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Sub. H. B. No. 420As Reported by the House Banking, Pensions and Securities CommitteeAs Reported by the House Banking, Pensions and Securities Committee
125th General Assembly | Regular Session | 2003-2004 |
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REPRESENTATIVES T. Patton, Otterman, Strahorn, Wilson, Allen, Reidelbach, Miller, Hughes
A BILL
To amend sections 1309.613, 1309.625, 2716.03, 2716.11, and 4710.01, to enact new sections 4710.02, 4710.03, and 4710.99 and section 4710.04, and to repeal sections 4710.02, 4710.03, and 4710.99 of the Revised Code to modify the Secured Transactions Law relating to notice of the location for the disposition of collateral that is given to certain persons and to reduce the amount of damages recoverable by a debtor or secondary obligor in an action against a person found in violation of the Secured Transactions Law; relative to property subject to garnishment held by a judgment debtor's employer or another person; relative to engaging in the business of debt adjusting for debtors, to specify contribution limits and auditing and insurance coverage duties, to require timely disbursement of debtor funds, and to provide penalties, including a criminal penalty, for a violation; and to eliminate previous provisions regulating entities engaging in the business of debt pooling.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:
Section 1. That sections 1309.613, 1309.625, 2716.03, 2716.11, and 4710.01 be amended and new sections 4710.02, 4710.03, and 4710.99 and section 4710.04 of the Revised Code be enacted to read as follows: Sec. 1309.613. (A) Except in a consumer-goods transaction,
all
of the following rules apply to a notification of disposition
of
collateral and to a
disposition of collateral: (1) The contents of a notification of disposition are
sufficient
if the notification:
(a) Describes the debtor and the secured party; (b) Describes the collateral that is the subject of the
intended disposition; (c) States the method of intended disposition; (d) States that the debtor is entitled to an accounting
of
the unpaid indebtedness and states the charge, if any, for an
accounting; and (e) States the time and place, by identifying the place of business or address or by providing other information that, in each case, reasonably describes the location, of a public disposition or the
time after which any other disposition is to be made. (2) Whether the contents of a notification that lacks any of
the
information specified in division (A)(1) of this section are
nevertheless sufficient is a question of fact. (3) The contents of a notification providing substantially
the
information specified in division (A)(1) of this section are
sufficient, even if the notification includes: (a) Information not specified by that division; or (b) Minor errors that are not seriously misleading. (4) A particular phrasing of the notification is not
required. (B) The following form of notification and the form
appearing in
division (B) of section 1309.614 of the Revised
Code,
when
completed, each provides sufficient information: "NOTIFICATION OF DISPOSITION OF COLLATERAL
To: (Name of debtor, obligor, or other person
to whom the
notification is sent) From: (Name, address, and telephone number of
secured party) Name of Debtor(s): (Include only if debtor(s)
are not an
addressee) (FOR A PUBLIC DISPOSITION:) We will sell (or lease or license, as applicable) the
(describe
collateral) to the highest qualified bidder in public as
follows: Day and Date:............. Time:..................... Place:.................... (FOR A PRIVATE DISPOSITION:) We will sell (or lease or license, as applicable) the
(describe
collateral) privately sometime after (day and date). You are entitled to an accounting of the unpaid indebtedness
secured by the property that we intend to sell (or lease or
license, as
applicable) (for a charge of $.........). You may
request an
accounting by calling us at (telephone number)."
Sec. 1309.625. (A) If it is established that a secured
party is
not proceeding in accordance with this chapter, a court
may order or restrain
collection, enforcement, or disposition
of
collateral on appropriate terms and conditions. (B) Subject to divisions (C), (D), and
(F) of this section,
a
person is liable for damages in the amount of any loss caused by
a
failure to comply with this chapter. Loss caused by a failure
to comply may
include loss resulting from the debtor's inability
to
obtain, or increased costs of, alternative financing. (C) Except as provided in section 1309.628 of the
Revised
Code: (1) A person who, at the time of the failure, was a debtor,
was
an obligor, or held a security interest in or other lien on
the collateral
may recover damages under division (B) of this
section for its
loss; and (2) If the collateral is consumer goods, a person who was a
debtor or a secondary obligor at the time a secured party failed
to comply
with sections 1309.601 to 1309.628 of the Revised Code
may
recover
for that failure in any event an amount not less than
the credit service
charge plus ten per cent of the principal
amount of the obligation or the
time-price differential plus ten
per cent of the cash price;. (D) A debtor whose deficiency is eliminated under section
1309.626 of the Revised Code may recover damages for the
loss of
any surplus. However, a debtor or secondary obligor whose
deficiency is
eliminated or reduced under section 1309.626 of the
Revised
Code may not recover otherwise under division (B) of this
section
for noncompliance with sections 1309.601 to 1309.628 of
the
Revised Code relating to
collection, enforcement, disposition,
or acceptance. Regardless of whether the debtor's or secondary obligor's deficiency is eliminated or reduced under section 1309.626 of the Revised Code, any damages recovered by the debtor or secondary obligor under division (C) of this section shall be reduced by the amount that the sum of the secured obligation, expenses, and attorney's fees exceeds the proceeds of collection, enforcement, disposition, or acceptance. (E) In addition to any damages recoverable under division
(B) of
this section, the debtor, consumer obligor, or person named
as a
debtor in a filed record, as applicable, may recover five
hundred
dollars in each case from a person that: (1) Fails to comply with section 1309.208 of the Revised
Code; (2) Fails to comply with section 1309.209 of the Revised
Code; (3) Files a record that the person is not entitled to file
under
division (A) of section 1309.509 of the Revised Code; (4) Fails to cause the secured party of record to file or
send a
termination statement as required by division (A) or (C) of
section 1309.513 of the Revised Code; (5) Fails to comply with division (B)(1) of section 1309.616
of
the Revised Code and whose failure is part of a pattern, or
consistent with a practice, of noncompliance; or (6) Fails to comply with division (B)(2) of section 1309.616
of the Revised Code. (F) A debtor or consumer obligor may recover damages under
division (B) of this section and, in addition, five hundred
dollars in each case from a person who, without reasonable cause,
fails to
comply with a request
under section 1309.210 of the
Revised Code. A recipient of
a
request under section 1309.210 of
the Revised Code who never
claimed an interest in the collateral
or obligations that are the subject of a
request under that
section has a reasonable excuse
for failure to comply with the
request within the meaning of this
division. (G) If a secured party fails to comply with a request
regarding
a list of collateral or a statement of account under
section 1309.210 of
the Revised Code, the secured party may claim
a security
interest only as shown in the list or statement
included in the
request as against a person who is reasonably
misled by the failure.
Sec. 2716.03. (A) Subject to the limitation on the commencement of
proceedings contained in division (B) of section 124.10 of the Revised Code, a
proceeding in garnishment of personal
earnings may be commenced after a judgment has been obtained by a
judgment creditor by the filing of an affidavit in writing made
by the judgment creditor or the judgment creditor's attorney setting forth all
of the following: (1) The name of the judgment debtor whose personal
earnings the judgment creditor seeks to garnish; (2) That the affiant has good reason to believe and does
believe that the person, partnership, limited liability company,
or corporation named in the
affidavit as the garnishee is an employer of the judgment debtor
who has may have personal earnings of the judgment debtor that are not
exempt under section 2329.66 of the Revised Code; (3) That the demand in writing, as required by section
2716.02 of the Revised Code, has been made; (4) That the payment demanded in the notice required by
section 2716.02 of the Revised Code has not been
made, and a sufficient portion of the payment
demanded has not been made to prevent the
garnishment of personal earnings as described in section 2716.02
of the Revised Code; (5) That the affiant has no knowledge of any application by
the judgment debtor for the appointment of a trustee so as to
preclude the garnishment of the judgment debtor's personal earnings; (6) That the affiant has no knowledge that the debt to
which the affidavit pertains is the subject of a debt scheduling
agreement of a nature that precludes the garnishment of
the personal earnings of the judgment debtor under division (B)
of this section. (B) No proceeding in garnishment of personal
earnings shall be brought against a judgment debtor for the
collection of a debt that is the subject of an agreement for debt
scheduling between the judgment debtor and a budget and
debt
counseling service, unless any payment to be made by the judgment
debtor, or by a budget and debt counseling service to
the
judgment creditor under the agreement for debt scheduling between
the judgment debtor and the budget and debt counseling
service,
is due and unpaid for more than forty-five days after the date on
which the payment became due, or unless the judgment creditor
previously was notified by the service that the debt scheduling
agreement between the judgment debtor and the service was
terminated. (C) Upon a court's issuance of an order of garnishment of
personal earnings following a
judgment creditor's filing of an affidavit under this section and
compliance with section 2716.04 of the Revised Code, the garnishee and the
judgment debtor shall be notified of the proceeding in garnishment of
personal earnings in accordance
with sections 2716.05 and 2716.06 of the Revised Code. (D) As used in this chapter: (1) A "budget and debt counseling service" or
"service"
means a corporation organized under Chapter 1702. of the Revised
Code for the purpose of counseling consumers with respect to
their financial obligations and assisting them in dealing with
their creditors. (2) "Debt scheduling" means counseling and assistance
provided to a consumer by a budget and debt counseling
service
under all of the following circumstances: (a) The counseling and assistance is manifested in an
agreement between the consumer and the service under which the
consumer regularly pays that portion of the consumer's income to
the service
that has been determined not to be required for the maintenance
of health or the essentials of life. (b) The payments are made to the service until the debts
of the consumer that are the subject of the agreement are fully
retired. (c) The service has sent written notice, by certified
mail, return receipt requested, or by regular mail evidenced by a
properly completed and stamped certificate of mailing by regular
mail, to the creditors of the consumer that are disclosed by the
consumer to the service. The notice shall contain all of
the
following: (i) A statement of the consumer's intent to participate in
debt scheduling; (ii) A summary of the consumer's income, proposed itemized
budget, schedule of creditors, and proposed debt retirement plan; (iii) A statement of the particular creditor's duty to
respond, in writing, to the service regarding the consumer's
participation in debt scheduling within fifteen days after
receiving the notice. (d) The debts of the consumer that are the subject of the
agreement for debt scheduling are determined as follows: (i) Any debt owed to a creditor that was notified of the
consumer's intent to participate is a subject of the agreement if
the creditor responds to the service and enters into an agreement
with the service, pursuant to which the creditor agrees
not to attempt to collect the debts of the consumer as long as
the consumer regularly pays to the service the amount previously
agreed upon by the service and the consumer, and no payment to be
made by the judgment debtor to the service or by the service to
the creditor is due and unpaid for more than forty-five days
after the date on which the payment became due, as long as the
debt scheduling agreement between the consumer and the service
has not been terminated, and as long as the service regularly
pays to the creditor a mutually acceptable amount
that is either the amount agreed upon by the service and the creditor
on the date they entered into their original agreement or an
amount agreed upon by both the service and the creditor on a date
after the date of the original agreement. (ii) Any debt owed to a creditor that was notified of the
consumer's intent to participate is a subject of the agreement if
the creditor does not respond to the service and state the
creditor's objection, in writing, to the consumer's participation
in debt scheduling within fifteen days after receiving notice of
the consumer's intention to do so; however, no debt that is
subject to a lien or security interest of any type, other than a
judgment lien or execution lien, shall be a subject of the
agreement unless the creditor specifically assents, in writing,
to the debt being a subject of the agreement. The creditor shall
be considered to have entered into an agreement of the type
described in division (D)(2)(d)(i) of this section, and the
amount to be regularly paid by the service to the creditor shall
be an amount determined to be reasonable by the service or an
amount agreed upon by both the service and the creditor on a date
after the expiration of the fifteen-day period. (iii) Any debt owed to a creditor that was not notified of
the consumer's intent to participate, or a debt owed to a
creditor that was notified of the consumer's intent to
participate and that responded to the service and stated its
objection, in writing, to the consumer's participation in debt
scheduling within fifteen days after receiving notice of the
consumer's intention to do so, is not a subject of the agreement. (e) The service agrees that, if the consumer fails to make
a payment under the agreement within forty-five days of its due
date or if the agreement is terminated, the service will notify
each creditor that is owed a debt that is subject to the
agreement of the failure or termination by regular mail within
two business days of the failure or termination, and the service
provides that notice in accordance with the agreement.
Sec. 2716.11. A proceeding for garnishment of property, other than personal
earnings, may be commenced after a judgment has been obtained by a judgment
creditor by the filing of an affidavit in writing made by the judgment
creditor or the judgment creditor's
attorney setting forth all of the following: (A) The name of the judgment debtor whose property, other than personal
earnings, the judgment creditor seeks to garnish; (B) That the affiant has good reason to believe and does believe that the
person named in the affidavit as the garnishee has may have property, other than
personal earnings, of the judgment debtor that is not exempt under the law of
this state or the United States; (C) A description of the property.
Sec. 4710.01. As used in sections 4710.01, 4710.02, and 4710.99 of the
Revised Code this chapter: (A) "Person" includes individuals, partnerships, associations, and
corporations, trusts, and other legal entities. (B) "Debt pooling company adjusting" means any person doing business as a in debt adjusting, budget
counseling, debt management, prorating, or debt pooling service, or holding
itself oneself out, by words of similar import, as providing services to debtors in
the management of their debts, and contracting with a debtor for a fee or
other thing of value; to do either of the following: (1) To effect the adjustment, compromise, or discharge of any account, note,
or other indebtedness of the debtor; (2) To receive from the debtor and disburse to his the debtor's
creditors any money or other thing of value.
(C) "Resides" means to live in a particular place on a temporary or a permanent basis.
Sec. 4710.02. (A) Subject to division (C) of this section, a person engaged in debt adjusting shall do both of the following:
(1) Unless specifically instructed otherwise by a debtor, disburse to the appropriate creditors all funds received from the debtor, less any contributions not prohibited by division (B) of this section, within thirty days of receipt of the funds from the debtor;
(2) Maintain a separate trust account for the receipt of any funds from debtors and the disbursement of the funds to creditors on behalf of the debtors.
(B) If contributions for engaging in debt adjusting are accepted, directly or indirectly, no person engaged in debt adjusting shall do any of the following:
(1) Accept a contribution exceeding seventy-five dollars from a debtor residing in this state for an initial consultation or initial set up;
(2) Accept a consultation contribution exceeding one hundred dollars per calendar year from a debtor residing in this state;
(3) Accept a periodic
contribution from a debtor residing in this state, which contribution exceeds eight and one-half per cent of the amount paid by the debtor each month for distribution to the debtor's creditors or thirty dollars, whichever is greater.
(C) Division (A) or (B) of this section does not prohibit a person engaged in debt adjusting for a debtor who is residing in this state from charging the debtor a reasonable fee for insufficient funds transactions that is in addition to contributions not prohibited by division (B) of this section.
(D) Any person that engages in debt adjusting, annually, shall arrange for and undergo an audit conducted by an independent, third party, certified public accountant of the person's business, including any trust funds deposited and distributed to creditors on behalf of debtors. Both of the following apply to an audit described in this division:
(1) The person shall file the results of the audit and the auditor's opinion with the consumer protection division of the attorney general.
(2) The attorney general shall make available a summary of the results of the audit and the auditor's opinion upon written request of a person and payment of a fee not exceeding the cost of copying the summary and opinion.
(E) A person engaged in debt adjusting shall obtain and maintain at all times insurance coverage for employee dishonesty, depositor's forgery, and computer fraud in the amount of ten per cent of the monthly average for the immediate preceding six months of the aggregate amount of all deposits made with the person by all debtors. The insurance coverage shall comply with all of the following:
(1) The insurance coverage is not less than one hundred thousand dollars.
(2) The insurance coverage includes a deductible that does not exceed ten per cent of the face amount of the policy coverage.
(3) The insurance coverage is issued by an insurer rated at least A- or its equivalent by a nationally recognized rating organization.
(4) The insurance coverage provides that thirty days advance written notice be given to the consumer protection division of the attorney general before coverage is terminated.
(F)(1) No person engaged in debt adjusting shall fail to comply with division (A) of this section or shall violate division (B) of this section.
(2) No person engaged in debt adjusting shall fail to comply with divisions (D) and (E) of this section.
Sec. 4710.03. Nothing in this chapter applies to any of the following:
(A) The federal national mortgage association; the federal home loan mortgage corporation; a bank, bank holding company, trust company, savings and loan association, credit union, savings bank, or credit card bank, that is regulated by the office of the comptroller of currency, office of thrift supervision, federal reserve, federal deposit insurance corporation, national credit union administration, or division of financial institutions; or to subsidiaries of any of these entities;
(B) Debt adjusting incurred in the practice of law in this state;
(C) A person that incidentally engages in debt adjusting to adjust the indebtedness owed to that person; (D) A registrant as defined in section 1321.51 of the Revised Code; (E) A registrant or licensee as both are defined in section 1322.01 of the Revised Code.
Sec. 4710.04. (A) Any violation of division (F)(1) of section 4710.02 of the Revised Code is deemed an unfair or deceptive act or practice in violation of section 1345.02 of the Revised Code. A person injured by a violation of that division has a cause of action and is entitled to the same relief available to a consumer under section 1345.09 of the Revised Code, and all the powers and remedies available to the attorney general to enforce sections 1345.01 to 1345.13 of the Revised Code are available to the attorney general to enforce division (F)(1) of section 4710.02 of the Revised Code.
(B) Any person who violates division (F)(2) of section 4710.02 of the Revised Code, in addition to the penalties imposed by section 4710.99 of the Revised Code, shall be fined not more than ten thousand dollars for each violation.
Sec. 4710.99. Whoever violates division (F) of section 4710.02 of the Revised Code is guilty of a misdemeanor of the third degree for a first offense and a misdemeanor of the second degree for any subsequent offense.
Section 2. That existing sections 1309.613, 1309.625, 2716.03, 2716.11, and 4710.01 and sections 4710.02, 4710.03, and 4710.99 of the Revised Code are hereby repealed. Section 3. Section 2716.03 of the Revised Code is presented in
this act as a composite of the section as amended by both Am. Sub. S.B. 144 and Am. Sub. S.B. 170 of
the 122nd General Assembly. The General Assembly, applying the
principle stated in division (B) of section 1.52 of the Revised
Code that amendments are to be harmonized if reasonably capable of
simultaneous operation, finds that the composite is the resulting
version of the section in effect prior to the effective date of
the section as presented in this act.
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