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Sub. H. B. No. 173 As Passed by the HouseAs Passed by the House
130th General Assembly | Regular Session | 2013-2014 |
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Representatives Terhar, Mallory
Cosponsors:
Representatives Grossman, Brenner, Blair, Beck, Bishoff, Buchy, Butler, Hackett, Hagan, C., Retherford, Ruhl Speaker Batchelder
A BILL
To amend sections 4710.01 and 4710.03 and to enact
sections 4710.20 to 4710.32 of the Revised Code to
regulate providers of debt settlement services.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:
Section 1. That sections 4710.01 and 4710.03 be amended and
sections 4710.20, 4710.21, 4710.22, 4710.23, 4710.24, 4710.25,
4710.26, 4710.27, 4710.28, 4710.29, 4710.30, 4710.31, and 4710.32
of the Revised Code be enacted to read as follows:
Sec. 4710.01. As used in this chapter sections 4710.01 to
4710.04 of the Revised Code:
(A) "Person" includes individuals, partnerships,
associations, corporations, trusts, and other legal entities.
(B)(1) "Debt adjusting" means doing business in debt
adjusting, budget counseling, debt management, or debt pooling
service, or holding oneself out, by words of similar import, as
providing services to debtors in the management of their debts, to
do either of the following:
(1)(a) To effect the adjustment, compromise, or discharge of
any account, note, or other indebtedness of the debtor;
(2)(b) To receive from the debtor and disburse to the
debtor's creditors any money or other thing of value.
(2) "Debt adjusting" does not include debt settlement
services as defined in section 4710.20 of the Revised Code.
(C) "Resides" means to live in a particular place on a
temporary or a permanent basis.
Sec. 4710.03. Nothing in this chapter sections 4710.01 to
4710.04 of the Revised Code 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. 4710.20. As used in sections 4710.20 to 4710.32 of the
Revised Code:
(A) "Affiliate" means any of the following:
(1) A person that controls, is controlled by, or is under
common control with a provider.
(2) An executive officer or director of a provider or any
individual performing functions similar to an executive officer or
director.
(3) An executive officer or director of a person described in
division (A)(1) of this section or any individual performing
functions similar to an executive officer or director.
(B) "Concessions" means assent to repayment of a debt on
terms more favorable to a debtor than the terms of the contract
between the debtor and a creditor.
(C) "Control" means the right to control at least ten per
cent of the voting power of another person.
(D) "Day" means a calendar day.
(E) "Debtor" means an individual to whom a provider furnishes
debt settlement services.
(F) "Debt settlement services agreement" means an agreement
between a provider and a debtor for the furnishing of debt
settlement services.
(G)(1) "Debt settlement services" means the services as an
intermediary between a debtor and one or more unsecured creditors
of the debtor for the purpose of obtaining concessions with
respect to the debtor's unsecured debt, which concessions may
include a reduction in the principal amount of the debt.
(2) "Debt settlement services" does not include any of the
following:
(a) Accounting services provided in an accountant-client
relationship by a certified public accountant licensed to provide
accounting services in this state;
(b) Financial planning services provided in a financial
planner-client relationship by a licensed member of a financial
planning profession;
(c) The collection of debts by a debt collector as defined in
the federal "Fair Debt Collection Practices Act," 91 Stat. 875
(1977), 15 U.S.C. 1692a, as amended.
(H) "Financial institution" means any national bank, any bank
doing business under authority granted by the superintendent of
financial institutions or the regulatory authority of another
state, any federal savings association, any savings and loan
association or savings bank doing business under authority granted
by the superintendent or the regulatory authority of another
state, any trust company, or any credit union regulated by a state
or federal regulatory authority.
(I) "Good faith" means honesty in fact and the observance of
reasonable standards of fair dealing.
(J) "Person" means an individual, corporation, business
trust, estate, trust, partnership, limited liability company,
association, joint venture, or any other legal or commercial
entity. The term does not include a public corporation,
government, or governmental subdivision, agency, or
instrumentality.
(K) "Principal amount of the debt" means the amount of a debt
at the time of the execution of a debt settlement services
agreement.
(L) "Program" means a program or strategy in which a provider
furnishes debt settlement services.
(M) "Provider" means a person that furnishes, offers to
furnish, or agrees to furnish debt settlement services.
(N) "Record" means information that is inscribed on a
tangible medium or that is stored in an electronic or other medium
and is retrievable in a perceivable form.
(O) "State" means the state of Ohio, except when the context
indicates the term is referring to another state of the United
States, the District of Columbia, Puerto Rico, the United States
Virgin Islands, or any territory or insular possession subject to
the jurisdiction of the United States.
(P) "Superintendent of financial institutions" includes the
deputy superintendent for consumer finance as provided in section
1181.21 of the Revised Code.
Sec. 4710.21. (A) A provider shall not furnish debt
settlement services to a debtor who the provider reasonably should
know resides in this state at the time the debt settlement
services agreement is entered into, except as provided in sections
4710.20 to 4710.32 of the Revised Code.
(B) Sections 4710.20 to 4710.32 of the Revised Code do not
apply to the following persons or their employees when the person
or the employee is engaged in the regular course of the person's
business or profession:
(1) A judicial officer, a person acting under an order of a
court or an administrative agency, or an assignee for the benefit
of creditors;
(2) A financial institution or an affiliate or agency of a
financial institution if the affiliate or agent is subject to
examination by a federal or state banking regulatory authority;
(3) A title insurer, escrow company, or other person that
provides bill-paying services if the furnishing of debt settlement
services is incidental to the bill-paying services;
(4) An attorney licensed or otherwise authorized to practice
law in this state who furnishes debt settlement services directly
to a client as part of a lawyer-client relationship and does not
have a business relationship with a provider that is in any way
related to the furnishing of debt settlement services;
(5) A registrant as defined in section 1321.51 of the Revised
Code.
Sec. 4710.22. A provider, prior to offering to furnish or
furnishing debt settlement services to a debtor who the provider
reasonably should know resides in this state at the time the debt
settlement services agreement is entered into, shall submit all of
the following to the department of commerce:
(A) Evidence that the provider has a resident agent in this
state recorded with the secretary of state;
(B) Proof of a bond in effect meeting the requirements of
section 4710.23 of the Revised Code;
(C) Proof that the provider is authorized by the laws of this
state to conduct business in this state.
Sec. 4710.23. (A) A provider shall obtain and maintain in
effect at all times a corporate surety bond issued by a bonding
company or insurance company authorized to do business in this
state that meets all of the following conditions:
(1) The bond is in favor of the superintendent of financial
institutions.
(2) The bond is for the exclusive benefit of any debtor
located in this state, and of the state for the benefit of any
debtor, who is injured by a failure to comply with any provision
of sections 4710.20 to 4170.32 of the Revised Code.
(3) The bond is in the amount of fifty thousand dollars.
(B) Any debtor claiming against the bond for a failure to
comply with any provision of sections 4710.20 to 4710.32 of the
Revised Code may maintain an action at law against the provider
and against the corporate surety. The aggregate liability of the
corporate surety for any and all breaches of the conditions of the
bond shall not exceed the penal sum of the bond.
(C) Whenever the penal sum of the bond is reduced by one or
more recoveries or payments, the provider shall furnish a new or
additional bond under this section, so that the total or aggregate
penal sum of the bond or bonds equals the sum required by this
section, or shall furnish an endorsement executed by the corporate
surety reinstating the bond to the required penal sum.
(D) The bond shall not be canceled by the provider or by the
corporate surety, except upon notice to the superintendent by
certified mail, return receipt requested. The cancellation shall
not be effective prior to thirty days after the superintendent
receives the notice.
Sec. 4710.24. A provider shall do all of the following:
(A) Act in good faith in all matters relating to the
furnishing of debt settlement services;
(B) Maintain a toll-free communication system, staffed at a
level that reasonably permits a debtor to speak to a customer
service representative, as appropriate, during ordinary business
hours;
(C) Provide all disclosures required by sections 4710.20 to
4710.32 of the Revised Code in English and in any other language
the provider will use primarily to communicate with a debtor.
Sec. 4710.25. (A) Before a debtor consents to pay the fees
for the goods and services offered by the provider, the provider
shall disclose, in a clear and conspicuous manner, all of the
following material information:
(1) A good faith estimate of the amount of time necessary to
achieve the represented results and, to the extent that the debt
settlement services may include a settlement offer to any of the
debtor's creditors, a good faith estimate of the time by which the
provider will start to make bona fide settlement offers to the
debtor's creditors, and the cost to the debtor for furnishing the
debt settlement services;
(2) To the extent that the debt settlement services may
include a settlement offer to any of the debtor's creditors, a
good faith estimate of the amount of money, or the percentage of
each outstanding debt, that the debtor will be required to
accumulate before the provider makes a bona fide settlement offer;
(3) To the extent that any aspect of the debt settlement
services relies upon or results in the debtor's failure to make
timely payments to creditors, that the use of the debt settlement
services will likely adversely affect the debtor's
creditworthiness, may result in the debtor being subject to
collection actions or sued by creditors, and may increase the
amount of money the debtor owes due to the accrual of fees and
interest;
(4) To the extent that the provider requests or requires the
debtor to place funds in an account at a financial institution,
that the debtor owns the funds held in the account;
(5) That the debtor may withdraw from the debt settlement
services agreement at any time without penalty;
(6) That the use of the debt settlement services may result
in the creation of taxable income to the debtor and, if any debt
is cancelled, that the debtor will receive from the creditor the
United States internal revenue service form 1099 necessary for the
debtor in filing federal taxes pursuant to the "Internal Revenue
Code of 1986," 100 Stat. 2085, 26 U.S.C. 1 et seq., as amended.
(B) A provider shall not misrepresent, directly or by
implication, any material aspect of the debt settlement services,
including, but not limited to, any of the following:
(1) The amount of money or the percentage of the debt amount
that a debtor may save by entering into the debt settlement
services agreement;
(2) The effect of debt settlement services on the debtor's
creditworthiness and on the collection efforts of the debtor's
creditors;
(3) The percentage or number of debtors who attain the
represented results;
(4) Whether debt settlement services are being offered or
furnished by a nonprofit entity.
(C) Prior to entering into a debt settlement services
agreement, a provider shall prepare a financial analysis with
respect to the income and debts of the debtor seeking the debt
settlement services and provide the debtor with a copy of the
financial analysis.
Sec. 4710.26. A provider shall not impose fees or receive
payment for debt settlement services unless all of the following
conditions are met:
(A) The provider has renegotiated, settled, reduced, or
otherwise altered the terms of at least one debt under a debt
settlement program.
(B) The debtor has made at least one payment to a creditor in
furtherance of a settlement with that creditor;
(C) The fee for settling each individual debt enrolled in a
debt settlement program shall do either of the following:
(1) Bear the same proportional relationship to the total fees
for settling the entire debt balance as the individual debt amount
bears to the entire debt amount. For purposes of division (C)(1)
of this section, "individual debt amount" and "entire debt amount"
mean the amounts owed at the time the debt was enrolled in the
program.
(2) Represent a percentage of the amount saved as a result of
the settlement. The percentage charged shall not change from one
individual debt to another. For purposes of division (C)(2) of
this section, the "amount saved" means the difference between the
amount owed at the time the debt was enrolled in the program and
the amount actually paid to satisfy the debt.
Sec. 4710.27. (A) A provider shall not hold a debtor's funds
intended for distribution to creditors.
(B) Nothing in this section prohibits a provider from
requesting or requiring the debtor to place funds in an account to
be used for payment of the provider's fees and for payments to
creditors in connection with a renegotiation, settlement,
reduction, or other alteration of the terms of payment or other
terms of debt, provided that all of the following conditions are
met:
(1) The funds are held in a specifically designated account
at a financial institution.
(2) The debtor owns and controls the funds held in the
account and is paid accrued interest on the account, if any.
(3) The entity administering the account is not owned or
controlled by, or an affiliate of, the provider.
(4) The entity administering the account does not give or
accept any money or other compensation in exchange for referrals
of business by the provider.
(5) The debtor may terminate the debt settlement services
agreement at any time without penalty, and must receive all funds
in the account, other than funds earned by the provider in
accordance with sections 4710.20 to 4710.32 of the Revised Code,
within seven business days after the debtor's request.
Sec. 4710.28. If a provider enters into a debt settlement
services agreement without complying with sections 4710.20 to
4710.32 of the Revised Code, the debtor may void the agreement.
Sec. 4710.29. (A) The superintendent of financial
institutions may investigate an alleged failure to comply with any
provision of sections 4710.20 to 4710.32 of the Revised Code or
any complaints concerning such a failure.
(B) As often as the superintendent considers it necessary,
the superintendent may investigate and examine, in or outside this
state, the activities and the books, accounts, papers, records,
and other documents of a provider or of any person to which a
provider has delegated its obligations under an agreement or under
sections 4710.20 to 4710.32 of the Revised Code. In connection
with the investigation, the superintendent may charge the provider
the reasonable expenses necessarily incurred to conduct the
examination.
(C) In conducting any investigation pursuant to this section,
the superintendent may compel, by subpoena, witnesses to testify
in relation to any matter over which the superintendent has
jurisdiction and may require the production of any book, account,
paper, record, or other document pertaining to that matter. If a
person fails to file any statement or report, obey any subpoena,
give testimony, produce any book, account, paper, record, or other
document as required by a subpoena, or permit photocopying of any
book, account, paper, record, or other document subpoenaed, the
court of common pleas of any county in this state, upon
application made to it by the superintendent, shall compel
obedience by attachment proceedings for contempt, as in the case
of disobedience of the requirements of a subpoena issued from the
court or a refusal to testify therein.
(D) Examination or investigation information that identifies
debtors who have debt settlement services agreements with a
provider shall not be disclosed to the public.
Sec. 4710.30. If the superintendent of financial
institutions determines that a person is engaged in or is believed
to be engaged in activities that may constitute a failure to
comply with any provision of sections 4710.20 to 4710.32 of the
Revised Code, the superintendent, after notice and a hearing
conducted in accordance with Chapter 119. of the Revised Code, may
do any of the following:
(A) Issue a cease and desist order. Such an order shall be
enforceable in the court of common pleas.
(B) Seek and obtain civil penalties in an amount not to
exceed one thousand dollars for each failure to comply.
(C) Order the person to correct or remedy the conditions
resulting from the failure to comply, including by making
restitution. Such an order shall be enforceable in the court of
common pleas.
Sec. 4710.31. Any violation of sections 4710.20 to 4710.32
of the Revised Code is deemed an unfair or deceptive act or
practice in violation of section 1345.02 of the Revised Code. A
debtor injured by such a violation 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 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
sections 4710.20 to 4710.32 of the Revised Code.
Sec. 4710.32. Sections 4710.20 to 4710.31 of the Revised
Code modify, limit, and supersede the federal "Electronic
Signatures in Global and National Commerce Act," 114 Stat. 464, 15
U.S.C. 7001 et seq., as amended, but do not modify, limit, or
supersede section 101(c) of that act or authorize electronic
delivery of any of the notices described in section 103(b) of that
act.
Section 2. That existing sections 4710.01 and 4710.03 of the
Revised Code are hereby repealed.
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