SENATE, No. 1979

STATE OF NEW JERSEY

215th LEGISLATURE

 

INTRODUCED MAY 24, 2012

 


 

Sponsored by:

Senator  NICHOLAS P. SCUTARI

District 22 (Middlesex, Somerset and Union)

 

 

 

 

SYNOPSIS

     The “Debt-Management Services Act of New Jersey.”

 

CURRENT VERSION OF TEXT

     As introduced.

  


An Act concerning debt-management services, supplementing Title 17 of the Revised Statutes, and repealing P.L.1979, c.16 and section 3 of P.L.2005, c.287.

 

     Be It Enacted by the Senate and General Assembly of the State of New Jersey:

 

     1.    This act shall be known and may be cited as the “Debt-Management Services Act of New Jersey.”

 

     2.    As used in this act:

     “Affiliate” means, with respect to an individual: (1) a spouse; (2) a sibling or sibling’s spouse; (3) a lineal ancestor or lineal descendant of the individual or individual’s spouse, or aunt, great aunt, uncle, great uncle, first cousin, niece, grandniece, nephew, or grand nephew, whether related in whole or part by blood or by law, or the spouse of any of them; or (4) any other individual occupying the residence of the individual. 

     “Affiliate” means, with respect to an entity: (1) any person that directly or indirectly controls, is controlled by, or is under common control with, the entity, or the spouse of, or individual occupying the residence of, this person; (2) an officer or director of, or any individual performing similar functions with respect to, the entity or the entity’s affiliate described under paragraph (1) herein, or the spouse of, or individual occupying the residence of, this person; (3) any person that receives or received more than $25,000 or a greater amount established by the commissioner by regulation, from the entity in either the current or preceding calendar year, or any person that owns more than 10 percent of this receiving person, or an individual who is employed by, or is an officer or director of, this receiving person, or the spouse of, or individual occupying the residence of, any of them; or (4) a sibling or sibling’s spouse, or a lineal ancestor or lineal descendant of an individual or individual’s spouse, or aunt, great aunt, uncle, great uncle, first cousin, niece, grandniece, nephew, or grand nephew, whether related in whole or part by blood or by law, or the spouse of any of them, of any affiliate described in paragraphs (1) through (3) herein.

     “Business address” means the physical location of a business, including its street name and number.

     “Certified counselor” means an individual employed by a debt-management provider, who is certified pursuant to this act, to provide education and assistance in connection with debt-management services involving the reduction of finance charges or fees for late payment, default, or delinquency.

     “Certified debt specialist” means an individual employed by a debt-management provider, who is certified pursuant to this act, to provide education and assistance in connection with debt-management services involving the settlement of debts by creditors for less than the full principal amount owed by a debtor.

     “Commissioner” means the Commissioner of Banking and Insurance.”

     “Debt-management agreement” means a contract between a debt-management provider and an individual for the performance of debt-management services.

     “Debt-management plan” means a written program or strategy in which a debt-management 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 to pay the individual’s debt or debts.

     “Debt-management provider” or “provider” means a person registered pursuant to this act, that provides, offers to provide, or agrees to provide debt-management services directly or through others to an individual.

     “Debt-management service” means any function by a debt-management provider as an intermediary between an individual with whom the provider has a debt-management agreement and one or more creditors of the individual, for the purpose of obtaining concessions from a creditor for repayment of a debt on terms more favorable to the individual than the terms of the original agreement between the individual and creditor.  The term “debt-management service” shall not include: (1) any legal service provided in an attorney-client relationship by an attorney-at-law of this State or person otherwise authorized to practice law in this State; (2) any accounting service provided in an accountant-client relationship by a certified public accountant, public accountant, or person otherwise authorized to engage in the practice of public accountancy in this State; or (3) any financial planning service provided in a financial planner-client relationship by a member of a financial planning profession whose members, as determined by the commissioner pursuant to regulation, are: (a) licensed by this State or otherwise authorized to engage in financial planning practices in this State; (b) subject to a code of professional responsibility; (c) subject to regulatory oversight and a disciplinary mechanism; and (d) subject to a continuing education requirement.

     “Debt-management settlement fee” means a charge imposed upon or paid by an individual, pursuant to a debt-management agreement, in connection with a creditor’s assent to accept in full satisfaction of the individual’s debt an amount less than the principal amount of that debt.

     “Department” means the Department of Banking and Insurance.

     “Entity” means a person other than an individual.

     “Financial institution” means any State or federally chartered bank, savings bank, savings and loan association, credit union, trust company or other entity engaged in the business of banking and subject to regulation under applicable State or federal law.

     “Individual” means a natural person.

     “Record” means information preserved by a debt-management provider that is inscribed on a tangible medium, or that is stored in an electronic or other medium and is retrievable in a perceivable form.

     “Trust account” means an account held by a debt-management provider that is: (1) established in an insured financial institution; (2) separate from any other account of the provider or provider’s designee; (3) appropriately designated by the debt-management provider to indicate that the money in the account is not the money of the provider or provider’s designee; and (4) used to hold money of one or more individuals with a debt-management agreement for the purpose of disbursement to creditors.

 

     3.    This act shall not apply to the following:

     a.     While engaged in its regular course of business, any financial institution or an affiliate of a financial institution, if the affiliate is regulated by a State or federal banking regulatory authority;

     b.    Any debt-management provider who provides debt-management services to an individual for no compensation;

     c.     While engaged in the person’s regular course of business:

     (1)   Any judicial officer or other person acting pursuant to any order or judgment of a court or administrative agency;

     (2)   Any title insurer, escrow company, or other person that provides bill paying services so long as any debt-management services provided are incidental to the bill paying services; and

     (3)   Any assignee of a creditor acting for the benefit of the creditor; and

     d.    Any out-of-state person who provides or agrees to provide debt-management services to an individual residing in this State, but whom the person does not know and had no reason to know is a resident of this State at the time of providing or agreeing to provide the service.

 

     4.    a.  A debt-management provider shall not provide, offer to provide, or agree to provide debt-management services in this State unless the provider is registered with the Department of Banking and Insurance, for which the commissioner shall charge a nonrefundable application fee to be prescribed by regulation.

     b.    An application for registration shall be in a form prescribed by the commissioner pursuant to regulation, properly certified, and shall include the following information:

     (1)   the applicant’s name, all names under which the applicant shall conduct business, the principal business address, telephone number, electronic-mail address, and Internet website;

     (2)   the business address, if different than the principal business address submitted pursuant to paragraph (1) of this subsection, for each location in this State, if any, at which debt-management services shall be provided;

     (3)   if the applicant does not provide an in-State business address: (a) the name and business address of an in-State agent to accept service of process in any action, suit, or proceeding that may arise under this act; or (b) designation of the commissioner as this agent;

     (4)   evidence of accreditation for debt-management services by an independent accrediting organization recognized by the commissioner pursuant to regulation;

     (5)   the identification of each jurisdiction in which, during the immediately preceding five-year period, any individual received debt-management services from the applicant;

     (6)   a demonstration of coverage by a surety bond or other form of financial assurance as required by sections 10 or 11 of this act;

     (7)   a demonstration of insurance coverage as required by section 12 of this act; 

     (8)   the name and home address of each officer and director of the applicant, and of any person that owns at least 10 percent of the applicant;

     (9)   the identification of each jurisdiction in which, during the immediately preceding five-year period, the applicant or any of its officers, owners or directors has been licensed or registered to provide debt-management services;

     (10)  the designation of each director who is also an affiliate, as defined under section 2 of this act, of the applicant, based upon a relationship, other than as director, to the applicant;

     (11)  if applicable, the name and business address of the employer of each director during the immediately preceding 10-year period;

     (12)  a description of any ownership interest of at least 10 percent by a director, owner, officer, 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 to any individual with a debt-management agreement, relating to the applicant’s debt-management services;

     (13)  an affirmation, with supporting evidence as appropriate, that each counselor employed by the applicant is, or will become within 12 month of being employed, a certified counselor or certified debt specialist based upon an accreditation from an independent accrediting organization recognized by the commissioner pursuant to regulation;

     (14)  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 submission of the application, or, if it has not been in operation for the three immediately preceding years, for the applicable period of its existence;

     (15)  in coordination with the submission of information for a criminal history record background check pursuant to subsection c. of this section, a statement by the applicant describing, to the extent known, 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 officer, director, and owner of the applicant, and any employee or agent of the applicant who is authorized to access the applicant’s trust accounts designated in accordance with paragraph (16) of this subsection;

     (16)  an identification of all trust accounts, if any, to be used by the provider in the performance of debt-management services;

     (17)  a copy of the applicant’s financial statements, audited by an appropriately authorized accountant, for each of the two years immediately preceding the submission of the application, or, if the applicant has not been in operation for the two immediately preceding years, for the applicable period of its existence;

     (18)  a description of the applicant’s financial analysis and initial budget plan, including any form or electronic model, used or to be used to screen and evaluate the financial condition of individuals for debt-management services;

     (19)  a description of the three educational programs most commonly used or to be used by the applicant, with copies of any materials for those programs;

     (20)  a copy of each form of debt-management agreement to be used to provide debt-management services;

     (21)  the schedule of fees and charges to be used by the applicant with respect to providing debt-management services; and

     (22) any other information deemed necessary by the commissioner.

     c.     An application for registration shall be accompanied by the applicant’s submission to the commissioner of the name, address, fingerprints and written consent for a criminal history record background check to be performed on each officer, director, and owner of the applicant, and any employee or agent of the applicant who is authorized to access the applicant’s trust accounts designated in accordance with paragraph (16) of subsection b. of this section.  The commissioner is authorized to exchange fingerprint data with and receive criminal history record information from the State Bureau of Identification in the Division of State Police and the Federal Bureau of Investigation consistent with applicable State and federal laws, rules and regulations, for the purposes of facilitating determinations concerning the registration eligibility for the applicant, based upon any findings related to an officer, director, owner, employee, or agent.  The applicant shall bear the cost for the criminal history record background check, including all costs of administering and processing the check.  The Division of State Police shall promptly notify the commissioner in the event an officer, director, owner, employee, or agent who was the subject of a criminal history record background check pursuant to this subsection, is arrested for a crime or offense in this State after the date the background check was performed, whether the person represents a prospective new registrant, or subsequently, a current registrant.

     d.    Any information provided with respect to an application for registration as a debt-management provider shall be subject to public access unless exempt from access pursuant to P.L.1963, c.73 (C.47:1A-1 et seq.).

     e.     Any nonprofit social service agency or nonprofit consumer credit counseling agency that was licensed as a debt adjuster pursuant to P.L.1979, c.16 (C.17:16G-1 et seq.) prior to the effective date of this act may continue on or after that effective date to provide debt-management services, so long as the nonprofit social service agency or nonprofit consumer credit counseling agency applies and is registered as a debt-management provider pursuant to this act.

 

     5.    a. (1) Within 120 days of receipt of an application for registration as a debt-management provider, the commissioner shall issue a one-year certificate of registration to an applicant in order for the applicant to act as a debt-management provider in this State, if:

     (a)   the applicant provides all of the information and supporting materials to the commissioner as set forth under section 4 of this act; and

     (b)   the commissioner finds the applicant is duly qualified to engage in the business of debt-management services, based upon an examination of the financial responsibility, experience, character, and general fitness of the applicant and its owners, directors, employees, and agents.

     (2)   The commissioner may extend the 120-day review period for up to an additional 60 days, or issue, in lieu of a one-year certificate of registration, a temporary certificate of registration, to expire no later than 180 days after issuance, for an applicant that has submitted an incomplete application but is making a timely effort to obtain any further information or supporting material, as set forth under section 4 of this act, required to complete the application.

     (3)   The commissioner shall maintain and make publicly available, including through the department’s Internet website, a complete list of all registered debt-management providers.  

     b.    (1)   The commissioner may deny a certificate of registration to an applicant if:

     (a)   the application contains information that is materially erroneous or incomplete;

     (b)   an officer, director, or owner of the applicant has been convicted of a crime, or had a civil judgment entered against him, involving dishonesty or any violation of a state or federal securities law; or

     (c)   the applicant or any officer, director, or owner has defaulted in the payment of money collected for others.

     (2)   The commissioner shall deny a certificate of registration to an applicant that is organized as a not-for-profit entity or has obtained tax-exempt status under section 501 of the federal Internal Revenue Code (26 U.S.C. s.501), if the applicant’s board of directors is not independent of the applicant’s employees and agents.  For purposes of this paragraph, a board of directors shall be deemed not independent if more than one-fourth of its members: (a) are affiliates of the applicant, as defined under section 2 of this act, based upon a relationship, other than as director, to the applicant; or  (b) were employed by or directors of a person that received from the applicant more than $25,000 in a calendar year, or a greater amount established by the commissioner by regulation, beginning from the date 10 years prior to the date of first becoming directors of the affiliate.

     c.     Within seven days of the denial of a certificate of registration pursuant to this section, the commissioner shall provide a follow-up writing to the applicant stating the reasons for the denial.  This denial may be appealed by the applicant in accordance with the “Administrative Procedure Act,” P.L.1968, c.410 (C.52:14B-1 et seq.).

 

     6.    a. A registered debt-management provider shall obtain a renewal of its registration annually in order to continue conducting the business of debt-management services in this State.  The commissioner shall charge the debt-management provider a nonrefundable application fee for the renewal, which shall be prescribed by regulation.

     b.    An application for registration renewal shall be filed not more than 60 days, but not less than 30 days, prior to the expiration of the debt-management provider’s current registration.  The application shall be in a form prescribed by the commissioner pursuant to regulation, properly certified, and shall include the following:

     (1)   disclosure of any changes in the information or supporting materials submitted to the commissioner with the provider’s immediately preceding application for a certificate of registration, as set forth pursuant to subsection b. of section 4 of this act; and 

     (2)   in addition to any disclosures under paragraph (1) of this subsection, and even if the information or supporting material is the same as that contained in the provider’s immediately preceding application:

     (a)   evidence of accreditation for debt-management services by an independent accrediting organization recognized by the commissioner pursuant to regulation;

     (b)   a demonstration of coverage by a surety bond or other form of financial assurance as required by sections 10 or 11 of this act;

     (c)   a demonstration of insurance coverage as required by section 12 of this act;

     (d)   a copy of a financial statement, audited by an appropriately authorized accountant, for the year immediately preceding the submission of the application of registration renewal;

     (e)   disclosure of the total amount of money:

     (i)    received by the provider from or on behalf of any individual pursuant to any debt-management plan during the immediately preceding year for the purpose of making payments on an individual’s debt or debts, and the total amount of money distributed during this period to each individual’s creditors; and

     (ii)   otherwise accumulated by the provider pursuant to any debt-management agreement during the immediately preceding year; and

     (f)    any other information deemed necessary by the commissioner.

     c.     Any information provided with respect to an application for registration renewal as a debt-management provider shall be subject to public access unless exempt from access pursuant to P.L.1963, c.73 (C.47:1A-1 et seq.).

 

     7.    a. A debt-management provider’s application for registration renewal shall be reviewed, and approved or disapproved in the same manner and within the same timeframe as set forth for the review, and approval or disapproval of an initial application for registration as set forth in section 5 of this act.

     b.    If a debt-management provider files a timely and complete application for registration renewal, the provider’s currently issued certificate of registration in force at the time of the application shall remain in effect until the commissioner either issues a renewed certificate, or denies the renewal.  If denied, the debt-management provider may, within 30 days of receipt of the written notice of denial pursuant to subsection c. of section 5 of this act, appeal the decision in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.).  Pending the final outcome of this appeal process, the provider shall be permitted to continue to provide debt-management services to individuals with whom it already has debt-management agreements.  If the denial of the registration renewal is affirmed, the commissioner shall, subject to the final order from the appeal process, oversee the transfer of any on-going debt-management agreements to another registered debt-management provider or the return of all unexpended money received from or on behalf of individuals with agreements that is under the control of the provider.

     8.    a. If a debt-management provider holds a current license or certificate of registration issued in another state, authorizing it to provide debt-management services in that state, the provider may submit to the commissioner a copy of this other state’s license or registration, along with a copy of the other state’s application for this license or registration, and this shall be accepted by the commissioner as an application for a certificate of registration or registration renewal, as appropriate, in lieu of an application set forth in sections 4 and 6 of this act, if:

     (1)   the submission from the other state contains information and supporting materials substantially similar or more comprehensive than that required in an application set forth in sections 4 or 6 of this act;

     (2)   the submission contains, in addition to any information and supporting material provided under subsection a. of this section, and even if the information or supporting material is the same as that provided under subsection a. of this section:

     (a)   any name, business address, or other contact information, as set forth under paragraph (1) of subsection b. of section 4 of this act;

     (b)   any in-State location at which debt-management services shall be provided, as set forth under paragraph (2) of subsection b. of section 4 of this act;

     (c)   a description of the three educational programs most commonly used or to be used for providing debt-management services, with copies of any materials for those programs, as set forth under paragraph (19) of subsection b. of section 4 of this act; 

     (d)   the forms to debt-management agreements to be used to provide debt-management services, as set forth under paragraph (20) of subsection b. of section 4 of this act; and

     (e)   the schedule of fees and charges to be used with respect to providing debt-management services, as set forth under paragraph (21) of subsection b. of section 4 of this act;

     (3)   the submission is properly certified with an indication that all information and supporting materials are current or, to the extent not current on the original form from the other state, properly noted and updated to be current by an attachment to the original form;

     (4)   the submission is accompanied by all necessary information and fees required to perform criminal history record background checks, as set forth under subsection c. of section 4 of this act; and

     (5)   the submission is accompanied by a nonrefundable application fee, in an amount to be prescribed by the commissioner by regulation.

     b.    The submission in lieu of an application by an out-of-State debt-management provider pursuant to this section shall be reviewed, and a certificate of registration or registration renewal issued or denied, in the same manner as set forth for an application pursuant to sections 5 and 7 of this act.

     9.    An applicant for a certificate of registration as a debt-management provider, or a currently registered debt-management provider, shall:

      a.    Notify the commissioner within 10 days of any change involving the information or materials previously submitted to the commissioner concerning:

     (1)   any name, business address, or other contact information, as set forth under paragraph (1) of subsection b. of section 4 of this act;

     (2)   an in-State location at which debt-management services shall be provided, as set forth under paragraph (2) of subsection b. of section 4 of this act;

     (3)   coverage by a surety bond or other form of financial assurance, as set forth under paragraph (6) of subsection b. of section 4 of this act;

     (4)   insurance coverage, as set forth under paragraph (7) of subsection b. of section 4 of this act;

     (5)   any material civil or criminal judgment or litigation, and any material administrative or enforcement action by a governmental agency, as set forth under paragraph (15) of subsection b. of section 4 of this act;

     (6)   the forms for debt-management agreements to be used to provide debt-management services, as set forth under paragraph (20) of subsection b. of section 4 of this act; or

     (7)   the schedule of fees and charges to be used with respect to providing debt-management services, as set forth under paragraph (21) of subsection b. of section 4 of this act; and

     b.    Notify the commissioner within 30 days of receipt of service of any notice of a civil action for a violation of this act by any person, in order for the commissioner to make a determination as to whether to investigate the allegations presented in the civil action, as authorized by section 22 of this act.    

 

     10.  a.  Except as otherwise permitted by section 11 of this act, an applicant for a certificate of registration or registration renewal as a debt-management provider shall file a surety bond with the commissioner with its application.  The surety bond shall have payment conditioned upon noncompliance with this act, and shall:

     (1)   be in effect during the period of registration, and for two years after the debt-management provider ceases to provide any further debt-management services to any individual in this State; and

     (2)   apply to the benefit of this State and to any individuals who reside in this State when executing debt-management agreements with the provider, as their interests may appear.

     b.    The surety bond shall be in an amount set forth by the commissioner by regulation, as determined by an examination of the financial condition and business experience of the debt-management provider, the history of the provider in performing debt-management services, the risk to individuals with whom the provider makes agreements, and any other factor deemed appropriate by the commissioner.

     c.     The surety bond shall be issued by a bonding, surety, or insurance company authorized to do business in this State and rated with at least an “A” rating or equivalent by a nationally recognized rating organization.

     d.    If the amount of a surety bond is reduced by payment of a judgment or claim, the debt-management provider shall immediately notify the commissioner and, within 30 days after providing this notice, file a new or additional surety bond in an amount determined by the commissioner by regulation.  The amount of the new or additional surety bond shall be at least the amount of the surety bond that is reduced by the judgment or claim.

     e.     If the surety bond is terminated by the bonding, surety, or insurance company, the debt-management provider shall immediately notify the commissioner and file a new surety bond in at least the same amount as the surety bond being terminated.

 

     11.  In lieu of the surety bond requirement for an applicant for a certificate of registration or registration renewal as a debt-management provider, a provider may file with the commissioner:

     a.     A certificate of insurance, issued by an insurance company authorized to do business in this State and rated with at least an “A” rating or equivalent by a nationally recognized rating organization:

     (1)   with no deductible; or

     (2)   if the provider supplies a bond in the amount of $5,000, a deductible not exceeding $5,000; or

     b.    With the approval of the commissioner:

     (1)   an irrevocable letter of credit, issued or confirmed by a financial institution approved by the commissioner, payable upon presentation of an order or other certificate by the commissioner determining that the provider has not complied with this act; or

     (2)  bonds or other obligations of the United States or guaranteed by the United States, or bonds or other obligations of this State or political subdivision of this State or guaranteed by this State or its political subdivision, to be deposited and maintained with a financial institution approved by the commissioner for this purpose.

     Other than with respect to the specific form of financial assurance, the provisions of section 10 shall otherwise apply to the debt-management provider.

 

     12.  An applicant for a certificate of registration or registration renewal as a debt-management provider shall provide to the commissioner evidence of insurance coverage, in the amount of at least $250,000 and a deductible not to exceed $5,000, as set forth by the commissioner by regulation, issued by an insurance company authorized to do business in this State and rated with at least an “A” rating or equivalent by a nationally recognized rating organization.  This coverage shall insure against the risks of dishonesty, fraud, theft, and other misconduct committed by the provider or any officer, director, owner, employee, or agent.  The coverage shall be payable for the benefit of the provider, this State, and any individuals who reside in this State when executing debt-management agreements with the provider, as their interests may appear.  The coverage shall not be subject to cancellation by the provider or the issuing insurance company until at least 60 days after written notice has been delivered to the commissioner.

 

     13.  A certified debt-management provider shall maintain a toll-free communication system, including, but not limited to, a toll-free telephone number, staffed at a level that reasonably permits individuals to communicate with the provider regarding debt-management services with appropriate provider employees, including a certified counselor or certified debt specialist, during ordinary business hours.

 

     14.  a. Prior to providing any debt-management service for an individual, a debt-management provider shall give the individual an itemized list of goods and services, and the corresponding fee or other charge for each.  This list shall be in a clear and conspicuous form, that the individual may maintain whether or not assenting to a debt-management agreement with the provider, and shall indicate which goods and services the provider offers:

     (1)   for a charge, by dollar amount or other method of determination, independent of whether the individual enters into a debt-management agreement with the provider;

     (2)   for a charge, by dollar amount or other method of determination, if the individual enters into a debt-management agreement, which shall be based upon the following categories and subject to any applicable limitations set forth under section 18 of this act:

     (a)   set-up fee;

     (b)   monthly service fee;

     (c)   debt-management settlement fee; and

     (d)   goods and services outside of those provided in connection with a debt settlement plan.

     b.    A debt-management provider shall not provide any debt-management service to an individual, unless a certified counselor or certified debt specialist of the provider:

     (1)   provides the individual with reasonable education about the management of personal finance;

     (2)   has prepared a financial analysis of the individual; and

     (3)   if the individual will make payments on any debt as part of the debt-management services:

     (a)   has completed a debt-management plan for the individual;

     (b)   has made a determination, based upon the financial analysis prepared pursuant to paragraph (2) of this subsection and other available information, that the plan is suitable for the individual and will be able to meet the payment obligations under the plan; and

     (c)   reasonably believes that each creditor of the individual listed as a participating creditor under the plan pursuant to subsection c. of this section will accept payment of the individual’s debt as provided in the plan.

     c.     A debt-management provider shall not enter into a debt-management agreement to execute a debt-management plan with an individual until it:

     (1)   provides the individual with a copy of the individual’s financial analysis and debt-management plan, prepared as required under paragraphs (2) and (3) of subsection b. of this section, and which the individual may keep regardless of whether the individual assents to the debt-management agreement;

     (2)   informs the individual of the availability of assistance through the provider’s toll-free communication system established pursuant to section 13 of this act; and

     (3)   with respect to all creditors identified by the individual or otherwise determined by the provider, presents the individual with a list of:

     (a)   creditors that the provider reasonably expects to participate in the debt-management plan and grant concessions concerning a debt;

     (b) creditors that the provider reasonably expects to participate in the debt-management plan but not grant any concessions concerning a debt;

     (c) creditors that the provider reasonably expects not to participate in the debt-management plan; and

     (d)   all other creditors.

     d.    A debt-management provider shall inform an individual with whom it seeks to enter into a debt-management agreement, in a separate notice that may be retained whether or not the individual assents to the agreement, stating:

     (1)   the name and business address of the provider;

     (2)   an indication that debt-management plans are not suitable for all individuals, and the individual may inquire with the provider about other means, including but not limited to bankruptcy, to handle the individual’s indebtedness;

     (3)   an indication that a debt-management plan may adversely impact the individual’s credit rating or credit score, making it more difficult to obtain credit;

     (4)   an indication that nonpayment of debt may lead creditors to increase finance and other charges or undertake collection actions against the individual, including litigation;

     (5)   if applicable, an indication that the provider may receive compensation from a creditor of the individual; and

     (6)   if applicable, an indication that if a creditor settles for less than the full amount of a debt owed as a result of a debt-management plan, it may result in the creation of taxable income to the individual, even though the individual did not actually receive any money.

 

     15.  a. A debt-management agreement shall be in a written format and:

     (1)   be dated and signed by the debt-management provider and the individual;

     (2)   include the name of the individual and the address where the individual resides;

     (3)   include the name, business address, telephone number, and other contact information for the provider;

     (4)   be delivered to the individual immediately upon formation and execution of the agreement; and

     (5)   disclose the following:

     (a)   the debt-management services and other services to be provided;

     (b)   the amount, or method of determination, of all fees, individually itemized, to be paid by or on behalf of the individual;

     (c)   the schedule of payments to be made by or on behalf of the individual, including the amount of each payment and the date by which it is due, in accordance with a debt-management plan;

     (d)   if the debt-management plan provides for regular, periodic payments to multiple creditors, a breakdown of the schedule of payments listed under subparagraph (c) of this paragraph that includes each creditor to which payment will be made, the amount owed to each creditor, and any concession on a debt the provider reasonably believes each creditor will offer;

     (e)   a list of each creditor that the provider reasonably believes will not participate in the debt-management plan and to which the provider shall not direct any payment;

     (f)    a notice that the provider shall notify the individual within five days of learning of a creditor’s final decision to reject or withdraw from a debt-management plan, which indicates the name of the creditor and that this change grants the individual the right to modify or cancel the agreement in accordance with section 16 of this act;

     (g)   a notice of the provider’s methods of compliance with respect to record keeping and periodic reports to the individual pursuant to section 19 of this act;

     (h)   that the individual authorizes any financial institution in which the provider has established a trust account to disclose to the commissioner any financial records relating to that trust account;

     (i)    a notice that the provider may cancel the debt-management agreement for good cause, and return any unexpended moneys of the individual held in the provider’s trust account as set forth in subsection d. of section 16 of this act;

     (j)    a notice that the individual may cancel the debt-management agreement in accordance with section 16 of this act; and

     (k)   a notice that the provider may contact the department, as the regulatory entity overseeing the debt-management activities of the provider, for further assistance or to file a complaint, and include the mailing address, telephone number, and Internet website of the department.

     b.    (1) A debt-management agreement may confer on the debt-management provider a power of attorney to settle an individual’s debt for no more than 50% of the principal amount of that debt.  An agreement shall not confer a power of attorney to settle a debt for more than 50% of the principal amount of that debt, but may confer a power of attorney to negotiate with creditors of the individual regarding an amount of more than 50% of the principal amount of a debt.  An agreement shall provide that the provider shall obtain the approval of the individual of a negotiated settlement of more than 50% of the principal amount owed by an individual in order to finalize that negotiated settlement between the creditor and individual.

     (2)   Any grant of a power of attorney provided by a debt-management agreement shall be automatically revoked if the agreement is subsequently cancelled by either party to the agreement.

     c.     A debt-management agreement shall not:

     (1)   provide for the application of the law of any jurisdiction other than the United States and this State;

     (2)   contain any provision, other than as set forth in a pre-dispute arbitration clause, modifying or limiting otherwise available forums or procedural rights, including the right to a jury trial, that are generally available to the individual under the law;

     (3)   contain any provision that modifies or limits the individual’s available remedies under this act and any other applicable law; and

     (4)   contain any provision that limits or releases the liability of any person for failing to perform in accordance with a debt-management agreement or violating any provision of this act, or indemnifies the person from liability arising under the agreement or this act.

     d.    (1) Any debt-management agreement that violates any provision of subsections b. or c. of this section shall be void.

     (2)   Any debt-management agreement signed and executed between an individual and debt-management provider without a valid registration in this State shall be voidable by the individual.


     16.  a. (1) An individual may cancel a debt-management agreement for any reason, and receive a full refund of any moneys paid to a debt-management provider, within three business days after the individual assents to the agreement.  However, this period shall be extended to 30 days with respect to any agreement that does not comply with the cancellation notice requirement set forth in subsection c. of this section, or the requirements concerning debt-management agreements set forth in section 15 of this act.

     (2)   An individual may waive this right to cancel, if a personal financial emergency necessitates the disbursement of an individual’s money to a creditor before the expiration of the period stated in subsection a. of this section, and the individual provides the debt-management provider a signed and dated written statement describing the circumstances that necessitate the waiver and an explicit acknowledgment of waiving this right.

     b.    An individual may cancel a debt-management agreement at any time after the initial period stated in subsection a. of this section, however, the provider shall only be required to refund:

     (1)   any unexpended money received from the individual and held in a trust account for the reduction or satisfaction of the individual’s debt; and

     (2)   with respect to an agreement that provided for creditors to settle debts for less than their principal amount, 65% of any portion of the set-up fee, as indicated to the individual pursuant to subparagraph (a) of paragraph (2) of subsection a. of section 14 of this act, that has not been credited against the provider’s debt-management settlement fee, as indicated to the individual pursuant to subparagraph (c) of paragraph (2) of subsection a. of section 14 of this act.

     c.     The debt-management agreement shall be accompanied by a cancellation notice that contains the following text in clearly legible, bold-face type:

 

Notice of Right to Cancel

 

     You may cancel this agreement, without penalty or obligation, at any time within three business days after initially consenting to the agreement as indicated by your signature, which may have been done electronically.  This period under law extends to 30 days if certain requirements by [name of debt-management provider] were not fulfilled when forming the agreement.

     To cancel this agreement during this period, send this notice or another written notice, which may be an e-mail, to [name of debt-management provider] at [provider’s business address] or [provider’s electronic-mail address].  If you cancel the agreement within the 3-day or 30-day period, if applicable, [name of debt-management provider] will refund all money you have already paid to [name of debt-management provider] regarding the agreement.

     You may also cancel this agreement at a later time, but in accordance with the agreement and applicable law, [name of debt-management provider] may not be required to refund certain fees, or portions of fees, already paid to [name of debt-management provider].

 

                                                I hereby cancel this agreement,

 

                                                [name of individual]  

                                                [signature of individual]        

                                                [date]                                     

 

     d.    A debt-management provider may cancel an agreement with an individual if a payment from that individual, as required by the agreement, is at least 60 days overdue.  The provider shall return any unexpended money received from the individual and held in a trust account and, if applicable, a portion of any set-up fee in the same manner as set forth in subsection b. of this section.

 

     17.  a.  A debt-management provider shall hold in trust all money paid to it by or on behalf of an individual with whom it has a debt-management agreement for distribution to creditors in accordance with an agreed upon debt-management plan.  Within two business days after receipt, the provider shall deposit the money in a trust account as indicated in the information submitted to the commissioner pursuant to paragraph (16) of subsection b. of section 4 of this act.

     b.    The money held in trust by a debt-management provider shall not be deemed the property of the provider and shall not be made available to the creditors of the provider by way of any proceeding, order, or judgment.

     c.     With respect to the administration of any trust account, the debt-management provider shall:

     (1)   maintain separate records of accounts for each individual for whom the provider is furnishing debt-management services;

     (2)   disburse money from a trust account to creditors of an individual as set forth in the debt-management plan agreed to as part of a debt-management agreement, except that:

     (a)   the provider may delay payment to the extent that a payment by the individual is not final; and

     (b)   if the debt-management plan provides for regular, periodic payments to multiple creditors, this disbursement shall comply with the due dates established by each creditor; and

     (3)   promptly correct any payments that are not made or misdirected as a result of an error by the provider, and reimburse the individual for any cost or fee imposed by a creditor as a result of the non-payment or misdirected payment;

     d.    (1)  A debt-management provider shall ensure that a trust account at all times has a cash balance equal to the sum of the balances of each individual’s account within the trust account.

     (2)   The provider shall reconcile the trust account at least once per month.  This reconciliation shall compare the cash balance in the trust account with the sum of the balances in each individual’s account within the trust account.  If the provider has more than one trust account, each one shall be individually reconciled.

     e.     If a debt-management provider knows, or has a reasonable suspicion, of embezzlement or other unlawful appropriation of money held in trust, the provider shall immediately notify the department in a manner established by the commissioner by regulation.  Unless otherwise set forth in regulation, within five days of first notifying the department of any occurrence of unlawful appropriation, the provider shall provide the department with further information describing the remedial action taken or to be taken in response to the occurrence.

     f.     If the debt-management provider intends to relocate any trust account to another financial institution, and this institution or account number is not included in the information submitted to the commissioner pursuant to paragraph (16) of subsection b. of section 4 of this act, the provider shall promptly inform the commissioner of the name, business address, and other contact information for the new financial institution and corresponding trust account number.

 

     18.  a.  A debt-management provider shall not impose directly or indirectly any fee or other charge on an individual for debt-management services except as permitted pursuant to this section.  If a provider imposes a fee or other charge not authorized by this section, the individual may void the agreement.

     b.    Except as provided in subsection d. of this section, a debt-management provider shall not impose upon an individual any fee or other charge pursuant to this section until the provider and individual have signed and executed a debt-management agreement that complies with the provisions of this act.

     c.     Upon assenting to a debt-management agreement, a debt-management provider:

     (1)   may impose a fee or other charge upon an individual for educational or counseling services, based upon the nature and extent of the services as determined by the commissioner by regulation; and

     (2)   additionally may impose, as set forth under subparagraph (a) or (b) of this paragraph, but not both:

     (a)   if an individual assents to a debt-management plan that involves creditors reducing finance charges or fees for late payment, default, or delinquency, the provider may charge:

     (i)    a fee not to exceed $50 or a higher amount set forth under regulation for consultation, obtaining a credit report, establishing an account, and similar set-up activities; and

     (ii)   a monthly service fee, not to exceed $10 or a higher amount set forth in regulation, multiplied by the number of creditors remaining in the plan at the time the fee is assessed, but not more than $50 total, or a higher amount set forth in regulation, in any month.

     (b)   If an individual assents to a debt-management plan that involves creditors settling debts for less than their principal amount, a provider may charge:

     (i)    a fee for consultation, obtaining a credit report, establishing an account, and similar set-up activities, in an amount not to exceed the lesser of $400 or four percent of the individual’s total debt at the inception of the plan, or a higher amount set forth in regulation;

     (ii)   a monthly service fee, not to exceed $10 or a higher amount set forth in regulation, multiplied by the number of creditors remaining in the plan at the time the fee is assessed, but not more than $50 total, or a higher amount set forth in regulation, in any month; and

     (iii)  a debt-management settlement fee for each debt settled with each individual creditor, not to exceed 30% of the difference between the debt originally owed and the amount the creditor accepts as settlement for that debt, less a credit for any fee or other charge collected from the individual pursuant to sub-subparagraphs (i) and (ii) of this subparagraph.

     d.    If an individual does not assent to a debt-management agreement, a debt-management provider may still receive a fee or other charge for educational or counseling services provided to the individual in an amount not to exceed $100, or a higher amount set forth in regulation based upon the nature and extent of the services.  This fee shall be refunded to the individual if, within 90 days of the completion or termination of any educational or counseling services, the individual assents to a debt-management agreement with the debt-management provider.

     e.     A debt-management provider may impose a fee or other charge not to exceed $25, or a higher amount set forth in regulation, if any payment made to a provider by an individual is dishonored.

 

     19.  a.  A debt-management provider shall provide a record in writing to any individual with whom it has a debt-management plan as part of a debt-management agreement, indicating:

     (1)   the amount of money received from the individual, since the inception of the plan and since the date of the immediately preceding report;

     (2)   any amounts deducted by the provider for fees or other charges from the amount received from the individual; 

     (3)   the amounts and dates of disbursement made on the individual’s behalf, or by the individual upon the direction of the provider, to each creditor since the date of the immediately preceding report;

     (4)   the amount held in reserve in a trust account; and

     (5)   if, since the immediately preceding report, a creditor has agreed to accept as full settlement on a debt an amount that is less than the principal amount owed:

     (a)   the total amount and terms of the settlement;

     (b)   the amount of the total debt when the individual assents to the debt-management plan;

     (c)   the amount of the remaining debt when the creditor agreed to the settlement; and

     (d)   the calculation of the debt-management settlement fee, in accordance with sub-subparagraph (iii) of subparagraph (b) of paragraph (2) of subsection c. of section 18 of this act.

     b.    A debt-management provider shall forward this report to an individual:

     (1)   at least once each month;

     (2)   within five business days after a request for a report by the individual, except that the provider shall not be required to honor more than one request each month; and

     (3)   upon fulfillment or earlier cancellation of a debt-management agreement.

     c.     A debt-management provider shall maintain records for each individual with whom it has a debt-management agreement for not less than five years after the fulfillment or earlier cancellation of the agreement, and provide a record to an individual within a reasonable time following a request for this record.

 

     20.  a. A debt-management provider may satisfy its written notice, disclosure, and periodic reporting requirements under this act, including the requirements for an itemized list of goods and services, financial analysis, and debt-management plan pursuant to section 14 of this act, a debt-management agreement pursuant to section 15 of this act, and records on activities pursuant to section 19 of this act, and obtain an individual’s consent for services, through the Internet or other electronic means, if the provider obtains the individual’s consent in the manner provided by section 101(c)(1) of the federal “Electronic Signatures in Global and National Commerce Act,” Pub.L.106-229 (15 U.S.C. s.7001(c)(1)).  Any notice, disclosure, or periodic report provided through the Internet or other electronic means shall be presented in a printable format.

     b.    At the time of providing any materials pursuant to subsection a. of this section, the debt-management provider shall inform the individual that upon a written, telephonic, or electronic request, the provider shall provide a written copy of any requested material.  This request for a written copy shall be fulfilled within the same timeframe as set forth for individual requests for materials set forth throughout this act.

     c.     If an individual consents to the use of electronic communication pursuant to section 101(c)(1) of the federal “Electronic Signatures in Global and National Commerce Act,” Pub.L.106-229 (15 U.S.C. s.7001(c)(1)), but then withdraws this consent as permitted under that federal law, a debt-management provider may, upon 30 days notice, cancel a debt-management agreement with the individual.  However, the provider’s 30-day notice shall inform the individual that the agreement shall remain valid if the individual renews, pursuant to section 101(c)(1) of the federal act, the consent to use electronic communications, and the notice of cancellation shall be void if the individual renews his consent within the 30-day timeframe.  

     d.    A debt-management provider that maintains an Internet website to conduct any activities pursuant to this section shall disclose on the home page of its website, or on a separate page that is linked in a clear and conspicuous manner from the home page:

     (1)   its name and all names under which it conducts business;

     (2)   its principal business address, telephone number, electronic-mail address, and Internet website; and

     (3)   the name of its principal officers.

     e.     The provisions of this section, and of this act generally, modify, limit, and supersede the federal “Electronic Signatures in Global and National Commerce Act,” Pub.L.106-229 (15 U.S.C. s.7001 et seq.), but do not modify, limit, or supersede section 101(c) of that act (15 U.S.C. s.7001(c)) or authorize electronic delivery of any of the notices described in section 103(b) of that act (15 U.S.C. s.7003(b)).

 

     21.  A debt-management provider, in addition to any other prohibitions established by this act, shall not:

     a.     Misappropriate or misapply money held in trust;

     b.    Initiate a transfer from an individual’s account with a financial institution or other person, unless the transfer is:

     (1)   properly authorized by a debt-management agreement with an individual; or

     (2)   a return of money to the individual, due to the cancellation of the agreement or other reason;

     c.     Offer a gift or bonus, premium, reward, or other compensation to an individual in exchange for executing a debt-management agreement;

     d.    Offer, pay, or otherwise provide a gift or bonus, premium, reward, or other compensation to a person for referring an individual as a prospective customer for debt-management services, if the person making the referral has a financial interest in the outcome of any services provided the customer and that interest is communicated to the prospective customer by either the debt-management provider or referring person;

     e.     Receive a bonus, commission, benefit, or other compensation for making any referral of an individual to any person;

     f.     Structure a debt-management plan in a manner that results in a negative amortization of any individual’s debt, unless a creditor that is owed a negatively amortizing debt agrees to refund or waive the finance charge upon payment of the principal amount of the debt;

     g.     Compensate its employees on the basis of any formula that incorporates the volume of individuals the employee assists in entering into debt-management agreements with the provider;

     h.     Settle a debt or lead an individual to believe that a payment to a creditor shall settle a debt unless, at the time of settlement, the individual receives a certification from the creditor that the payment represents the settlement of the debt;

     i.      Make any representation that:

     (1)   the debt-management provider will furnish money to pay bills or prevent attachments for an individual;

     (2)   the payment of a certain amount on an individual’s debts will permit satisfaction of a certain amount or range of indebtedness; or

     (3)   participation in a debt-management plan may or will prevent or stay any litigation or other legal proceeding, including garnishment, attachment, repossession, or eviction for an individual;

     j.     Represent that it is authorized or competent to furnish legal advice or perform legal services;

     k.    Represent that it is:

     (1)   a not-for-profit entity unless it is organized and properly operating as a not-for profit entity under federal law and the state of its incorporation; or

     (2)   a tax-exempt entity unless it has received certification of tax-exempt status from the federal Internal Revenue Service and is properly operating as a not-for-profit entity under federal law and the state of its incorporation;

     l.      Accept a confession of judgment or power of attorney to confess judgment against an individual;

     m.    Employ any unfair, unconscionable, or deceptive act or practice, including the knowing omission of any material information;

     n.     Purchase a debt or obligation of an individual to whom it provides debt-management services;

     o.    Receive from or on behalf of an individual to whom it provides debt-management services a promissory note or other negotiable instrument other than a check or demand draft;

     p.    Lend money or provide credit to an individual to whom it provides debt-management services, except as a deferral of a debt-management settlement fee at no additional expense to the individual;

     q.    Obtain from an individual to whom it provides debt-management services a mortgage or other security interest from any person in connection with the services provided to the individual;

     r.     Disclose, except as permitted by federal and State law, the identity or personal identifying information of an individual to whom it provides debt-management services, except to:

     (1)   the commissioner or department, as appropriate for handling regulatory oversight of debt-management services;

     (2)   a creditor of the individual, to the extent necessary to secure the cooperation of the creditor to a debt-management plan; or

     (3)   to the extent necessary to administer a debt-management plan;

     s.     Except as otherwise established by an agreed upon debt-management settlement fee, provide an individual to whom it provides debt-management services less than the full benefit of any concession on a debt arranged by the provider;

     t.     Charge an individual to whom it provides debt-management services, or provide credit or other insurance, coupons for goods or services, club memberships, access to computers or the Internet, or any other matter not directly related to any service concerning the individual’s personal finance;

     u.     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 from a lender or service provider, except for educational or counseling services required pursuant to a government-sponsored program; and

     v.     Purchase goods, services, or facilities from a person, if an employee of the debt-management provider, or a person that the provider reasonably should know is an affiliate of the provider, unless the person supplies goods, services, or facilities generally and supplies them to the debt-management provider at the same cost as charged to others.

 

     22.  a. The commissioner may take appropriate actions to enforce the provisions of this act, including investigations, requests for voluntary compliance, making references on activities to the Attorney General, and seeking remedies as provided by section 23 of this act.

     b.    The commissioner may investigate and examine the activities, books, accounts, and other records of any person that provides, offers to provide, or agrees to provide debt-management services to individuals residing in this State.  With respect to any investigation, the commissioner may:

     (1)   charge the person the reasonable expenses, including attorney’s fees, necessarily incurred in conducting the investigation;

     (2)   require the person to submit to testimony under oath as to any facts or circumstances concerning the matter being investigated; and

     (3)   obtain a court order from a court of competent jurisdiction authorizing the commissioner to seize any money, books, accounts, and other property of a person related to a trust account that is under the control of a financial institution.

     c.     The commissioner may enter into cooperative arrangements with any other state or federal agency having authority over debt-management providers or debt-management services, and exchange information with any agency about any person under investigation by the commissioner.

 

     23.  a. The commissioner shall enforce this act and any regulations promulgated pursuant to this act by:

     (1)   suspending, revoking, refusing to renew, or denying a certificate of registration, if:

     (a)   a debt-management provider violates any provision of this act;

     (b)   a fact or condition develops that, had it existed when a provider applied for a certificate of registration or registration renewal, would have been grounds for a denial of the registration;

     (c)   a provider becomes insolvent, based upon financial criteria set forth by the commissioner by regulation;

     (d)   a provider refuses or otherwise obstructs the commissioner, or makes a material misrepresentation or omission to the commissioner, regarding any investigation or examination conducted pursuant to section 22 of this act; or

     (e)   the provider does not respond within a reasonable time and in an appropriate form to any communication from the commissioner.

     If the commissioner suspends, revokes, refuses to renew, or denies a certificate of registration pursuant to this subsection, the commissioner may additionally obtain a court order from a court of competent jurisdiction authorizing the commissioner to seize any money, books, accounts, and other property of a provider related to a trust account that is under the control of a financial institution, as set forth under paragraph (3) of subsection b. of section 22 of this act.  Any decision by the commissioner regarding the suspension, revocation, refusal to renew, or denial of a certificate of registration may be appealed in accordance with the “Administrative Procedure Act,” P.L.1968, c.410 (C.52:14B-1 et seq.).

     (2)   issuance of cease and desist orders, enforceable against a debt-management provider or any officer, director, owner, employee, or agent of the provider, or any other appropriate person;

     (3)   ordering a civil penalty in an amount not to exceed $10,000 for each violation;

     (4)   ordering restitution to any person harmed by a violation; and

     (5)   entering as an intervenor in any private cause of action filed pursuant to section 24 of this act, as appropriate.

     b.    The commissioner may, with respect to any enforcement action under this section, be reimbursed for the reasonable expenses of that action, including attorney’s fees.

 

     24.  A person may file a private cause of action in a court of competent jurisdiction against any person who violates any provision of this act. 

     a.     The person initiating the action may recover:

     (1)   (a) compensatory damages, including for noneconomic injury, or $5,000, whichever is greater, for each violation, except for monies already paid to creditors; or

     (b)   treble damages calculated pursuant to subparagraph (a) of this paragraph, if the private cause of action involves an individual who voided a debt-management agreement due to a debt-management provider imposing a fee or other charge not permitted by section 18 of this act;

     (2)   punitive damages; and

     (3)   reasonable attorney’s fees and costs.

     b.    (1) A debt-management provider shall not be liable in a private cause of action initiated pursuant to this section if the provider’s action or omission was not intentional and resulted from a good faith error, notwithstanding the maintenance of procedures adapted to avoid any error; except that, this good faith defense shall not apply if, in connection with any violation concerning fees or other charges imposed, the provider received more money than authorized by this act or an agreement with an individual, and the provider did not refund the excess money to the individual within two business days of discovering the violation. 

     (2) An error in legal judgment with respect to a provider’s obligations under this act shall not be deemed a good faith error.

     c.     Any private cause of action shall be commenced within two years of the violation or within two years as measured, if applicable, from the latest of:

     (1)   an individual’s last transmission of money to a debt-management provider;

     (2)   an individual’s last transmission of money to a creditor at the direction of the provider pursuant to a debt-management plan;

     (3)   the provider’s last disbursement to a creditor of the individual;

     (4)   the provider’s last report presented to an individual pursuant to subsection b. of section 19 of this act; or

     (5)   the date on which an individual discovered or reasonably should have discovered the information giving rise to the private cause of action.

     d.    If a violation of this act is also a violation of the consumer fraud act, P.L.1960, c.39 (C.56:8-1 et seq.), a person shall not be permitted to collect any damages, or make another recovery of any kind, under both enactments.

 

     25.  The following are repealed:

            P.L.1979, c.16 (C.17:16G-1 et seq.); and

            Section 3 of P.L.2005, c.287 (C.17:16G-9).

 

     26.  This act shall take effect on the first day of the thirteenth month next following enactment, but the Commissioner of Banking and Insurance may take any anticipatory administrative action in advance thereof as shall be necessary for the implementation of this act.

 

 

STATEMENT

 

     This bill, titled the “Debt-Management Services Act of New Jersey,” is based upon a national model act drafted by the National Conference of Commissioners on Uniform State Laws.  The bill intends to provide a comprehensive reworking of the State’s debt settlement law, P.L.1979, c.16 (C.17:16G-1 et seq.), by repealing this existing law and establishing a new registration requirement for debt-management providers (covering credit counseling and debt settlement activities), mandatory notices and other provisions for consumer agreements, and enforcement through the Department of Banking and Insurance, as well as private causes of action.        

     Under the bill, a debt-management provider, which may be organized for-profit or nonprofit, shall not provide, offer to provide, or agree to provide any debt-management services in this State unless the provider is registered with the department.  An application for registration shall be in a form prescribed by the Commissioner of Banking and Insurance, properly certified, and which documents the applicant’s contact information, business organization, proof of coverage by a surety bond or other form of financial assurance and insurance coverage, past and proposed business practices, and includes a submission for criminal history record background checks on officers, directors, owners, and employees and agents authorized to access the applicant’s trust accounts containing consumer money.  The application shall also include evidence of accreditation for debt-management services by an independent accrediting organization recognized by the commissioner pursuant to regulation, and an affirmation, with supporting evidence as appropriate, that each consumer counselor employed is, or will become within 12 months of being employed, properly certified for counseling based upon accreditation from a similarly recognized independent accrediting organization.

     Within 120 days of receipt of an application for registration, the commissioner shall issue a one-year certificate of registration to an applicant in order for the applicant to act as a debt-management provider in this State, if: the application and all supporting materials are provided; and the commissioner finds the applicant is duly qualified, based upon an examination of the financial responsibility, experience, character, and general fitness of the applicant and its owners, directors, employees, and agents.  Under the bill, the commissioner may extend this review period for up to an additional 60 days, or issue a temporary certificate of registration, to last no more than 180 days after issuance, for an applicant that has submitted an incomplete application but is making a timely effort to obtain any necessary information or supporting material.

     A registered debt-management provider shall obtain a renewal of its registration annually in order to continue conducting business in this State.  This application for registration renewal, containing updated information for review by the commissioner as well as financial disclosures concerning the previous year’s business operations, shall be filed not more than 60 days, but not less than 30 days, prior to the expiration of the debt-management provider’s current registration.  If the commissioner denies the registration renewal, the debt-management provider, pending outcome of an appeal of the denial, shall be permitted to continue to provide services to individuals with whom it already has debt-management agreements.  If the denial is affirmed, the commissioner shall oversee the transfer of any on-going debt-management agreements to another registered debt-management provider or the return of all unexpended money received from or on behalf of individuals with agreements under the control of the provider.

     A debt-management provider holding a current license or certificate of registration issued in another state to provide debt-management services may submit to the commissioner a copy of this other state’s license or registration, along with a copy of the other state’s application for this license or registration, and this shall be accepted by the commissioner as an application for this State, if:  (1)  the submission from the other state contains information and supporting materials substantially similar or more comprehensive than that required by an application prepared pursuant to this bill; and (2)  the submission contains additional information specific to conducting business in this State, including a listing of in-State service locations and a submission for criminal history record background checks on officers, directors, owners, employees, and agents.  This submission in lieu of a standard application shall be reviewed, and a certificate of registration (or registration renewal) issued or denied, in the same manner as set forth for a standard, in-State application.

     Any nonprofit social service agency or nonprofit consumer credit counseling agency that was licensed as a debt adjuster pursuant to P.L.1979, c.16 (C.17:16G-1 et seq.) prior to the effective date of this bill may continue on or after that effective date to provide debt-management services, so long as the nonprofit social service agency or nonprofit consumer credit counseling agency applies and is registered accordingly as a debt-management provider pursuant to this bill.

     Prior to providing any debt-management services for any individual, a debt-management provider shall give the individual an itemized list of goods and services, and the corresponding fee or other charge for each.  This list shall indicate all goods and services the provider offers for a charge, by dollar amount or other method of determination, which may include with respect to a debt-management agreement a set-up fee, monthly service fee, and debt-management settlement fee.  The debt-management provider shall not provide any debt-management service to an individual, unless a properly certified consumer counselor provides the individual with reasonable education about the management of personal finance, has prepared a financial analysis of the individual, and made a determination about the suitability of any payment plan to reduce debt prepared for the individual. 

     Further, in a separate notice, the debt-management provider shall inform the individual, prior to entering an agreement, of the potential financial and legal consequences of entering the agreement, which shall include: (1) an indication that a debt-management plan may adversely impact the individual’s credit rating or credit score, making it more difficult to obtain credit; (2)  an indication that nonpayment of debt may lead creditors to increase finance and other charges or undertake collection actions against the individual, including litigation; and (3) if applicable, an indication that if a creditor settles for less than the full amount of a debt owed as a result of a debt-management plan, it may result in the creation of taxable income to the individual, even though the individual did not actually receive any money.

     The debt-management agreement shall be in writing, in accordance with the provisions of the bill.  Any such agreement may confer on the debt-management provider a power of attorney to settle an individual’s debt for no more than 50% of the principal amount of that debt.  An agreement shall provide that the debt-management provider obtain approval from the individual of a negotiated settlement of more than 50% of the principal amount owed on any debt.  An agreement shall not: provide for the application of the law of any jurisdiction other than the United States and this State; contain any provision modifying or limiting otherwise available legal forums or procedural rights, except as set forth in any pre-dispute arbitration clause; and contain any provision that modifies or limits the individual’s available remedies under this bill and any other applicable law.

     An individual may cancel a debt-management agreement for any reason, and receive a full refund of any moneys paid to a debt-management provider, within three business days after assenting to the agreement.  However, this period shall extend to 30 days if the agreement does not comply with the requirements set forth under the bill as stated above as well as the requirement to notify the individual in writing regarding this right to cancel.  This right to cancel may also be waived, in writing, by the individual, if a personal financial emergency necessitates the disbursement of an individual’s money to a creditor before the expiration of the initial cancellation period.

     A debt-management provider shall hold in trust all money paid to it by or on behalf of an individual with whom it has a debt-management agreement for distribution to creditors.  Within two business days after receipt, the provider shall deposit the money in a trust account indicated in the information submitted to the commissioner as part of its application to be registered to conduct business in this State. 

     The debt-management provider shall reconcile each trust account at least once per month, by comparing the cash balance in the trust account with the sum of balances in each individual’s account within the trust account.  If the debt-management provider knows, or has a reasonable suspicion, of embezzlement or other unlawful appropriation of money held in trust, the provider shall immediately notify the department.  Unless otherwise set forth in regulation, within five business days of first notifying the department of any occurrence, the debt-management provider shall provide the department with further information describing the remedial action taken or to be taken in response to the occurrence.

     With respect to enforcement, the commissioner may take appropriate actions to enforce the provisions of this bill, including investigations, requests for voluntary compliance, making references on activities to the Attorney General, and seeking various remedies, including: the suspension or revocation of a certificate of registration; issuance of cease and desist orders; ordering a civil penalty in an amount not to exceed $10,000 for each violation; and ordering restitution for any person harmed by a violation.  The commissioner may also enter into cooperative arrangements with any other state or federal agency having authority over debt-management providers or debt-management services, and exchange information with any agency about any person under investigation by the commissioner.

     Additionally, a person may file a private cause of action in a court of competent jurisdiction against any person who violates the bill.  The person may recover: (1) compensatory damages, including for noneconomic injury, or $5,000, whichever is greater, for each violation, except for monies already paid to creditors; or (2) treble these damages, if the private cause of action involves an individual who voided a debt-management agreement due to a debt-management provider imposing a fee or other charge not permitted under the bill.  The person may also recover punitive damages, reasonable attorney’s fees and costs.  A debt-management provider shall not be liable in a private cause of action if the provider’s action or omission was not intentional and resulted from a good faith error; except that, this good faith defense shall not apply if, in connection with any violation concerning fees or other charges imposed, the provider received more money than authorized by the bill or the agreement with an individual, and the provider did not refund the excess money within two business days of discovering the violation.

     This bill shall take effect on the first day of the thirteenth month next following enactment, but the Commissioner of Banking and Insurance may take any anticipatory administrative action in advance thereof as shall be necessary for the implementation of the bill.