defaulted in making payments to creditors on behalf of debtors as required
by agreements between the provider and debtor; or
new text end

new text begin (12) has used fraudulent, coercive, or dishonest practices, or demonstrated
incompetence, untrustworthiness, or financial irresponsibility in this state or elsewhere.
new text end

Sec. 10.

new text begin [332A.09] SUSPENDING, REVOKING, OR REFUSING TO RENEW
LICENSE.
new text end

new text begin Subdivision 1. new text end

new text begin Procedure. new text end

new text begin The commissioner may revoke, suspend, or refuse to
renew any license issued hereunder, or may levy a civil penalty under section 45.027, or
any combination of actions, if the debt management service provider or any controlling
or affiliated person has committed any act or omission for which the commissioner
could have refused to issue an initial license or renew an existing license. Revocation or
refusal to renew must be upon notice and hearing as prescribed in the Administrative
Procedure Act, sections 14.57 to 14.69. The notice must set a time for hearing before
the commissioner not less than 20 nor more than 30 days after service of the notice,
provided the licensee may waive the 20-day minimum. The commissioner may, in the
notice, suspend the license for a period not to exceed 60 days. Unless the notice states that
the license is suspended, pending the determination of the main issue, the licensee may
continue to transact business until the final decision of the commissioner. If the license is
suspended, the commissioner shall hold a hearing and render a final determination within
ten days of a request by the licensee. If the commissioner fails to do so, the suspension
shall terminate and be of no force or effect.
new text end

new text begin Subd. 2. new text end

new text begin Notification of interested persons. new text end

new text begin After the notice and hearing required
in subdivision 1, upon issuing an order suspending or revoking a license or refusing to
renew a license, the commissioner may notify all individuals who have contracts with the
affected licensee and all creditors who have agreed to a plan of forbearance that the license
has been revoked and that the order is subject to appeal.
new text end

new text begin Subd. 3. new text end

new text begin Receiver for funds of sanctioned licensee. new text end

new text begin When an order is issued
revoking or refusing to renew a license, the commissioner may apply and the district court
must appoint a receiver to temporarily or permanently receive the assets of the licensee
pending a final determination of the validity of the order.
new text end

Sec. 11.

new text begin [332A.10] WRITTEN DEBT MANAGEMENT SERVICES
AGREEMENT.
new text end

new text begin Subdivision 1. new text end

new text begin Written agreement required. new text end

new text begin A debt management services provider
may not perform any debt management plan services or receive any money related to
a debt management plan until the provider has obtained a debt management services
agreement that contains all material terms of the agreement between the debt management
service provider and the debtor. A debt management services agreement must be in
writing, dated, and signed by the debt management service provider and the debtor. The
licensee must furnish the debtor with a copy of the signed contract upon execution.
new text end

new text begin Subd. 2. new text end

new text begin Actions prior to written agreement. new text end

new text begin No person may provide debt
management services for a debtor unless the person first has:
new text end

new text begin (1) provided the debtor individualized counseling and educational information
that, at a minimum, addresses managing household finances, managing credit and debt,
budgeting, and personal savings strategies;
new text end

new text begin (2) prepared in writing and provided to the debtor, in a form that the debtor may
keep, an individualized financial analysis and a proposed debt management plan listing the
debtor's known debts with specific recommendations regarding actions the debtor should
take to reduce or eliminate the amount of the debts, including written disclosure that
debt management services are not suitable for all debtors and that there are other ways,
including bankruptcy, to deal with indebtedness;
new text end

new text begin (3) made a determination supported by an individualized financial analysis that the
debtor can reasonably meet the requirements of the proposed debt management plan
and that there is a net tangible benefit to the debtor of entering into the proposed debt
management plan;
new text end

new text begin (4) a reasonable, supportable expectation that each creditor of the debtor listed as a
participating creditor in the plan will accept payment of the debtor's debts as provided in
the proposed debt management plan; and
new text end

new text begin (5) prepared, in a form the debtor may keep, a written list identifying all known
creditors of the debtor that the provider reasonably expects to participate in the plan
and the creditors, including secured creditors, that the provider reasonably expects not
to participate.
new text end

new text begin Subd. 3. new text end

new text begin Required terms. new text end

new text begin (a) Each debt management services agreement must
contain the following terms, which must be disclosed prominently and clearly in bold
print upon the front page of the agreement, segregated by bold lines from all other
information on the page:
new text end

new text begin (1) the fee amount to be paid by the debtor and whether the initial fee amount is
refundable or nonrefundable;
new text end

new text begin (2) the monthly fee amount or percentage to be paid by the debtor; and
new text end

new text begin (3) the total amount of fees reasonably anticipated to be paid by the debtor over
the term of the agreement.
new text end

new text begin (b) Each debt management services agreement must also contain the following:
new text end

new text begin (1) a disclosure that if the amount of debt owed is increased by interest, late fees,
over the limit fees, and other amounts imposed by the creditor the length of the debt
management services agreement will be extended and remain in force and that the total
dollar charges agreed upon may increase at the rate agreed upon in the original contract
agreement;
new text end

new text begin (2) a prominent statement describing the terms upon which the debtor may cancel
the contract as set forth in section 332A.11;
new text end

new text begin (3) a detailed description of all services to be performed by the debt management
service for the debtor;
new text end

new text begin (4) the debt management service provider's refund policy; and
new text end

new text begin (5) the debt management service provider's principal business address and the name
and address of its agent in this state authorized to receive service of process.
new text end

new text begin Subd. 4. new text end

new text begin Prohibited terms. new text end

new text begin The following terms shall not be included in the debt
management services agreement:
new text end

new text begin (1) a hold harmless clause;
new text end

new text begin (2) a confession of judgment, or a power of attorney to confess judgment against the
debtor or appear as the debtor in any judicial proceeding;
new text end

new text begin (3) a waiver of the right to a jury trial, if applicable, in any action brought by
or against a debtor;
new text end

new text begin (4) an assignment of or order for payment of wages or other compensation for
services;
new text end

new text begin (5) a provision in which the debtor agrees not to assert any claim or defense arising
out of the debt management services agreement;
new text end

new text begin (6) a waiver of any provision of this chapter or a release of any obligation required
to be performed on the part of the debt management services provider; or
new text end

new text begin (7) a mandatory arbitration clause.
new text end

new text begin Subd. 5. new text end

new text begin New debt management services agreements; modification of existing
agreements. new text end

new text begin (a) Separate and additional debt management services agreements that
comply with this chapter may be entered into by the debt management service provider
and the debtor provided that no additional initial fee may be charged by the debt
management services provider.
new text end

new text begin (b) Any modification of an existing debt management services agreement, including
any increase in the number or amount of debts included in the debt management service,
must be in writing and signed by both parties. No fees, charges, or other consideration
may be demanded from the debtor for the modification, other than an increase in the
amount of the monthly maintenance fee established in the original debt management
services agreement.
new text end

Sec. 12.

new text begin [332A.11] RIGHT TO CANCEL.
new text end

new text begin Subdivision 1. new text end

new text begin Debtor's right to cancel. new text end

new text begin A debtor has the right to cancel the debt
management services agreement without cause at any time upon ten days' written notice to
the debt management service provider. In the event of cancellation, the debt management
service provider must, within ten days of the cancellation, notify the debtor's creditors of
the cancellation and provide a refund of all unexpended funds paid by or for the debtor
to the debt management service provider.
new text end

new text begin Subd. 2. new text end

new text begin Notice of debtor's right to cancel. new text end

new text begin A debt management services
agreement must contain, on its face, in an easily readable typeface immediately adjacent
to the space for signature by the debtor, the following notice: Right To Cancel: You have
the right to cancel this contract at any time on ten days' written notice.
new text end

new text begin Subd. 3. new text end

new text begin Automatic termination. new text end

new text begin Upon the payment of all listed debts and
fees, the debt management services agreement must automatically terminate, and all
unexpended funds paid by or for the debtor to the debt management service provider
must be immediately returned to the debtor.
new text end

new text begin Subd. 4. new text end

new text begin Debt management service provider's right to cancel. new text end

new text begin A debt
management services provider may cancel a debt management services agreement with
cause upon 30 days' written notice to the debtor. Within ten days of the cancellation,
the debt management service provider must: (1) notify the debtor's creditors of the
cancellation; and (2) return to the debtor all unexpended funds paid by or for the debtor.
new text end

Sec. 13.

new text begin [332A.12] BOOKS, RECORDS, AND INFORMATION.
new text end

new text begin Subdivision 1. new text end

new text begin Records retention. new text end

new text begin Every licensee must keep, and use in the
licensee's business, such books, accounts, and records as will enable the commissioner to
determine whether the licensee is complying with this chapter and of the rules, orders,
and directives adopted by the commissioner pursuant to this chapter. Every licensee must
preserve such books, accounts, and records for at least six years after making the final
entry on any transaction recorded therein. Examinations of the books, records, and method
of operations conducted under the supervision of the commissioner shall be done at the
cost of the licensee. The cost must be assessed as determined pursuant to section 46.131.
new text end

new text begin Subd. 2. new text end

new text begin Statements to debtors. new text end

new text begin Each licensee must maintain and must make
available records and accounts that will enable each debtor to ascertain the amounts paid
to the creditors of the debtor. A statement showing amounts received from the debtor,
disbursements to each creditor, amounts which any creditor has agreed to accept as
payment in full for any debt owed the creditor by the debtor, charges deducted by the
licensee, and such other information as the commissioner may prescribe must be furnished
by the licensee to the debtor at least monthly and, in addition, upon any cancellation or
termination of the contract. In addition to the statements required by this subdivision, each
debtor must have reasonable access, without cost, to information in the licensee's files
applicable to the debtor. These statements, records, and accounts must otherwise remain
confidential except for duly authorized state and government officials, the commissioner,
the attorney general, the debtor, and the debtor's representative and designees. Each
licensee must prepare and retain in the file of each debtor a written analysis of the debtor's
income and expenses to substantiate that the plan of payment is feasible and practical.
new text end

Sec. 14.

new text begin [332A.13] FEES, PAYMENTS, AND CONSENT OF CREDITORS.
new text end

new text begin Subdivision 1. new text end

new text begin Origination fee; credit background report cost. new text end

new text begin The licensee may
charge a nonrefundable origination fee of not more than $50, which may be retained by the
licensee from the initial amount paid by the debtor to the licensee. The licensee may also
collect from the debtor as part of the origination fee an additional amount for the actual
cost of a credit report obtained from a one or more credit reporting agencies not related to
or affiliated with the licensee. The amount charged for the credit reports may not exceed
$10 per report or $25 for all such reports, whichever is less. The cost of only one credit
background report may be collected from the debtor in any 12-month period.
new text end

new text begin Subd. 2. new text end

new text begin Monthly maintenance fee. new text end

new text begin The licensee may charge a periodic fee for
account maintenance or other purposes, but only if the fee is reasonable for the service
provider and does exceed 15 percent of the monthly payment amount.
new text end

new text begin Subd. 3. new text end

new text begin Additional fees unauthorized. new text end

new text begin A debt management services provider may
not impose any fee or other charge or receive any funds or other payment other than the
initial fee or monthly maintenance fee authorized by this section.
new text end

new text begin Subd. 4. new text end

new text begin Amount retained of periodic payments. new text end

new text begin The debt management service
provider may retain as payment for the fees authorized by this section no more than 15
percent of any periodic payment made to the debt management service provider by the
debtor. The remaining 85 percent must be disbursed to listed creditors pursuant to and in
accordance with the debt management services agreement.
new text end

new text begin Subd. 5. new text end

new text begin Advance payments. new text end

new text begin No fees or charges may be received or retained for
any payments by the debtor made more than the following number of days in advance
of the date specified in the debt management services agreement on which they are due:
(1) 42 days in the case of contracts requiring monthly payments; (2) 15 days in the case
of agreements requiring biweekly payments; or (3) seven days in the case of agreements
requiring weekly payments. For those agreements which do not require payments in
specified amounts, a payment is deemed an advance payment to the extent it exceeds twice
the average regular payment theretofore made by the debtor pursuant to that contract.
This subdivision does not apply when it is the intention of the debtor to use the advance
payments to satisfy future payment of obligations due within 30 days under the contract.
This subdivision supersedes any inconsistent provision of this chapter.
new text end

new text begin Subd. 6. new text end

new text begin Consent of creditors. new text end

new text begin A licensee must actively seek to obtain the consent
of all creditors to the debt management services plan set forth in the debt management
services agreement. Consent by a creditor may be express and in writing, or may be
evidenced by acceptance of a payment made pursuant to the debt management services
plan set forth in the contract. The licensee must notify the debtor within ten days after
the expiration of the 60-day period prescribed in this subdivision of any failure to obtain
the required consent and of the debtor's right to cancel without penalty. The notice must
be in a form as the commissioner shall prescribe. Nothing contained in this section is
deemed to require the return of any origination fee and any fees earned by the licensee
prior to cancellation or default.
new text end

new text begin Subd. 7. new text end

new text begin Withdrawal of creditor. new text end

new text begin Whenever a creditor withdraws from a
debt management plan, or refuses to participate in a debt management plan, the debt
management service provider must promptly notify the debtor of the withdrawal or refusal.
In no case may this notice be provided more than 15 days after the debt management plan
learns of the creditor's decision to withdraw from or refuse to participate in a plan. This
notice must include the identity of the creditor withdrawing from the plan, the amount of
the monthly payment to that creditor, and the right of the debtor to cancel the agreement
under section 332A.11.
new text end

new text begin Subd. 8. new text end

new text begin Payments held in trust. new text end

new text begin Any payment received by a licensee from or on
behalf of a debtor must be held in trust by the licensee from the moment it is received.
The licensee may commingle the payment with the licensee's own property or funds,
but only to the extent necessary to ensure the 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. The debt
management service provider must maintain a separate trust account and deposit in the
account all payments received. All disbursements, whether to the debtor or to the creditors
of the debtor, or to the licensee, must be made from such account.
new text end

new text begin Subd. 9. new text end

new text begin Timely payment of creditors. new text end

new text begin The debt management service provider
must disburse any funds paid by or on behalf of a debtor to creditors of the consumer
within 42 days after receipt of the funds, or earlier if necessary to comply with the due
date in the contract between the debtor and the creditor, unless the reasonable payment
of one or more of the debtor's obligations requires that the funds be held for a longer
period so as to accumulate a sum certain or where the debtor's payment is returned for
insufficient funds or other reason that makes the withholding of such payments in the
net interest of the debtor.
new text end

Sec. 15.

new text begin [332A.14] PROHIBITIONS.
new text end

new text begin A licensee shall not:
new text end

new text begin (1) purchase from a creditor any obligation of a debtor;
new text end

new text begin (2) use, threaten to use, seek to have used or seek to have threatened the use of any
legal process, including but not limited to garnishment and repossession of personal
property, against any debtor while the debt management services agreement between the
licensee and the debtor remains executory;
new text end

new text begin (3) advise a debtor to stop paying a creditor until a debt management service plan is
in place;
new text end

new text begin (4) require as a condition of performing debt management services require in any
debt management services agreement the purchase of any services, stock, insurance,
commodity, or other property or any interest therein either by the debtor or the licensee;
new text end

new text begin (5) compromise any debts unless the prior written approval of the debtor has been
obtained to such compromise and unless such compromise inures solely to the benefit
of the debtor;
new text end

new text begin (6) receive from any debtor as security or in payment of any fee a promissory note
or other promise to pay or any mortgage or other security, whether as to real or personal
property;
new text end

new text begin (7) lend money or provide credit to any debtor if any interest or fee is charged,
or directly or indirectly collect any fee for referring, advising, procuring, arranging, or
assisting a consumer in obtaining any extension of credit or other debtor service from a
lender or service provider;
new text end

new text begin (8) structure a debt management agreement that would result in negative
amortization of any debt in the plan;
new text end

new text begin (9) engage in any unfair, deceptive, or unconscionable act or practice in connection
with any service provided to any debtor;
new text end

new text begin (10) offer, pay, or give any material cash fee, gift, bonus, premium, reward, or other
compensation to any person for referring any prospective customer to the licensee or for
enrolling a debtor in a debt management services plan, or provide any other incentives
for employees or agents of the debt management service provider to induce debtors to
enter into a debt management plan;
new text end

new text begin (11) receive any cash, fee, gift, bonus, premium, reward, or other compensation
from any person other than the debtor or a person in the debtor's behalf in connection with
activities as a licensee; provided that this paragraph does not apply to a licensee which is a
bona fide nonprofit corporation duly organized under chapter 317A;
new text end

new text begin (12) enter into a contract with a debtor unless a thorough written budget analysis
indicates that the debtor can reasonably meet the requirements of the financial adjustment
plan and will be benefited by the plan;
new text end

new text begin (13) in any way charge or purport to charge or provide any debtor credit insurance in
conjunction with any contract or agreement involved in the financial adjustment plan;
new text end

new text begin (14) operate or employ a person who is an employee or owner of a collection agency
or process-serving business; or
new text end

new text begin (15) require or attempt to require payment of a sum that the provider states,
discloses, or advertises to be a voluntary contribution from the debtor.
new text end

Sec. 16.

new text begin [332A.15] RULES.
new text end

new text begin The commissioner may make and file in accordance with the provisions of chapter
14 such reasonable rules as shall be necessary for the administration of this chapter.
new text end

Sec. 17.

new text begin [332A.16] ADVERTISEMENT OF DEBT MANAGEMENT SERVICES
PLANS.
new text end

new text begin No debt management service provider may make false, deceptive, misleading
statements or omissions about the rates, terms, or conditions of an actual or proposed debt
management plan or its debt management services, or create the likelihood of consumer
confusion or misunderstanding regarding its services, including but not limited to the
following:
new text end

new text begin (1) in any broadly disseminated advertising, fail to disclose the amount of fees
that it regularly charges for its services;
new text end

new text begin (2) represent that the debt management service provider is a nonprofit, not-for-profit,
or has similar status or characteristics if some or all of the debt management service will
be provided by a for-profit company that is a controlling or affiliated party to the debt
management service provider; or
new text end

new text begin (3) make any communication that gives the impression that the debt management
service provider is acting on behalf of a government agency.
new text end

Sec. 18.

new text begin [332A.17] DEBT MANAGEMENT SERVICES AGREEMENT VOID.
new text end

new text begin Any debtor has the right to rescind any debt management services agreement with a
debt management service provider that commits a material violation of this chapter. On
rescission, all fees paid to the debt management service provider or any other person
other than creditors of the debtor must be returned to the debtor entering into the debt
management services agreement within ten days of rescission of the debt management
services agreement.
new text end

Sec. 19.

new text begin [332A.18] ENFORCEMENT; REMEDIES.
new text end

new text begin Subdivision 1. new text end

new text begin Violation a deceptive practice. new text end

new text begin A violation of any of the provisions
of this chapter is considered an unfair or deceptive trade practice under section 8.31,
subdivision 1. A private right of action under section 8.31 by an aggrieved debtor is in
the public interest.
new text end

new text begin Subd. 2. new text end

new text begin Private right of action. new text end

new text begin (a) A debt management service provider who fails
to comply with any of the provisions of this chapter is liable in an individual action for
the sum of: (i) actual, incidental, and consequential damages sustained by the debtor as a
result of the failure; and (ii) statutory damages of up to $1,000.
new text end

new text begin (b) A debt management service provider who fails to comply with any of the
provisions of this chapter is liable in a class action for the sum of: (i) the amount that each
named plaintiff could recover under paragraph (a), clause (i); and (ii) such amount as the
court may allow for all other class members.
new text end

new text begin (c) In determining the amount of statutory damages, the court shall consider, among
other relevant factors:
new text end

new text begin (1) the frequency, nature, and persistence of noncompliance;
new text end

new text begin (2) the extent to which the noncompliance was intentional; and
new text end

new text begin (3) in the case of a class action, the number of debtors adversely affected.
new text end

new text begin (d) A plaintiff or class successful in a legal or equitable action is entitled to the costs
of the action, plus reasonable attorney fees.
new text end

new text begin Subd. 3. new text end

new text begin Injunctive relief. new text end

new text begin A debtor may sue a debt management service 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 management service provider has 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 management service provider violated with any
provision of this chapter.
new text end

new text begin Subd. 4. new text end

new text begin Remedies cumulative. new text end

new text begin The remedies provided in this section are
cumulative and do not restrict any remedy that is otherwise available. The provisions
of this chapter are not exclusive and are in addition to any other requirements, rights,
remedies, and penalties provided by law.
new text end

new text begin Subd. 5. new text end

new text begin Public enforcement. new text end

new text begin The attorney general has the right to obtain any
remedy provided in this section.
new text end

new text begin Subd. 6. new text end

new text begin Criminal penalties. new text end

new text begin Any person willfully violating any of the provisions
of this chapter shall be guilty of a gross misdemeanor.
new text end

Sec. 20.

new text begin [332A.19] INVESTIGATION.
new text end

new text begin Subdivision 1. new text end

new text begin Examination; audit. new text end

new text begin The commissioner may examine the books
and records of every licensee and of any person engaged in the business of providing
debt management services as defined in section 332A.02 at any reasonable time. The
commissioner once during any calendar year may require the submission of an audit
prepared by a certified public accountant of the books and records of each licensee
hereunder. If the licensee has, within one year previous to the commissioner's demand,
had an audit prepared for some other purpose, this audit may be submitted to satisfy the
requirement of this section. The commissioner may investigate any complaint concerning
violations of this chapter and may require the attendance and sworn testimony of witnesses
and the production of documents.
new text end

new text begin Subd. 2. new text end

new text begin Duties of attorney general and county attorney. new text end

new text begin Upon transmittal from
the commissioner of a written complaint of any person feeling aggrieved, the attorney
general may forward the complaint to the county attorney of the county wherein the
business is situated, who may investigate and report. The attorney general or county
attorney may require the attendance and sworn testimony of witnesses and the production
of documents.
new text end

Sec. 21. new text begin APPROPRIATION.
new text end

new text begin $150,000 is appropriated from the general fund to the commissioner of commerce
for expenses associated with the licensing of debt management service providers. The
appropriation is available until spent.
new text end

Sec. 22. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2006, sections 332.12; 332.13; 332.14; 332.15; 332.16; 332.17;
332.18; 332.19; 332.20; 332.21; 332.22; 332.23; 332.24; 332.25; 332.26; 332.27; 332.28;
and 332.29, new text end new text begin are repealed.
new text end