Section 14. Requirements for providing debt management
services.
A licensee shall provide debt management services in accordance with the following requirements:
(1) The licensee shall provide each consumer for whom it
provides debt management services with a consumer education
program at no cost to the consumer.
(2) (i) A licensee may only provide debt management
services in accordance with a written debt management
services agreement entered into between the licensee and
the consumer. Before the licensee and consumer enter into
a debt management services agreement, the licensee shall
prepare an analysis of the consumer's financial situation
and a budget for the consumer. The analysis shall include
a good faith determination whether the consumer will
benefit from debt management services and an explanation
of that benefit. If the analysis determines that the
consumer will not benefit from debt management services,
the licensee shall not offer debt management services to
the consumer.
(ii) The licensee may communicate with the consumer
by electronic mail or the Internet, but shall not enter
into a debt management services agreement unless a
certified credit counselor employed by the licensee and
the consumer have orally reviewed the analysis, the
budget and the debt management services agreement through
a person-to-person discussion. The licensee shall provide
copies of the analysis, budget and debt management
services agreement to the consumer.
(3) A debt management services agreement shall be in
writing, signed by the licensee and the consumer, in plain
English and printed in at least 12-point type. It shall
contain at least the following information:
(i) The name, address and telephone number of the
consumer and of the licensee.
(ii) The license number of the licensee.
(iii) A description of the debt management services
to be provided to the consumer.
(iv) A description of the fees that will be charged
to the consumer.
(v) The name and address of the depository
institution where the trust account into which the
consumer's funds, paid to the licensee for disbursement
to the consumer's creditors, is located.
(vi) A list of each of the consumer's creditors that
the licensee in good faith reasonably expects to
participate in the licensee's management of the
consumer's debt, including the amount owed to each
creditor and the schedule of payments to be made to each
creditor.
(vii) A list of each of the consumer's creditors
that the licensee in good faith reasonably expects not to
participate in the licensee's management of the
consumer's debt.
(viii) A schedule of the payments that the consumer
must make to the licensee, including the amount of each
payment, the date it is due and the form in which it must
be made.
(ix) Disclosure of any fees that either the consumer
must make to the licensee or that the licensee will
retain from each of the consumer's payments to the
licensee.
(x) A notice, in bold print, that the consumer's
participation in the debt management services agreement
may negatively impact the consumer's credit rating or
credit score.
(xi) Disclosure that the licensee may receive
compensation from the consumer's creditors for providing
debt management services to the consumer.
(xii) Notice that either party may terminate the
debt management services agreement upon ten days' written
notice to the other party.
(xiii) Notice that if the debt management services
agreement is terminated, the consumer is entitled to a
prompt refund of any payments made that have not yet been
disbursed to the consumer's creditors.
(xiv) An explanation of the way in which disputes
that arise under the debt management services agreement
will be resolved.
(xv) An explanation of applicable privacy laws.
(4) The licensee shall provide each consumer
participating in a debt management services agreement with at
least quarterly statements setting forth the payments
received from the consumer and the disbursements made to the
consumer's creditors.
(5) Within two business days of receiving any payment,
the licensee shall deposit all payments received from
consumers under debt management services agreements into a
trust account established for the benefit of the consumers to
whom the licensee is furnishing debt management services. All
money paid to a licensee by or on behalf of a consumer for
distribution to creditors pursuant to a debt management
services agreement is held in trust. Any interest earned from
money held in trust on behalf of a consumer shall be used for
the benefit of the consumer. The trust account shall be in a
federally insured depository institution and is subject to
the following:
(i) Except as provided in subparagraph (iii), money
held in trust by a licensee is not property of the
licensee or any designee. The money shall not be
available to creditors of the licensee, except for a
consumer from whom or on whose behalf the licensee
received the money, to the extent the money has not been
disbursed to creditors on behalf of the consumer.
(ii) In connection with the trust account, a
licensee shall:
(A) maintain separate records of accounts for
each individual to whom the provider is furnishing
debt management services; and
(B) disburse money paid by or on behalf of the
individual to creditors of the individual as
disclosed in the debt management services agreement,
except that:
(I) The licensee may delay payment to the
extent that a payment by the consumer does not
comply with the terms of the debt management
services agreement because it is not sufficient
to pay designated creditors.
(II) If the debt management services
agreement provides for regular periodic payments
to creditors, the licensee shall make payments to
comply with the due dates established by each
creditor.
(III) The licensee may promptly correct any
payments that are not made or that are
misdirected as a result of an error by the
licensee or any person in control of the trust
account and reimburse the consumer for any costs
or fees imposed by a creditor as a result of the
licensee's failure to pay a creditor in a timely
manner.
(iii) A licensee may commingle money in a trust
account established for the benefit of the consumers who
have a debt management services agreement or debt
settlement services agreement with the licensee and to
whom the licensee is furnishing debt management services
or debt settlement services. In the event a licensee
deposits a consumer's entire payment to the licensee,
including both money for disbursement to creditors and
fees owed to the licensee, the licensee may accept
payment of fees owed to it from the trust. All money in
the trust account established for the benefit of
consumers however, shall be accounted for separately,
including an accounting for fees owed to the licensee. No
other money shall be deposited into the trust account and
the money in the account may only be used for the
purposes expressed in this subparagraph.
(iv) A trust account shall at all times have a cash
balance equal to the total amount held in all consumer
accounts.
(v) The licensee shall reconcile the trust account
at least once a month, which shall include reconciling
the cash balance in the trust account with the sum of the
balances in each consumer account. If the licensee has
more than one trust account, each trust account must be
individually reconciled.
(vi) If a licensee discovers, or has reasonable
suspicion of, embezzlement or other unlawful
appropriation of money held in trust, the licensee shall
immediately notify the department.
(vii) If a consumer terminates a debt management
services agreement with a licensee, the licensee shall
promptly refund to the consumer all money paid by or on
behalf of the consumer which has not been paid to
creditors and interest accrued thereon, less fees that
are payable to the licensee as authorized by this act.
(6) The licensee shall disburse a consumer's funds to
the consumer's creditors in a timely manner based on the
availability of the funds pursuant to the consumer's debt
management services agreement. In the event that a consumer
makes only a partial payment as required by a debt management
services agreement, the licensee shall disburse the available
funds to creditors prior to the licensee collecting its own
fees from the consumer's partial payment. In the event that a
consumer fails to resolve any scheduled payment deficiency
within 45 days of the deficiency occurring, a licensee may
terminate the debt management services agreement in
accordance with the agreement.
(7) The licensee or any business entity in which any
director, owner, officer, employee or principal of the
licensee, or any member of such person's immediate family as
defined in 65 Pa.C.S. § 1102 (relating to definitions), has
an equitable, beneficial or other ownership interest shall
not purchase any debt or obligation of a consumer.
(8) The licensee or any business entity in which any
director, owner, officer, employee or principal of the
licensee, or any member of such person's immediate family as
defined in 65 Pa.C.S. § 1102, has an equitable, beneficial or
other ownership interest shall not lend money or provide
credit to a consumer.
(9) The licensee or any business entity in which any
director, owner, officer, employee or principal of the
licensee, or any member of such person's immediate family as
defined in 65 Pa.C.S. § 1102, has an equitable, beneficial or
other ownership interest shall not offer or provide credit
insurance to a consumer.
(10) The licensee or any business entity in which any
director, owner, officer, employee or principal of the
licensee, or any member of such person's immediate family as
defined in 65 Pa.C.S. § 1102, has an equitable, beneficial or
other ownership interest shall not obtain a mortgage or other
security interest in the property of a consumer.
(11) The licensee shall not operate as a collection
agency or debt collector.
(12) The licensee shall not structure a consumer's debt
management services agreement in a way that results in the
negative amortization of any of the consumer's debts.
(13) The licensee shall not compromise any debt of a
consumer unless the compromise benefits the consumer and the
consumer has approved the proposed compromise in writing.
(14) The licensee shall have written policies describing
its safeguards against conflicts of interest in the
conducting of its business.
(15) The licensee shall not disseminate information,
including by advertising, regarding its debt management
services in any way that is false, misleading or deceptive.
(16) The licensee or any business entity in which any
director, owner, officer, employee or principal of the
licensee, or any member of such person's immediate family as
defined in 65 Pa.C.S. § 1102, has an equitable, beneficial or
other ownership interest, shall not offer, pay or give a
gift, bonus, premium, reward or any other compensation to a
person for referring a consumer to the licensee.
(17) The licensee shall not directly or indirectly
accept, offer, pay, provide, give or receive any gift, bonus,
premium, reward or any other compensation to or from any
person, including, but not limited to, any for-profit parent,
subsidiary or the affiliate of any licensee and any entity
whether or not legally recognized by the Commonwealth for
business purposes that provide debt management services for
referring a consumer to the licensee or to another licensee
or person.
(18) The licensee or any business entity in which any
director, owner, officer, employee or principal of the
licensee, or any member of such person's immediate family as
defined in 65 Pa.C.S. § 1102, has an equitable, beneficial or
other ownership interest, shall not offer or pay an
incentive, including a gift, bonus, premium, reward or any
other compensation to a consumer for executing a debt
management services agreement with the licensee.
(19) A licensee shall not, except as provided in this
section, initiate a transfer to or from an individual's
account at a financial institution or with another person
unless the transfer is one of the following:
(i) a return of money to the individual's account;
or
(ii) before termination of debt management services,
properly authorized by the debt management services
agreement and this section and for either of the
following:
(A) payment to one or more creditors pursuant to
a debt management services agreement; or
(B) payment of a fee permitted by this act and
as part of a debt management services agreement.
(20) The licensee shall not disclose the identity or
identifying information of a consumer or the identity of the
consumer's creditors except as permitted by Federal law.
Disclosure may be made:
(i) to the department;
(ii) to a creditor of the consumer, to the extent
necessary to secure the cooperation of the creditor in
the debt management services agreement; or
(iii) as is necessary to administer the debt
management services agreement.
(21) The licensee that primarily communicates with a
consumer in a language other than English shall provide the
debt management services agreement and any other documents or
disclosures required by this act to the consumer in that
other language.
(22) The licensee shall not delegate any of its duties
or obligations under this act or a debt management services
agreement to any person who is not licensed pursuant to this
act and to whom this act is applicable.
(23) The licensee shall have a toll-free telephone
number that shall be prominently displayed on the licensee's
literature and advertising.
(24) The licensee shall not compensate its employees on
the basis of a formula that incorporates the number of
consumers the employee induces to enter into debt management
services agreements or the amount of debt included in a debt
management services agreement.
(25) A licensee shall maintain a communications system,
staffed at a level that reasonably permits inquiring persons
and clients to individually speak and discuss with counselors
or a customer services representative of the licensee during
regular business hours.