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S 3264 ISCommentsClose CommentsPermalink

To amend the Consumer Credit Protection Act to provide for regulation of debt settlement services, and for other purposes.CommentsClose CommentsPermalink

April 27, 2010CommentsClose CommentsPermalink

Mr. SCHUMER (for himself and Mrs. MCCASKILL) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban AffairsCommentsClose CommentsPermalink

To amend the Consumer Credit Protection Act to provide for regulation of debt settlement services, and for other purposes.CommentsClose CommentsPermalink

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,CommentsClose CommentsPermalink

SECTION 1. SHORT TITLE.

This Act may be cited as the ‘Debt Settlement Consumer Protection Act of 2010’.CommentsClose CommentsPermalink

SEC. 2. REGULATION OF DEBT SETTLEMENT SERVICES.

(a) In General- The Consumer Credit Protection Act (15 U.S.C. 1601 et seq.) is amended by adding at the end the following:CommentsClose CommentsPermalink

‘TITLE X--DEBT SETTLEMENT SERVICESCommentsClose CommentsPermalink

‘SEC. 1001. DEFINITIONS.

‘In this title:CommentsClose CommentsPermalink





‘(1) ATTORNEY GENERAL OF A STATE- The term ‘attorney general of a State’ means the attorney general or other chief law enforcement officer of a State.CommentsClose CommentsPermalink





‘(2) COMMISSION- The term ‘Commission’ means the Federal Trade Commission.CommentsClose CommentsPermalink





‘(3) CONSUMER- The term ‘consumer’ means any person.CommentsClose CommentsPermalink





‘(4) CONSUMER SETTLEMENT ACCOUNT- The term ‘consumer settlement account’ means any account or other means or device in which payments, deposits, or other transfers from a consumer are held or transferred to a debt settlement provider for the accumulation of the consumer’s funds in anticipation of proffering an adjustment or settlement of a debt or obligation of the consumer to a creditor on behalf of the consumer.CommentsClose CommentsPermalink





‘(5) DEBT SETTLEMENT PROGRAM- The term ‘debt settlement program’ means the actions and activities undertaken by a debt settlement provider and a consumer in connection with the provision of debt settlement service.CommentsClose CommentsPermalink





‘(6) DEBT SETTLEMENT PROVIDER-CommentsClose CommentsPermalink





‘(A) IN GENERAL- Except as provided in subparagraph (B), the term ‘debt settlement provider’ means any person or entity engaging in, or holding itself out as engaging in, the business of providing debt settlement services in exchange for a fee or compensation, or any person who solicits for or acts on behalf of any person or entity engaging in, or holding itself out as engaging in, the business of providing debt settlement services in exchange for any fee or compensation.CommentsClose CommentsPermalink





‘(B) EXCEPTION- The term ‘debt settlement provider’ does not include the following:CommentsClose CommentsPermalink





‘(i) Attorneys when--CommentsClose CommentsPermalink





‘(I) acting in the ordinary practice of their professions;CommentsClose CommentsPermalink





‘(II) acting through any entity in the ordinary practice of their profession;CommentsClose CommentsPermalink





‘(III) acting in the States where they are licensed to practice their profession; andCommentsClose CommentsPermalink





‘(IV) not holding themselves out as debt settlement providers or providing debt settlement service.CommentsClose CommentsPermalink





‘(ii) Escrow agents, accountants, broker dealers in securities, or investment advisors in securities, when acting--CommentsClose CommentsPermalink





‘(I) in the ordinary practice of their professions; andCommentsClose CommentsPermalink





‘(II) through any entity in the ordinary practice of their profession.CommentsClose CommentsPermalink





‘(iii) Any bank, agent of a bank, trust company, savings and loan association, savings bank, credit union, crop credit association, development credit corporation, industrial development corporation, title insurance company, or insurance company operating or organized under the laws of a State or the United States.CommentsClose CommentsPermalink





‘(iv) Mortgage servicers (as such term is defined in section 6(i) of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2605(i)(2)) carrying out mortgage loan modifications.CommentsClose CommentsPermalink





‘(v) Any person who performs credit services for such person’s employer while receiving a regular salary or wage when the employer is not engaged in the business of offering or providing debt settlement service.CommentsClose CommentsPermalink





‘(vi) An organization that is described in section 501(c)(3) and subject to section 501(q) of the Internal Revenue Code of 1986 and exempt from tax under section 501(a) of such Code.CommentsClose CommentsPermalink





‘(vii) Public officers while acting in their official capacities and persons acting under court order.CommentsClose CommentsPermalink





‘(viii) Any person while performing services incidental to the dissolution, winding up, or liquidating of a partnership, corporation, or other business enterprise.CommentsClose CommentsPermalink





‘(7) DEBT SETTLEMENT SERVICE-CommentsClose CommentsPermalink





‘(A) IN GENERAL- Except as provided in subparagraph (B), the term ‘debt settlement service’ means--CommentsClose CommentsPermalink





‘(i) offering to provide advice or service, or to act or acting as an intermediary between or on behalf of a consumer and one or more of a consumer’s creditors, where the primary purpose of the advice, service, or action is to obtain a settlement, adjustment, or satisfaction of the consumer’s debt to a creditor in an amount less than the full amount of the principal amount of the debt or in an amount less than the current outstanding balance of the debt; orCommentsClose CommentsPermalink





‘(ii) offering to provide services related to or providing services advising, encouraging, assisting, or counseling a consumer to accumulate funds for the primary purpose of proposing, obtaining, or seeking to obtain a settlement, adjustment, or satisfaction of the consumer’s debt to a creditor in an amount less than the full amount of the principal amount of the debt or in an amount less than the current outstanding balance of the debt.CommentsClose CommentsPermalink





‘(B) EXCEPTION- The term ‘debt settlement service’ does not include services of an attorney in providing information, advice, or legal representation with respect to filing a case or proceeding under title 11, United States Code.CommentsClose CommentsPermalink





‘(8) ENROLLMENT FEE- The term ‘enrollment fee’ means any fee, obligation, or compensation paid or to be paid by the consumer to a debt settlement provider in consideration of or in connection with establishing a contract or other agreement with a consumer related to the provision of debt settlement service.CommentsClose CommentsPermalink





‘(9) MAINTENANCE FEE- The term ‘maintenance fee’ means any fee, obligation, or compensation paid or to be paid by a consumer on a periodic basis to a debt settlement provider in consideration of maintaining the relationship and services to be provided by a debt settlement provider in accordance with a contract with a consumer related to the provision of debt settlement service.CommentsClose CommentsPermalink





‘(10) PRINCIPAL AMOUNT OF THE DEBT- The term ‘principal amount of the debt’ means the total amount or outstanding balance owed by a consumer to one or more creditors for a debt that is included in a contract for debt settlement service at the time when the consumer enters into a contract for debt settlement service pursuant to section 1002(a).CommentsClose CommentsPermalink





‘(11) SETTLEMENT FEE- The term ‘settlement fee’ means any fee, obligation, or compensation paid or to be paid by a consumer to a debt settlement provider in consideration of or in connection with an agreement or other arrangement on the part of a creditor to accept less than the principal amount of the debt as satisfaction of the creditor’s claim against the consumer.CommentsClose CommentsPermalink

‘SEC. 1002. REQUIRED ACTS.

‘(a) Contract Required-CommentsClose CommentsPermalink





‘(1) IN GENERAL- A debt settlement provider may not provide a debt settlement service to a consumer or receive any fee from a consumer for a debt settlement service without a written contract described in paragraph (2) that is signed by the consumer.CommentsClose CommentsPermalink





‘(2) CONTRACT CONTENTS- A contract described in this paragraph is a contract between a debt settlement provider and a consumer for debt settlement services that includes the following:CommentsClose CommentsPermalink





‘(A) The name and address of the consumer.CommentsClose CommentsPermalink





‘(B) The date of execution of the contract.CommentsClose CommentsPermalink





‘(C) The legal name of the debt settlement provider, including any other business names used by the debt settlement provider.CommentsClose CommentsPermalink





‘(D) The corporate address and regular business address, including a street address, of the debt settlement provider.CommentsClose CommentsPermalink





‘(E) The license or registration number under which the debt settlement provider is licensed or registered if the consumer resides in a State that requires a debt settlement provider to obtain a license or registration as a condition of providing debt settlement service in that State.CommentsClose CommentsPermalink





‘(F) The telephone number at which the consumer may speak with a representative of the debt settlement provider during normal business hours.CommentsClose CommentsPermalink





‘(G) A complete list of the consumer’s accounts, debts, and obligations covered under the debt settlement service covered by the contract, including the name of each creditor and principal amount of each debt.CommentsClose CommentsPermalink





‘(H) A description of the services to be provided by the debt settlement provider, including the expected timeframe for settlement for each account, debt, or obligation included in subparagraph (G).CommentsClose CommentsPermalink





‘(I) A clear and conspicuous itemized list of all fees, including any enrollment fee and settlement fees to be paid by the consumer to the debt settlement provider, and the date, approximate date, or circumstances under which each fee will become due.CommentsClose CommentsPermalink





‘(J) A clear and conspicuous statement of a good faith estimate of the total amount of all fees to be collected by the debt settlement provider from the consumer for the provision of debt settlement service under the contract.CommentsClose CommentsPermalink





‘(K) A clear and conspicuous statement of the proposed savings goals for the consumer, stating the amount to be saved per month or other period, the time period over which the savings goals extend, and the total amount of the savings expected to be paid by the consumer pursuant to the terms of the contract.CommentsClose CommentsPermalink





‘(L) A notice to the consumer that unless the consumer is insolvent, if a creditor settles a debt for an amount less than the consumer’s current outstanding balance at the time of settlement, the consumer may incur a tax liability.CommentsClose CommentsPermalink





‘(M) A written notice to the consumer, which includes a form that the consumer may use and the address to which the form may be returned to the debt settlement provider, that the consumer may cancel the contract pursuant to the provisions of section 1006.CommentsClose CommentsPermalink





‘(N) A clear and conspicuous written notice to the consumer that--CommentsClose CommentsPermalink





‘(i) the consumer may cancel the contract--CommentsClose CommentsPermalink





‘(I) within 90 days of--CommentsClose CommentsPermalink

‘(aa) the execution of the contract; orCommentsClose CommentsPermalink

‘(bb) the provision of the notice of the right to cancel and cancellation form; orCommentsClose CommentsPermalink

‘(II) at any time in the event of a violation of this title on the part of the debt settlement provider; andCommentsClose CommentsPermalink





‘(ii) in the case the consumer cancels the contract as described in clause (i)--CommentsClose CommentsPermalink





‘(I) the consumer will be entitled to a full refund--CommentsClose CommentsPermalink

‘(aa) of all fees and compensation paid by the consumer to the debt settlement provider, except any settlement fee; andCommentsClose CommentsPermalink

‘(bb) of all funds provided by the consumer to the debt settlement provider for a consumer settlement account, except for funds actually paid to a creditor on behalf of the consumer, under the terms of the contract for debt settlement service; andCommentsClose CommentsPermalink

‘(II) all powers of attorney granted to the debt settlement provider by the consumer will be revoked and voided.CommentsClose CommentsPermalink





‘(b) Notification Required- A debt settlement provider shall, before the earlier of the date of entering into a written contract with a consumer for debt settlement services or rendering debt settlement services to a consumer, provide to the consumer in writing the following:CommentsClose CommentsPermalink





‘(1) An individualized financial analysis of the consumer, including an assessment of the consumer’s income, expenses, and debts.CommentsClose CommentsPermalink





‘(2) A description of the debt settlement service being offered to the consumer by the debt settlement provider, including the following:CommentsClose CommentsPermalink





‘(A) A description of the debt settlement program being offered as part of the service.CommentsClose CommentsPermalink





‘(B) A list of each of the consumer’s debts, creditors, and debt collectors that will be covered under the program.CommentsClose CommentsPermalink





‘(3) A statement containing the following:CommentsClose CommentsPermalink





‘(A) A good-faith estimate of the length of time it will take to achieve settlement of each debt covered under the program.CommentsClose CommentsPermalink





‘(B) The specific time by which the debt settlement service provider will make a bona fide settlement offer to each creditor and debt collector covered under the program.CommentsClose CommentsPermalink





‘(C) The total amount of debt owed by the consumer to each creditor covered under the program.CommentsClose CommentsPermalink





‘(D) An estimate of the total and the monthly savings the consumer will be required to accumulate to complete the program.CommentsClose CommentsPermalink





‘(4) A clear and conspicuous statement that--CommentsClose CommentsPermalink





‘(A) the consumer remains legally obligated to make periodic or scheduled payments to creditors while participating in a debt settlement program; andCommentsClose CommentsPermalink





‘(B) the debt settlement provider will not make any periodic or scheduled payments to creditors on behalf of the consumer.CommentsClose CommentsPermalink





‘(5) A clear and conspicuous notice to the consumer that--CommentsClose CommentsPermalink





‘(A) the utilization of debt settlement service may not be suitable for all consumers;CommentsClose CommentsPermalink





‘(B) the utilization of debt settlement service may adversely impact the consumer’s credit history and credit score;CommentsClose CommentsPermalink





‘(C) the consumer may inquire about other means of dealing with indebtedness, including nonprofit credit counseling and bankruptcy;CommentsClose CommentsPermalink





‘(D) the failure to make periodic or scheduled payments to a creditor--CommentsClose CommentsPermalink





‘(i) is likely to affect adversely the consumer’s creditworthiness;CommentsClose CommentsPermalink





‘(ii) may result in continued collection activity by creditors or debt collectors;CommentsClose CommentsPermalink





‘(iii) may result in the consumer being sued by one or more creditors or debt collectors, and in the garnishment of the consumer’s wages; andCommentsClose CommentsPermalink





‘(iv) may increase the amount of money the consumer owes to one or more creditors or debt collectors due to the imposition by the creditor of interest charges, late fees, and other penalty fees; andCommentsClose CommentsPermalink





‘(E) any savings the consumer realizes from use of a debt settlement service may be taxable income.CommentsClose CommentsPermalink





‘(c) Determination of Benefit to Consumers Required- A debt settlement provider may not enter into a written contract with a consumer unless the debt settlement provider makes written determinations, supported by the financial analysis, that--CommentsClose CommentsPermalink





‘(1) the consumer can reasonably meet the requirements of the proposed debt settlement program included in the debt settlement service offered to the consumer, including the fees and the periodic savings amounts set forth in the savings goals under the program;CommentsClose CommentsPermalink





‘(2) there is a net tangible financial benefit to the consumer of entering into the proposed debt settlement program; andCommentsClose CommentsPermalink





‘(3) the debt settlement program is suitable for the consumer at the time the contract is to be signed.CommentsClose CommentsPermalink





‘(d) Choice of Language- If a debt settlement provider communicates with a consumer primarily in a language other than English, the debt settlement provider shall furnish to the consumer a translation of the disclosures and documents required by this title in that other language.CommentsClose CommentsPermalink





‘(e) Monthly Statements Required- A debt settlement provider shall, not less frequently than monthly, provide each consumer with which it has a contract for the provision of debt settlement service a statement of account balances, fees paid, settlements completed, remaining debts, and any other term considered appropriate by the Commission.CommentsClose CommentsPermalink

‘SEC. 1003. PROHIBITED ACTS.

‘(a) Loans- A debt settlement provider may not make loans or offer credit or solicit or accept any note, mortgage, or negotiable instrument other than a check signed by the consumer and dated no later than the date of signature.CommentsClose CommentsPermalink





‘(b) Confession of Judgment- A debt settlement provider may not take any confession of judgment or power of attorney to confess judgment against the consumer or appear as the consumer or on behalf of the consumer in any judicial or non-judicial proceedings.CommentsClose CommentsPermalink





‘(c) Release or Waiver of Obligation- A debt settlement provider may not take any release or waiver of any obligation to be performed on the part of the debt settlement provider or any right of the consumer.CommentsClose CommentsPermalink





‘(d) Receipt of Third-Party Compensation- A debt settlement provider may not receive any cash, fee, gift, bonus, premium, reward, or other compensation from any person other than the consumer explicitly for the provision of debt settlement service to that consumer, without prior disclosure of such to the consumer.CommentsClose CommentsPermalink





‘(e) Confidentiality- A debt settlement provider may not (without prior written consent of the consumer) disclose to anyone the name or any personal information of a consumer for whom the debt settlement provider has provided or is providing debt settlement service other than to a consumer’s own creditors or the debt settlement provider’s agents, affiliates, or contractors for the purpose of providing debt or settlement service.CommentsClose CommentsPermalink





‘(f) Misrepresentation, Omission, and False Promises- A debt settlement provider may not misrepresent, directly or by implication, any material fact, make a material omission, or make a false promise directed to one or more consumers in connection with the solicitation, offering, contracting or provision of debt settlement service, including the following:CommentsClose CommentsPermalink





‘(1) The total costs to purchase, receive, or use the services, or the nature of the services to be provided.CommentsClose CommentsPermalink





‘(2) Any material restriction, limitation, or condition to receive the offered debt settlement service.CommentsClose CommentsPermalink





‘(3) Any material aspect of the performance, efficacy, nature, or central characteristics of the offered debt settlement service.CommentsClose CommentsPermalink





‘(4) Any material aspect of the nature of terms of the seller’s cancellation policies.CommentsClose CommentsPermalink





‘(5) Any claim of affiliation with, or endorsement or sponsorship by, any person or government entity.CommentsClose CommentsPermalink





‘(6) Any material aspect of any debt settlement service, including the following:CommentsClose CommentsPermalink





‘(A) The amount of time necessary to achieve settlement of all debt.CommentsClose CommentsPermalink





‘(B) The amount of money or the percentage of the debt amount that the consumer must accumulate before the provider will initiate attempts with the consumer’s creditors or debt collectors to settle the debt.CommentsClose CommentsPermalink





‘(C) The effect of the service on a consumer’s creditworthiness.CommentsClose CommentsPermalink





‘(D) Whether the provider is a nonprofit or a for-profit entity.CommentsClose CommentsPermalink





‘(g) Purchasing of Debts- A debt settlement provider may not purchase debts or engage in the practice or business of debt collection.CommentsClose CommentsPermalink





‘(h) Secured Debt- A debt settlement provider may not include in a debt settlement agreement any secured debt.CommentsClose CommentsPermalink





‘(i) Unfair or Deceptive Acts or Practices- A debt settlement provider may not employ any unfair, unconscionable, or deceptive act or practice, including the knowing omission of any material information.CommentsClose CommentsPermalink





‘(j) Limitation on Communication- A debt settlement provider may not--CommentsClose CommentsPermalink





‘(1) obtain a power of attorney or other authorization from a consumer that prohibits or limits the consumer or any creditor from communication directly with one another; orCommentsClose CommentsPermalink





‘(2) represent, expressly or by implication, that a consumer cannot or should not contact or communicate with any creditor.CommentsClose CommentsPermalink

‘SEC. 1004. FEES.

‘(a) Types of Fees Permitted- The types of fees that a debt settlement provider may charge a consumer are the following:CommentsClose CommentsPermalink





‘(1) Enrollment fees.CommentsClose CommentsPermalink





‘(2) Settlement fees.CommentsClose CommentsPermalink





‘(b) Types of Fees Prohibited- All fee types not included under subsection (a) are prohibited, including maintenance fees.CommentsClose CommentsPermalink





‘(c) Enrollment Fee Amounts- The amount of an enrollment fee charged by a debt settlement provider shall not exceed the lesser of--CommentsClose CommentsPermalink





‘(1) the amount that is reasonable and commensurate to the debt settlement service provided to a consumer; andCommentsClose CommentsPermalink





‘(2) $50.CommentsClose CommentsPermalink





‘(d) Debt Settlement Fee Amounts- The amount of a settlement fee charged by a debt settlement provider shall not exceed the lesser of--CommentsClose CommentsPermalink





‘(1) the amount that is reasonable and commensurate to the debt settlement service provided to a consumer; andCommentsClose CommentsPermalink





‘(2) the amount that is 5 percent of the difference between--CommentsClose CommentsPermalink





‘(A) the principal amount of that debt; andCommentsClose CommentsPermalink





‘(B) the amount--CommentsClose CommentsPermalink





‘(i) paid by the debt settlement provider to the creditor pursuant to a settlement negotiated by the debt settlement provider on behalf of the consumer as full and complete satisfaction of the creditor’s claim with regard to that debt; orCommentsClose CommentsPermalink





‘(ii) negotiated by the debt settlement provider and paid by the consumer to the creditor pursuant to a settlement negotiated by the debt settlement provider on behalf of the consumer as full and complete satisfaction of the creditor’s claim with regard to that debt.CommentsClose CommentsPermalink





‘(e) Timing of Debt Settlement Fees- A debt settlement provider shall not collect any debt settlement fee from a consumer until--CommentsClose CommentsPermalink





‘(1) a creditor enters into a legally enforceable agreement with the consumer to accept funds in a specific dollar amount as full and complete satisfaction of the creditor’s claim with regard to that debt; andCommentsClose CommentsPermalink





‘(2) those funds are provided--CommentsClose CommentsPermalink





‘(A) by the debt settlement provider on behalf of the consumer; orCommentsClose CommentsPermalink





‘(B) directly by the consumer to the creditor pursuant to a settlement negotiated by the debt settlement provider.CommentsClose CommentsPermalink

‘SEC. 1005. CONSUMER SETTLEMENT ACCOUNTS.

‘(a) Trust Account Required- A debt settlement provider who receives funds from a consumer shall hold all funds received for a consumer settlement account in a properly designated trust account in a federally insured depository institution. Such funds shall remain the property of the consumer until the debt settlement provider disburses the funds to a creditor on behalf of the consumer as full or partial satisfaction of the consumer’s debt to the creditor or the creditor’s claim against the consumer.CommentsClose CommentsPermalink





‘(b) Independent Administration of Account- A debt settlement provider may not hold funds received for a consumer settlement account under subsection (a) in an account administered by an entity that--CommentsClose CommentsPermalink





‘(1) is owned by, controlled by, or in any way affiliated with the debt settlement service provider; orCommentsClose CommentsPermalink





‘(2) gives or accepts any money or other compensation in exchange for referrals of business involving the debt settlement service provider.CommentsClose CommentsPermalink





‘(c) Limitations- A debt settlement service provider shall not--CommentsClose CommentsPermalink





‘(1) be named on a consumer’s bank account;CommentsClose CommentsPermalink





‘(2) take a power of attorney in a consumer’s bank account;CommentsClose CommentsPermalink





‘(3) create a demand draft on a consumer’s bank account;CommentsClose CommentsPermalink





‘(4) exercise any control over any bank account held by or on behalf of the consumer; orCommentsClose CommentsPermalink





‘(5) obtain any information about a consumer’s bank account from any person other than the consumer.CommentsClose CommentsPermalink

‘SEC. 1006. CANCELLATION OF CONTRACT.

‘(a) In General- A consumer may cancel a contract with a debt settlement provider at any time.CommentsClose CommentsPermalink





‘(b) Refunds-CommentsClose CommentsPermalink





‘(1) CANCELLATION WITHIN 90 DAYS OR UPON VIOLATION OF THIS TITLE- If a consumer cancels a contract with a debt settlement provider not later than 90 days after the date of the execution of the contract or at any time upon a violation of a provision of this title by the debt settlement provider, the debt settlement provider shall refund to the consumer all--CommentsClose CommentsPermalink





‘(A) fees paid to the debt settlement provider by the consumer, with the exception of any earned settlement fee; andCommentsClose CommentsPermalink





‘(B) funds paid by the consumer to the debt settlement provider that--CommentsClose CommentsPermalink





‘(i) have accumulated in a consumer settlement account; andCommentsClose CommentsPermalink





‘(ii) the debt settlement provider has not disbursed to creditors.CommentsClose CommentsPermalink





‘(2) CANCELLATIONS AFTER 90 DAYS- If a consumer cancels a contract with a debt settlement provider later than 90 days after the date of the execution of the contract and for any reason other than for a violation of a provision of this title by the debt settlement provider, the debt settlement provider shall refund to the consumer--CommentsClose CommentsPermalink





‘(A) half of all of the fees collected from the consumer, with the exception of any earned settlement fees; andCommentsClose CommentsPermalink





‘(B) all funds paid by the consumer to the debt settlement provider that have accumulated in a consumer settlement account and which the debt service provider has not disbursed to creditors.CommentsClose CommentsPermalink





‘(3) TIMING OF REFUNDS- A debt settlement provider shall make any refund required under this subsection not later than 5 business days after a notice of cancellation is made on behalf of the consumer under subsection (d).CommentsClose CommentsPermalink





‘(4) STATEMENT OF ACCOUNT- A debt settlement provider making a refund to a consumer under this subsection shall include with such refund a full statement of account showing the following:CommentsClose CommentsPermalink





‘(A) The fees received by the debt settlement provider from the consumer.CommentsClose CommentsPermalink





‘(B) The fees refunded to the consumer by the debt settlement provider.CommentsClose CommentsPermalink





‘(C) The savings of the consumer held by the debt settlement provider.CommentsClose CommentsPermalink





‘(D) The payments made by the debt settlement provider to creditors on behalf of the consumer.CommentsClose CommentsPermalink





‘(E) The settlement fees earned, if any, by the debt settlement provider by settling debt on behalf of the consumer.CommentsClose CommentsPermalink





‘(F) The savings of the consumer refunded to the consumer by the debt settlement provider.CommentsClose CommentsPermalink





‘(c) Revocation of Powers of Attorney and Direct Debit Authorizations- Upon cancellation of a contract by a consumer--CommentsClose CommentsPermalink





‘(1) all powers of attorney and direct debit authorizations granted to the debt settlement provider by the consumer are revoked and voided; andCommentsClose CommentsPermalink





‘(2) the debt settlement provider shall immediately take any action necessary to reflect cancellation of the contract, including notifying the recipient of any direct debit authorization.CommentsClose CommentsPermalink





‘(d) Notice of Cancellation to Creditors- Upon the cancellation of a contract under this section of the Act, the debt settlement provider shall provide timely notice of the cancellation of such contract to each of the creditors with whom the debt settlement provider has had any prior communication on behalf of the consumer in connection with the provision of any debt settlement service.CommentsClose CommentsPermalink

‘SEC. 1007. OBLIGATION OF GOOD FAITH.

‘A debt settlement provider shall act in good faith in all matters under this title.CommentsClose CommentsPermalink

‘SEC. 1008. INVALIDATION OF CONTRACTS.

‘(a) Consumer Waivers Invalid- A waiver by a consumer of any protection provided or any right of the consumer under this title--CommentsClose CommentsPermalink





‘(1) is void; andCommentsClose CommentsPermalink





‘(2) may not be enforced by any other person.CommentsClose CommentsPermalink





‘(b) Attempt To Obtain Waiver- Any attempt by any person to obtain a waiver from any consumer of any protection provided by or any right or protection of the consumer or any obligation or requirement of the debt settlement provider under this title shall be considered a violation of a provision of this title.CommentsClose CommentsPermalink





‘(c) Contracts Not in Compliance- Any contract for a debt settlement service that does not comply with the provisions of this title--CommentsClose CommentsPermalink





‘(1) shall be treated as void;CommentsClose CommentsPermalink





‘(2) may not be enforced by any other person; andCommentsClose CommentsPermalink





‘(3) upon notice of a void contract, a refund by the debt settlement provider to the consumer shall be made as if the contract had been cancelled as provided in section 1006(b)(1) of this title.CommentsClose CommentsPermalink

‘SEC. 1009. ADVERTISING, MARKETING, AND COMMUNICATION PRACTICES.

‘A debt settlement provider shall not state or imply claims, results, or outcomes in any advertising, marketing, or other communication with consumers that represent or reflect results or outcomes, including about the percentage or dollar amount by which debt may be reduced or the amount a consumer may save or the historical experience of its customers with respect to debt reduction, that--CommentsClose CommentsPermalink





‘(1) are materially different from the actual average result or outcome achieved by that debt settlement provider on all of the debt of consumers who enter the program; orCommentsClose CommentsPermalink





‘(2) are not verified by an independent audit that documents that the described result or outcome was achieved for all debt enrolled in the program by at least 80 percent of the customers who began the service in the most recent 2 calendar year period.CommentsClose CommentsPermalink

‘SEC. 1010. RULEMAKING BY FEDERAL TRADE COMMISSION.

‘(a) In General- The Commission may prescribe rules with respect to advertising and marketing practices, record retention, provision of accountings to consumers, and such other matters as the Commission considers necessary to improve the consumer experience with debt settlement providers.CommentsClose CommentsPermalink





‘(b) Debt Relief Service Rules-CommentsClose CommentsPermalink





‘(1) IN GENERAL- Except as provided in paragraph (2), the Commission may prescribe rules with respect to the providers of debt relief service not otherwise covered by this title.CommentsClose CommentsPermalink





‘(2) EXCEPTION- Any rule prescribed under paragraph (1) shall not be applicable to or otherwise include services provided by those persons or entities identified in section 1001(6)(B) or section 1001(7)(B).CommentsClose CommentsPermalink





‘(3) DEBT RELIEF SERVICE DEFINED- In this subsection, the term ‘debt relief service’ means any service represented, directly or by implication, to renegotiate, or in any way alter the terms of payment or other terms of the debt between a consumer and one or more unsecured creditors or debt collectors, including a reduction in the balance, interest rate, or fees owed by a consumer to an unsecured creditor or debt collector.CommentsClose CommentsPermalink





‘(c) Procedure- All rulemaking under this title shall be conducted in accordance with section 553 of title 5, United States Code, and shall not be subject to other procedures set forth in section 18 of the Federal Trade Commission Act (15 U.S.C. 57a).CommentsClose CommentsPermalink

‘SEC. 1011. CIVIL LIABILITY.

‘(a) Liability Established- Any debt settlement provider who fails to comply with any provision of this title with respect to any consumer shall be liable to such consumer in an amount equal to the sum of the amounts determined under each of the following:CommentsClose CommentsPermalink





‘(1) ACTUAL DAMAGES- The greater of--CommentsClose CommentsPermalink





‘(A) the amount of any actual damage sustained by such consumer as a result of such failure; orCommentsClose CommentsPermalink





‘(B) any amount paid by the consumer to the debt settlement provider.CommentsClose CommentsPermalink





‘(2) STATUTORY DAMAGES- An amount determined by the court of not less than $1,000 nor more than $5,000 per violation.CommentsClose CommentsPermalink





‘(3) PUNITIVE DAMAGES-CommentsClose CommentsPermalink





‘(A) INDIVIDUAL ACTIONS- In the case of any action by an individual, such additional amount as the court may allow.CommentsClose CommentsPermalink





‘(B) CLASS ACTIONS- In the case of a class action, the sum of--CommentsClose CommentsPermalink





‘(i) the aggregate of the amount which the court may allow for each named plaintiff; andCommentsClose CommentsPermalink





‘(ii) the aggregate of the amount which the court may allow for each other class member, without regard to any minimum individual recovery.CommentsClose CommentsPermalink





‘(4) Attorneys’ FEES- In the case of any successful action to enforce any liability under paragraph (1), (2), or (3), the costs of the action, together with reasonable attorneys’ fees.CommentsClose CommentsPermalink





‘(b) Factors To Be Considered in Awarding Punitive Damages- In determining the amount of any liability of any debt settlement provider under subsection (a)(2), the court shall consider, among other relevant factors--CommentsClose CommentsPermalink





‘(1) the frequency and persistence of noncompliance by the debt settlement provider;CommentsClose CommentsPermalink





‘(2) the nature of the noncompliance;CommentsClose CommentsPermalink





‘(3) the extent to which such noncompliance was intentional; andCommentsClose CommentsPermalink





‘(4) in the case of any class action, the number of consumers adversely affected.CommentsClose CommentsPermalink

‘SEC. 1012. ENFORCEMENT BY FEDERAL TRADE COMMISSION.

‘(a) In General- The Commission shall enforce the provisions of this title in the same manner, by the same means, and with the same jurisdiction, powers, and duties as though all applicable terms and provisions of the Federal Trade Commission Act (15 U.S.C. 41 et seq.) were incorporated into and made part of this title.CommentsClose CommentsPermalink





‘(b) Unfair or Deceptive Acts or Practices- A failure to comply with a provision of this title or a violation of a rule prescribed under section 1010 shall be treated as a violation of a rule defining an unfair or deceptive act or practice prescribed under section 18(a)(1)(B) of the Federal Trade Commission Act (15 U.S.C. 57a(a)(1)(B)).CommentsClose CommentsPermalink

‘SEC. 1013. ACTION BY STATES.

‘(a) In General- In any case in which the attorney general of a State has reason to believe that an interest of the residents of the State has been or is threatened or adversely affected by the engagement of any person subject to a provision of this title or a rule prescribed under section 1010 in a practice that violates such provision or rule, the State may, as parens patriae, bring a civil action on behalf of the residents of the State in an appropriate district court of the United States or other court of competent jurisdiction--CommentsClose CommentsPermalink





‘(1) to enjoin that practice;CommentsClose CommentsPermalink





‘(2) to enforce compliance with the provision or rule; orCommentsClose CommentsPermalink





‘(3) to obtain damages under section 1011 on behalf of residents of the State.CommentsClose CommentsPermalink





‘(b) Attorneys’ Fees- In the case of any successful action under paragraph (1), (2), or (3) of subsection (a), the attorney general of the State bringing the action shall be awarded the costs of the action and reasonable attorneys’ fees as determined by the court.CommentsClose CommentsPermalink





‘(c) Rights of Federal Trade Commission-CommentsClose CommentsPermalink





‘(1) NOTICE TO FEDERAL TRADE COMMISSION-CommentsClose CommentsPermalink





‘(A) IN GENERAL- Except as provided in subparagraph (C), the attorney general of a State shall notify the Federal Trade Commission in writing of any civil action under subsection (a), prior to initiating such civil action.CommentsClose CommentsPermalink





‘(B) CONTENTS- The notice required by subparagraph (A) shall include a copy of the complaint to be filed to initiate such civil action.CommentsClose CommentsPermalink





‘(C) EXCEPTION- If it is not feasible for the attorney general of a State to provide the notice required by subparagraph (A), the State shall provide notice immediately upon instituting a civil action under subsection (a).CommentsClose CommentsPermalink





‘(2) INTERVENTION BY FEDERAL TRADE COMMISSION- Upon receiving notice required by paragraph (1) with respect to a civil action, the Commission may--CommentsClose CommentsPermalink





‘(A) intervene in such action; andCommentsClose CommentsPermalink





‘(B) upon intervening--CommentsClose CommentsPermalink





‘(i) be heard on all matters arising in such civil action;CommentsClose CommentsPermalink





‘(ii) remove the action to the appropriate district court of the United States; andCommentsClose CommentsPermalink





‘(iii) file petitions for appeal of a decision in such action.CommentsClose CommentsPermalink





‘(d) Investigatory Powers- Nothing in this section may be construed to prevent the attorney general of a State from exercising the powers conferred on such attorney general by the laws of such State to conduct investigations or to administer oaths or affirmations or to compel the attendance of witnesses or the production of documentary and other evidence.CommentsClose CommentsPermalink





‘(e) Effect of Action by Federal Trade Commission- If the Federal Trade Commission institutes a civil action or an administrative action to enforce a violation of a provision of this title or a rule prescribed under section 1010, no State may, during the pendency of such action, bring a civil action under subsection (a) against any defendant named in the complaint of the Commission for violation of a provision of this title or rule prescribed under section 1010 that is alleged in such complaint.CommentsClose CommentsPermalink





‘(f) Actions by Other State Officials-CommentsClose CommentsPermalink





‘(1) IN GENERAL- In addition to actions brought by an attorney general of a State under subsection (a), an action may be brought by officials in a State who are so authorized.CommentsClose CommentsPermalink





‘(2) SAVINGS PROVISION- Nothing contained in this section may be construed to prohibit an authorized official of a State from proceeding in a court of such State on the basis of an alleged violation of any civil or criminal statute of such State.CommentsClose CommentsPermalink

‘SEC. 1014. STATUTE OF LIMITATIONS.

‘Any action to enforce any liability under section 1011 may be brought before the later of--CommentsClose CommentsPermalink





‘(1) the end of the 5-year period beginning on the date of the occurrence of the violation involved; orCommentsClose CommentsPermalink





‘(2) in any case in which any debt settlement provider has materially and willfully misrepresented any information that the debt settlement provider is required, by any provision of this title, to disclose to any consumer and that is material to the establishment of the debt settlement provider’s liability to the consumer under this title, the end of the 5-year period beginning on the date of the discovery by the consumer of the violation.CommentsClose CommentsPermalink

‘SEC. 1015. RELATION TO STATE LAW.

‘This title shall not annul, alter, affect, or exempt any person subject to the provisions of this title from complying with the law of any State except to the extent that such law is inconsistent with any provision of this title, and then only to the extent of the inconsistency. For purposes of this section, a State statute, regulation, order, or interpretation is not inconsistent with the provisions of this title if the protection such statute, regulation, order, or interpretation affords any person is greater than the protection provided under this title and any subsequent amendments. Nothing in this title shall limit or prohibit a State from prohibiting or otherwise restricting the provision of debt settlement services, or imposing and administering a system of additional requirements, prohibitions, registration, or licensure.’.CommentsClose CommentsPermalink





(b) Initial Regulations-CommentsClose CommentsPermalink





(1) IN GENERAL- Not later than 60 days after the date of the enactment of this Act, the Federal Trade Commission shall commence a rulemaking to prescribe the following:CommentsClose CommentsPermalink





(A) The form of the written notices required under subparagraphs (M) and (N) of subsection (a)(2) and subsection (b)(5) of section 1002 of the Consumer Credit Protection Act, as added by subsection (a) of this section.CommentsClose CommentsPermalink





(B) The form of the statement required under subsection (e) of such section 1002.CommentsClose CommentsPermalink





(2) DEADLINE- The Federal Trade Commission shall complete the rulemaking required by paragraph (1) not later than 1 year after the date of the enactment of this Act.CommentsClose CommentsPermalink





(3) PROCEDURE- All rulemaking under paragraph (1) shall be conducted in accordance with section 553 of title 5, United States Code, and shall not be subject to other procedures set forth in section 18 of the Federal Trade Commission Act (15 U.S.C. 57a).CommentsClose CommentsPermalink





(c) Effective Date- Title X of the Consumer Credit Protection Act, as added by subsection (a) of this section, shall take effect on the date that is 60 days after the date of the enactment of this Act.CommentsClose CommentsPermalink