This bill deals with debt settlement services providers, which are regulated by the Department of Commerce under chapter 332B. Debt settlement services involve firms that enter into a contract with a debtor to negotiate with the debtor's creditors for reductions in the amount owed.
Section 1 eliminates a written specification of origination fees and monthly fees as components of fees that must be itemized on a separate document as components of the total fees to be charged to debtors under a debt settlement services agreement.
Section 2 eliminates the fees referenced in section 1 as fees that need to be itemized in the debt settlement services agreement.
Section 3 prohibits debt settlement services providers from holding debtors' funds except that upon compliance with specified sections, a debt settlement services provider may get permission from the debtor to make a withdrawal of an amount to pay fees.
Section 4 removes language in current law dealing with the debt settlement provider's right to fees after the debtor cancels the debt settlement agreement within the ten days permitted by law.
Section 5 eliminates language in current law that requires the debt settlement provider to stop collecting monthly fees from the debtor beginning in the month following the debt settlement provider's cancellation of the agreement.
Section 6 provides that a debt settlement services provider may not request or receive payment for any debt settlement service until or unless the three conditions listed in this section are satisfied. Fees are limited to 25 percent of the debt enrolled.
Section 7 amends an existing law that lists prohibited practices in debt settlement services by adding an exception for a partial payment plan to another prohibition involving a partial payment plan. Nothing in this section may be construed to interfere with the obligation of a debt settlement services provider to make required disclosures.
Section 8 provides that a bona fide clerical, unintentional error occurring despite reasonable adopted procedures is not a violation.
Section 9 repeals two subdivisions that provide detailed descriptions of fee structures that involve fees as a percentage of debt and fees as a percentage of savings (reduction of debt).
Section 10 makes the bill effective for debt settlement services agreements entered into on or after August 1, 2012.