LRB-0917/1
MDK:lmk/kjf/wlj:jf
2007 - 2008 LEGISLATURE
March 27, 2007 - Introduced by Joint Legislative Council. Referred to
Committee on Financial Institutions.
AB218,1,5
1An Act to renumber 218.02 (9) and 218.02 (10);
to amend chapter 218 (title),
2220.02 (2) (b), 220.02 (3) and 422.501 (2) (b) 4.; and
to repeal and recreate
3subchapter II (title) of chapter 218 [precedes 218.02], 218.02 (title) and 218.02
4(1) to (8) of the statutes;
relating to: adopting the Uniform Debt-Management
5Services Act, granting rule-making authority, and providing a penalty.
Analysis by the Legislative Reference Bureau
This bill regulates persons who provide certain debt-management services.
Under current law, the Division of Banking (division) of the Department of Financial
Institutions regulates persons engaged in the business of prorating the income of a
debtor to a debtor's creditors or assuming a debtor's obligations by purchasing the
accounts of the debtor. Such a person must obtain a license as an adjustment service
company from the division. The bill repeals this licensure requirement and adopts
instead the Uniform Debt-Management Services Act, which was approved by the
National Conference of Commissioners on Uniform State Laws in 2005.
Under the bill, with certain exceptions, a person may not provide
debt-management services to a resident of this state unless the person obtains a
license from the division. "Debt-management services" is defined as services as an
intermediary between an individual and one or more of the individual's creditors for
the purpose of obtaining "concessions," which is defined as assents to repayment of
debt on terms that are favorable to the individual.
A person is exempt from the licensure requirement if the person receives no
compensation for providing debt-management services, but this exemption does not
apply if the services are provided without charge for the purpose of evading the bill's
requirements. Also exempt is a person who provides debt-management services to
an individual whom the person has no reason to believe resides in this state at the
time the person agrees to provide the services. In addition, the bill exempts all of the
following persons:
1. Agents and employees of a person who is licensed under the bill.
2. Judicial officers and persons acting under court or administrative orders.
3. Assignees for the benefit of creditors.
4. Financial institutions and certain of their affiliates.
5. Title insurers, escrow companies, and other persons whose provision of
debt-management services is incidental to their provision of bill-paying services.
6. Attorneys and certified public accountants whose provision of
debt-management services is incidental to their provision of legal or accounting
services.
The bill requires an applicant for a license to pay a license fee and do all of the
following:
1. Provide evidence that the applicant has insurance of $250,000 against risks
of dishonesty, fraud, theft, and other misconduct on the part of directors, employees,
and agents.
2. If the applicant is a nonprofit or tax-exempt entity, provide evidence of such
status.
3. If the applicant is an out-of-state corporation or limited liability company,
provide a certificate of good standing issued by the other state.
4. Provide specified business, financial, employee, and accreditation
information.
5. Provide evidence that the applicant's counselors obtain certification as
counselors within 12 months of employment.
6. Describe criminal convictions and certain governmental and other actions,
charges, suits, or claims regarding the applicant.
7. Submit the results of criminal background checks on the applicant's officers.
8. Describe the applicant's educational programs, financial analyses, and
initial budget plans for individuals whom the applicant counsels.
9. Provide copies of the agreements for providing debt-management services
that the applicant will use in this state.
10. Provide the applicant's fee schedule.
In addition, an applicant must file a surety bond for the purpose of protecting
individuals for whom the applicant agrees to provide debt-management services.
Also, if the applicant intends to maintain trust accounts for paying creditors on
behalf of individuals to whom the applicant provides debt-management services, the
applicant must submit the results of criminal background checks on all employees
and agents who will have access to the trust accounts.
The division must issue a license to an applicant, unless any of the following
apply: 1) the application is incomplete or contains erroneous information; 2) an
officer, director, or owner of the applicant has defaulted in the payment of money
collected for others or has been convicted of a crime, or suffered a civil judgment,
involving dishonesty or the violation of federal or state securities laws; or 3) the
division makes a specified finding regarding the applicant's inability to operate its
business in compliance with the bill's requirements. In addition, if the applicant is
a nonprofit or tax-exempt entity, the division must deny the application if the
applicant's board of directors is not independent of its employees and agents. The
bill includes tests for the division to determine independence. The bill also requires
the division to deny a license if the applicant is liable for delinquent taxes or is
delinquent in making court-ordered child or family support payments.
If a person is licensed under the bill, the bill imposes various requirements on
the person's provision of debt-management services, including the following: 1) the
person must act in good faith; 2) the person must maintain a toll-free customer
service communication system; and 3) before providing services to an individual, the
person must provide the individual with an itemized list of goods, services, and
charges; educate the individual about personal finance management; and prepare
a financial analysis. Additional requirements apply if the person prepares a plan for
an individual to make payments to creditors. The bill also imposes requirements on
agreements for licensed persons to provide debt-management services to
individuals, including requirements for terminating such agreements. In addition,
the bill does the following: 1) imposes trust requirements on money held by licensed
persons for payment to creditors; 2) establishes limits on the fees that licensed
persons may charge; 3) specifies records that licensed persons must maintain; and
4) prohibits licensed persons from engaging in specified conduct.
The bill creates other requirements, including the following:
1. The bill imposes deadlines on the division's consideration of an application
for a license.
2. The bill requires licensed persons to renew their licenses annually.
3. The bill allows a person licensed or registered in another state to apply for
a license in this state by submitting the other state's application and license or
registration.
4. The bill allows the division to suspend or revoke a license if a person is
insolvent, violates the bill's requirements, or is liable for delinquent taxes or is
delinquent in making court-ordered child or family support payments.
5. The bill allows the division to investigate and enforce the bill's requirements,
including by ordering persons to take corrective action or by obtaining civil
forfeitures.
6. The bill allows an individual to void a debt-management service agreement
with a licensed person who violates the bill's requirements and allows an individual
who is harmed by a licensed person's violation of the bill's requirements to bring a
civil action against the licensed person.
For further information see the state fiscal estimate, which will be printed as
an appendix to this bill.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
AB218, s. 1
1Section
1. Chapter 218 (title) of the statutes is amended to read:
AB218,4,33
Finance companies, auto dealers,
AB218,4,4
4adjustment companies
AB218,4,5
5debt-management service providers,
AB218,4,66
and collection agencies
AB218, s. 2
7Section
2. Subchapter II (title) of chapter 218 [precedes 218.02] of the statutes
8is repealed and recreated to read:
AB218,4,1010
Subchapter II
AB218,4,1111
Uniform debt-management
