As noted in section 4 above, the federal Telemarketing Sales Rule restricts the nature and timing
of fees that certain adjustment service companies may charge to customers. In addition, the
Telemarketing Sales Rule identifies and prohibits certain deceptive or abusive acts or practices by telemarketer-sold debt relief services.
7. Summary of comments received during preliminary comment period and at public hearing on the statement of scope:
The Division received written comments from two trade groups representing members of the debt relief services industry (the American Fair Credit Council and the Consumer Debt Relief Initiative), as well as a company that provides account management services for industry members (Global Holdings, LLC). Their comments are summarized as applicable in Sections II.A through II.E of the Division’s May 2024 Report and Recommendations Concerning Telemarketer-Sold Debt Relief Services.
8. Comparison with rules in adjacent states:
The federal Telemarketing Sale Rule requires telemarketer-sold debt relief services to utilize one of two alternative fee structures, while leaving it to the states to determine which structures are permissible and the maximum fees that such companies may charge their residents. Fee caps are generally established on a state-by-state basis by statute or administrative rule:
States that have authorized companies to utilize the “percentage of debt” model subject to fee maximums include: Louisiana (12 percent cap), New Hampshire (10 to 15 percent, depending on the duration of the plan), Michigan (15 percent), Minnesota (15 percent), Washington (15 percent), Delaware (18 percent), Iowa (18 percent), Idaho (20 percent), Montana (20 percent), and Virginia (20 percent).
States that have authorized companies to utilize the “percentage of savings” model subject to fee maximums include: Connecticut (10 percent), Illinois (15 percent), Maine (15 percent), Iowa (30 percent), Minnesota (30 percent), North Dakota (30 percent), Rhode Island (30 percent), and Virginia (30 percent).
In addition, Oregon has authorized a “hybrid” fee structure, allowing companies to charge fees totaling up to 15 percent of the enrolled debt plus up to 7.5 percent of the savings achieved.
Other states either prohibit for-profit debt settlement services, impose fee structures that are different than those required by the Telemarketing Sales Rule, or do not establish a fixed maximum percentage that such companies may charge under a “percentage of debt” or “percentage of savings” model.
9. Summary of factual data and analytical methodologies:
The proposed rules are based on (1) the Department’s experience in administering and enforcing section 218.02 of the Wisconsin Statutes and its accompanying regulations; (2) the Department’s knowledge of the rules, practices, and experiences of regulators in other states and federal agencies in administering and enforcing statutes and rules applicable to the business of adjustment service companies; and (3) written comments and feedback provided to the Department in connection with the July 20, 2023 preliminary public hearing for this rule.
10. Analysis and supporting documents used to determine effect on small business:
The proposed changes do not seek to impose new restrictions on licensees doing business under current law, but rather to authorize an additional fee structure subject to appropriate safeguards. Based on the Division’s knowledge and experience in administering chapter DFI-Bkg 73, existing licensees that are compliant with the current version of chapter DFI-Bkg 73 will not need to modify their business practices to comply with the revisions proposed herein. The changes seek to clarify the law and to enable those companies that are subject to the Telemarking Sales Rule to utilize a fee structure contemplated by that rule, subject to consumer protections.
11. Anticipated costs incurred by private sector:
The proposed rule authorizes an additional fee structure that aligns with the requirements of the Telemarketing Sales Rule, but it would not eliminate or reduce the maximum fees that current licensees may charge under existing fee structures authorized by Wis. Admin. Code ch. DFI-Bkg 73 or impose new substantive requirements. For that reason, the Division does not anticipate the proposed rule would materially impact existing licensees. For consumers, updating Wis. Admin. Code ch. DFI-Bkg 73 to allow alternative fee structures subject to fee caps is likely to increase the number of licensees offering debt settlement services, while protecting consumers from being charged unreasonable fees for the services provided. 12. Effect on small business:
Small businesses are not affected by these revisions.
13. Agency contact person:
Matthew Lynch
Chief Legal Counsel
Wisconsin Department of Financial Institutions
14. Place where comments are to be submitted and deadline for submission:
Comments may be submitted to the contact person shown below no later than the date on which the public hearing on this proposed rule order is conducted. Information as to the place, date and time of the public hearing will be published in the Wisconsin Administrative Register.
By mail: Marc Shovers, Assistant Chief Legal Counsel, Department of Financial Institutions, PO Box 8861, Madison, WI 53708-8861.
By delivery: Marc Shovers, Assistant Chief Legal Counsel, Department of Financial Institutions, 4822 Madison Yards Way, North Tower, Madison, WI 53703.
TEXT OF RULE
SECTION 1. DFI-Bkg 73.01 (1) (a) is amended to read:
(1) Both Either of the 2 alternative fee plans set forth below may be used when contracting services with a debtor:
(a) The maximum A monthly fee charged the debtor, which may shall not exceed 10% of the amount of money paid to the licensee to be distributed to a creditor or creditors or $120 in any one calendar month, whichever is less.
SECTION 2. DFI-Bkg 73.01 (1) (b) is renumbered DFI-Bkg 73.01 (1m).
SECTION 3. DFI-Bkg 73.01 (1) (c) is created to read:
(1) (c) A performance-based fee charged the debtor as a percentage of the amount saved as the result of the licensee’s renegotiation, settlement, reduction, or alteration of a debt enrolled in the licensee’s service. The percentage charged cannot change from one individual debt to another and cannot exceed 30 percent of the savings actually negotiated by the licensee on behalf of the debtor. The amount saved is the difference between the amount owed at the time the debtor agreed to enroll the debt in the licensee’s service and the amount the debtor actually paid to satisfy the debt.
SECTION 4. DFI-Bkg 73.02 (2) (b), (c), and (d) are amended to read:
(2) (b) Provide in clear and precise terms payments and time A detailed schedule of payments to be made by the debtor, including the scheduled date and amount of each payment and how it will be applied, which must be based on a reasonable assessment of reasonably within the ability of the debtor to pay.
(c) The licensee’s fee as set forth in s. DFI-Bkg 73.01. No other amounts may be charged or collected. (d) The If the licensee utilizes the fee plan authorized in s. DFI-Bkg 73.01 (1) (c), the amount of each payment debt that the debtor agrees to enroll in the licensee’s service to be paid, renegotiated, settled, reduced, or altered by or in on behalf of the debtor, which may not exceed the actual balance that is due and owing from the debtor on each debt as of the date the agreement is signed by the debtor. Following execution of the contract or agreement, a debt may be added to or removed from this list of enrolled debts only upon the separate written agreement of the parties. SECTION 5. DFI-Bkg 73.02 (2) (f) to (j) are created to read:
(2) (f) If the licensee does not maintain a physical office within the state, the licensee’s office hours, which must comply with the requirements of DFI-Bkg 73.03 (1), together with the telephone number and email address at which the licensee will answer customer inquiries.
(g) If the licensee represents in marketing materials or other communications that the licensee’s services achieve certain results, the amount of time necessary to achieve the represented results.
(h) If the licensee’s services include making a settlement offer to any of the debtor’s creditors or debt collectors, the time by which the licensee will make a bona fide settlement offer to each creditor or debt collector and the amount of money that the debtor must accumulate before the licensee will make an offer.
(i) If any aspect of the licensee’s services relies upon or results in the debtor’s failure to make timely payments to creditors or debt collectors, a statement that the use of the licensee’s services will likely adversely affect the debtor’s creditworthiness, may result in the debtor being subject to collections or sued by creditors or debt collectors, and may increase the amount of money the customer owes due to the accrual of fees and interest.
(j) If the licensee requests or requires the debtor to place funds in an account at an insured financial institution, the following additional statements:
1. That the debtor owns the funds held in the account.
2. That the debtor may withdraw from the licensee’s services at any time without penalty.
3. That if the debtor withdraws from the licensee’s services, the debtor will receive all funds in the account, other than fees earned by the licensee in compliance with DFI-Bkg 73.01.
