[First Reprint]

SENATE, No. 3499

STATE OF NEW JERSEY

218th LEGISLATURE

 

INTRODUCED FEBRUARY 21, 2019

 


 

Sponsored by:

Senator  NELLIE POU

District 35 (Bergen and Passaic)

 

 

 

 

SYNOPSIS

     Makes certain for-profit debt adjusters eligible to be licensed to conduct business in the State.

 

CURRENT VERSION OF TEXT

     As reported by the Senate Commerce Committee on March 4, 2019, with amendments.

 


An Act concerning the licensing of debt adjusters and amending and supplementing P.L.1979, c.16.

 

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

 

     1.    Section 1 of P.L.1979, c.16 (C.17:16G-1) is amended to read as follows:

     1.    As used in this act:

     a.     "Nonprofit social service agency" or "nonprofit consumer credit counseling agency" means any corporation duly organized under Title 15 of the Revised Statutes or Title 15A of the New Jersey Statutes, no part of the assets, income or profit of which is distributable to, or enures to the benefit of its members, directors or officers, except to the extent permitted under this act, and which is engaged in debt adjustment.

     b.    "Credit counseling" means any guidance or educational program or advice offered by a nonprofit social service agency or nonprofit consumer credit counseling agency for the purpose of fostering the responsible use of credit and debt management.

     c.     (1)   "Debt adjuster" means a person who either (a) acts or offers to act for a consideration as an intermediary between a debtor and his creditors for the purpose of settling, compounding, or otherwise altering the terms of payment of any debts of the debtor, or (b) who, to that end, receives money or other property from the debtor, or on behalf of the debtor, for payment to, or distribution among, the creditors of the debtor.

     (2)   The following persons shall not be deemed debt adjusters:  (a) an attorney-at-law of this State who is not principally engaged as a debt adjuster; (b) a person who is a regular, full-time employee of a debtor, and who acts as an adjuster of his employer's debts; (c) a person acting pursuant to any order or judgment of court, or pursuant to authority conferred by any law of this State or the United States; (d) a person who is a creditor of the debtor, or an agent of one or more creditors of the debtor, and whose services in adjusting the debtor's debts are rendered without cost to the debtor; (e) a person who, at the request of a debtor, arranges for or makes a loan to the debtor, and who, at the authorization of the debtor, acts as an adjuster of the debtor's debts in the disbursement of the proceeds of the loan, without compensation for the services rendered in adjusting those debts; or (f) a person who is: (i) certified by the United States Secretary of Housing and Urban Development as a housing counseling organization or agency pursuant to section 106 of Pub.L.90-448 (12 U.S.C. s.1701x); (ii) participating in a counseling program approved by the New Jersey Housing and Mortgage Finance Agency; and (iii) not holding or disbursing the debtor's funds.

     1(3) Notwithstanding the provisions of paragraph (2) of this subsection to the contrary, an attorney-at-law who acts as a debt adjuster shall comply with the advance fee prohibition pursuant to subsection d. of section 6 of P.L.1979, c.16 (C.17:16G-6) and any disclosure requirements pursuant to section 7 of P.L.    , c.   (C.     ) (pending before the Legislature as this bill).  Any attorney-at-law who acts as a debt adjuster and fails to comply with those provisions shall be considered a debt adjuster and shall be subject to the requirements and penalty provisions of P.L.1979, c.16 (C.17:16G-1 et seq.).1

     d.    "Debtor" means an individual or two or more individuals who are jointly and severally, or jointly or severally indebted.

     e.     “For-profit debt adjuster” means a person or entity that conducts some or all of the activities described in paragraph 1[1] (1)1 of subsection c. of this section but: (1) does not receive or hold, actually or constructively, consumer funds; and (2) is subject to the provisions of 16 C.F.R. 310.4, or any successor federal law or regulation.

(cf: P.L.2009, c.173, s.1)

 

     2.    Section 2 of P.L.1979, c.16 (C.17:16G-2) is amended to read as follows:

     2.    a.   No person other than a nonprofit social service agency [or], a nonprofit consumer credit counseling agency, or a for-profit debt adjuster shall act as a debt adjuster.

     b.    It shall be unlawful for any nonprofit social service agency [or], nonprofit consumer credit counseling agency, or for-profit debt adjuster to act as a debt adjuster without first obtaining a license from the Commissioner of the Department of Banking and Insurance pursuant to this act.  In considering a license application, the commissioner shall require the submission of the name, address, fingerprints and written consent for a criminal history record background check to be performed on any officer, director, partner or owner of a controlling interest of the person seeking licensure and shall conduct any other investigations the commissioner deems necessary.

     c.     A licensee is authorized to offer credit counseling.

(cf: P.L.1986, c.184, s.2)

 

     3.    Section 5 of P.L.1979, c.16 (C.17:16G-5) is amended to read as follows:

     5.    a.   Any nonprofit social service agency or nonprofit consumer credit counseling agency licensed under this act shall be bonded to the satisfaction of the commissioner for each location pursuant to regulation.  In setting the bonding requirements for each location, the commissioner shall consider the number of debtors provided credit counseling and debt adjustment services at that location, and the balance of funds in the trust account required to be maintained pursuant to section 3 of P.L.2005, c.287 (C.17:16G-9).

     b.    The commissioner may require a licensee to file an annual report containing that information required by the commissioner by regulation concerning activities conducted as a licensee in the preceding calendar year.  The report shall be submitted under oath and in the form and within the time specified by the commissioner by regulation.

     c.     The commissioner may require a high-cost home loan counselor to file an annual report containing that information required by the commissioner by regulation concerning activities conducted pursuant to subsection g. of section 5 of P.L.2003, c.64 (C.46:10B-26) as a registrant in the preceding calendar year. The report shall be submitted under oath and in the form and within the time specified by the commissioner by regulation.

     d.    Each licensee shall file with the commissioner on or before April 1 of each year a copy of its annual report, containing the information required by the commissioner by regulation pursuant to P.L.1979, c.16 (C.17:16G-1 et seq.) and section 3 of P.L.2005, c.287 (C.17:16G-9). A licensee or high-cost home loan counselor that fails to make and file its annual report in the form and within the time provided in this section shall be subject to a penalty of not more than $100 for each day's failure, and the commissioner may revoke or suspend its authority to do business in this State. The penalty may be collected in a summary proceeding pursuant to the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.). A warrant may issue in lieu of a summons.

     e.     Each licensee shall have its financial records relating to debt adjustment audited annually by a certified public accountant or a public accountant, which audit shall be filed with the commissioner. Such an audit shall certify that the salaries and expenses paid by the licensee are reasonable compared to those incurred by comparable organizations providing similar services, except that a for-profit debt adjuster shall not be required to provide this certification.

     f.     After reviewing the annual report and audit, the Commissioner of Banking and Insurance may cause an examination of the licensee to be made, the actual expenses of such an examination shall be paid by the licensee, and the commissioner may maintain any action against any licensee to recover the fees and expenses herein provided for.

     g.    The licensee shall make a copy of the annual report and audit available for public inspection at each of the licensee's locations.

(cf: P.L.2007, c.81, s.25)

 

     4.    Section 6 of P.L.1979, c.16 (C.17:16G-6) is amended to read as follows:

     6.    a.   A licensee may charge a fee to cover the cost of providing debt adjustment and credit counseling.

     b.    The fee for debt adjustment for a nonprofit social service agency and a nonprofit consumer credit counseling agency, shall not exceed 1% of the gross monthly income of the person to whom the service is rendered, but in no case more than $15.00 in any one month, except as may be otherwise provided by rule or regulation promulgated by the commissioner.  This fee may be waived in the discretion of the licensee.

     c.     The commissioner is authorized to establish the maximum fee that may be charged by a nonprofit social service agency and a nonprofit consumer credit counseling agency for credit counseling.

     d.    The commissioner is authorized to establish maximum fees that may be charged by a for-profit debt adjuster for debt adjustment services and credit counseling, which fees, in the case of debt adjustment services, shall not be collected prior to performance of those services.

(cf: P.L.1986, c.184, s.4)

 

     5.    (New section)     The provisions of P.L.1979, c.16 (C.17:16G-1 et seq.) that are applicable to for-profit debt adjusters are only applicable to the extent that they are not in conflict with the provisions of 16 C.F.R. 310.4 or any successor federal law or regulation.

 

     6.    (New section) a. Except as otherwise provided in subsections f. and g. of this section, a for-profit debt adjuster shall file a surety bond with the commissioner that must:

     (1)   be in effect during the period of licensure and for two years after the for-profit debt adjuster ceases providing debt-management services to individuals in this State; and

     (2)   run to the State for the benefit of the State and individuals who reside in the State who receive debt-management services from the for-profit debt adjuster.

     b.    A surety bond filed pursuant to subsection a. of this section must:

     (1)   be issued by an insurer authorized to do business in this State;

     (2)   have payment conditioned upon noncompliance of the for-profit debt adjuster or its agent with P.L.1979, c.16 (C.17:16G-1 et seq.); and

     (3)   be in an amount of not less than $50,000 for the first office and $25,000 for each additional office, for the first 250 individuals serviced at any office and the first $250,000 in funds held in the trust account of the licensee, or such other amount as the commissioner determines is warranted by the financial condition and business experience of the for-profit debt adjuster, the history of the for-profit debt adjuster in performing debt-management services, the risk to individuals, and any other factor the commissioner considers appropriate.  The amount of the bond shall be increased based on the number of individuals in this State serviced by and the balance held in the trust accounts of licensees as set forth below:

     (a)   the amount of the bond shall be increased by $25,000 for each additional set of 250 debtors in this State as reported in the most recent annual report; and

     (b)   the amount of the bond shall be increased by $25,000 for each $250,000 or portion thereof in additional funds held in the trust account of the licensee based on the average of the highest daily balance each month as reported in the most recent annual report.

     c.     If the principal amount of a surety bond is reduced by payment of a claim or a judgment, the for-profit debt adjuster shall immediately notify the commissioner and, within 30 days after notice by the commissioner, file a new or additional surety bond in an amount set by the commissioner.  The amount of the new or additional bond must be at least the amount of the bond immediately before payment of the claim or judgment.  If for any reason a bond is terminated, the for-profit debt adjuster shall immediately file a new surety bond in the amount of $50,000 or other amount determined pursuant to subsection b. of this section.

     d.    The commissioner or an individual may obtain satisfaction out of the surety bond procured pursuant to this section for any violation of P.L.1979, c.16 (C.17:16G-1 et seq.).

     e.     The surety company shall pay individuals claims based on the damages directly incurred by the wrongful act, default, fraud or misrepresentation of the licensee. Attorney's fees, pre- or post-judgment interest, court costs and similar charges are not recoverable through the bond unless such charges are included in a final judgment against the licensee and the surety company was given prior notice of the court action and an opportunity to respond. The bond shall not be payable for claims made by business creditors. The bond shall not be payable for treble damage claims pursuant to P.L.1960, c.39 (C.56:8-1 et seq.) or any other State or federal law.

     f.     Instead of the surety bond required by subsection a. of this section, with the approval of the commissioner, a for-profit debt adjuster may deliver:

     (1)   an irrevocable letter of credit, issued or confirmed by a bank approved by the commissioner, payable upon presentation of a certificate by the commissioner stating that the for-profit debt adjuster or its agent has not complied with any provision of P.L.1979, c.16 (C.17:16G-1 et seq.); 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 a political subdivision of this State, to be:

     (a)   deposited and maintained with a bank approved by the commissioner for this purpose; and

     (b)   delivered by the bank to the commissioner upon presentation of a certificate by the commissioner stating that the for-profit debt adjuster or its agent has not complied with any provision of P.L.1979, c.16 (C.17:16G-1 et seq.).

     g.    If a for-profit debt adjuster furnishes a substitute for a surety bond pursuant to subsection f. of this section, the provisions of subsections a., c., d., and e. of this section shall apply to the substitute.

 

      17. (New section)  It is a violation of P.L.1979, c.16 (C.17:16G-1 et seq.) for any for-profit debt adjuster to fail to disclose truthfully, in a clear and conspicuous manner, prior to the consumer consenting to pay for debt adjustment services, the following material information:

      a.   The total costs of any debt adjustment services being offered;

      b.   All material restrictions, limitations, or conditions to the services being offered;

      c.   If the for-profit debt adjuster has a policy of not making refunds or cancellations, a statement informing the consumer of that policy; or, if the for-profit debt adjuster makes a representation about a refund or cancellation policy, a statement of all material terms and conditions of that policy;

      d.   If the offer includes a negative option feature, all material terms and conditions of the negative option feature, including, but not limited to, the fact that the consumer's account will be charged unless the consumer takes an affirmative action to avoid the charge, the date the charge will be submitted for payment, and the specific steps the consumer must take to avoid the charge;

      e.   The amount of time necessary to achieve the represented results, and to the extent that the service may include a settlement offer to any of the consumer's creditors or debt collectors, the time by which the for-profit debt adjuster will make a bona fide settlement offer to each of them;

      f.    To the extent that the service may include a settlement offer to any of the consumer's creditors or debt collectors, the amount of money or the percentage of each outstanding debt that the consumer is required to accumulate before the for-profit debt adjuster shall make a bona fide settlement offer to each of them;

      g.   To the extent that any aspect of the debt adjustment service relies upon or results in the consumer's failure to make timely payments to creditors or debt collectors, that the use of the debt adjustment service will likely adversely affect the consumer’s creditworthiness, may result in the customer being subject to collections or sued by creditors or debt collectors, and may increase the amount of money the customer owes due to the accrual of fees and interest; and

      h.   To the extent that the for-profit debt adjuster requests or requires the customer to place funds in an account at an insured financial institution, that the consumer owns the funds held in the account, the consumer may withdraw from the account at any time without penalty, and, if the consumer withdraws, the consumer is required to receive all funds in the account, other than funds earned by the for-profit debt adjuster for services performed in compliance with P.L.1979, c.16 (C.17:16G-1 et seq.).1

 

     1[7.]  8.1  This act shall take effect immediately.