PETITION OF:

SECTION 1. The General Laws, as appearing in the 2004 Official Edition, are hereby amended by repealing section 4A of chapter 180 and inserting after chapter 255E the following new chapter:-

CHAPTER 255F.

Consumer Credit Counseling

Section 1. For the purposes of this chapter, the following words shall have the following meanings unless the context clearly requires otherwise:

"Client", a person who engages the services of a credit counselor.

"Commissioner", the commissioner of banks.

"Consumer credit counseling services", (a) the provision of financial and budgetary advice and judgment to individuals in connection with the creation of a budgetary plan for personal, family or household purposes; or (b) the creation of a plan whereby an individual turns over an agreed amount of his income to a credit counseling corporation which distributes it to his creditors in accordance with a plan which they have approved and which may provide for smaller payments or a longer term than the original contract; or (c) the provision of educational services relating to the use of credit; or (d) any combination of these. "Creditor", includes a general creditor, a secured creditor, a lien creditor and any representative of creditors, including an assignee for the benefit of creditors, a trustee in bankruptcy, a receiver in equity and an executor or administrator of an insolvent debtor's or assignor's estate.

"Debt Management Plan", a written agreement entered into by a licensee and an individual whereby an individual turns over an agreed amount of his income to a credit counseling corporation which distributes it to his creditors in accordance with a plan which they have approved and which may provide forsmaller payments or a longer term than the original contract.

"License", a written certificate issued by the commissioner, authorizing a person or entity to provide consumer credit counseling services to residents of Commonwealth.

"Licensee", a person or entity licensed under this act to perform consumer credit counseling services.

Section 2. No person or entity shall engage in consumer credit counseling services with any individual residing within the boundaries of this commonwealth nor shall they advertise consumer credit counseling services within the boundaries of this commonwealth without first obtaining a license from the commissioner. All written advertisements and solicitations by a licensee shall include a statement that the licensee is licensed by the commissioner and shall provide the license number of the licensee. The commissioner may from time to time establish such regulations pertaining to the conduct of the business as he may deem necessary.

No person, other than an attorney or a nonprofit charitable corporation Licensed by the commissioner, shall enter into a debt management plan with a client. Each such corporation shall comply with the provisions of section 8F of chapter 12.

Any such corporation formed for credit counseling purposes shall not engage in the practice of law. If it appears that an individual receiving credit counseling services needs legal advice or counsel, he shall be referred to an attorney of his own choice, the local bar association referral service, or a local legal aid program, whichever course may seem most appropriate.

A licensee shall charge a reasonable fee under a consumer credit counseling services contract. If, upon review, the commissioner shall determine that the fees or service charges set by the licensee are unreasonable, he shall direct the licensee to make adjustments in said fees and service charges in accordance with his findings, which shall set forth a detailed factual basis and reasoning supporting such finding.

All deposits paid to a consumer credit counseling service by consumers for disbursement to their creditors shall be deposited in one or more trust accounts maintained at a federally insured financial institution. Said account(s) shall contain only those funds collected from such clients or applicants. A licensee may offset funds in the trust account(s) against payments to which it is entitled for services actually performed or for reimbursement for authorized fees paid directly to third parties. All offsets shall be accounted for through written documentation evidencing the amount of offset. The licensee shall maintain complete and accurate trust account records and shall produce, upon request, all documents pertaining to trust account activity.

A consumer credit counseling agency:

(i) May not engage in false or misleading advertising concerning the terms or conditions of any services or assistance offered;

(ii) Must show proof of counselor certification through a bona fide third-party certification provider that demonstrates the competence of counselors providing consumer assistance;

(iii) Must have a board of directors, a majority of which does not include individuals for whom such a position could impose a conflict with the mission of the organization, such as creditors and creditors’ representatives; bankruptcy attorneys; and others who could have a direct stake in the outcome of the counseling process. The board should have a working majority that is not comprised of officers of the company or their relatives;

(iv) Must show proof of agency accreditation provided by a bona fide third-party accreditation body, such as the Council on Accreditation or such other body that is approved by the commissioner. Such accreditation shall include sector certification that ensures compliance with industry standards, best practices and corporate governance;

(v) Must show proof of an annual audit by an independent Certified Public Accountant, with such audit taking place within six months of the close of the agency’s fiscal year.

Section 3. The application for a license shall be in writing, shall be in a form prescribed by the commissioner, and shall contain the name, residential address and the address where the business of the applicant is to be conducted, and if the applicant is a partnership, association, corporation or other form of business organization, the names and addresses of each member, director and principal officer thereof, together with such further information as the commissioner may require including, but not limited to, a description of the nature of the business to be conducted, the proposed hours of operation on a daily basis and the area intended to be served. The application shall also contain the criminal history, if any, of each member, director, partner and principal officer, and a disclosure of any pending lawsuits, settled lawsuits, and judgments related to fraud of each member, director, partner and principal officer. Each application for a license shall be accompanied by:

(a) an investigation fee and license fee. Investigation and license fees shall be determined annually by the secretary of administration under the provisions of section three B of chapter seven;

(b) the certificates and reports filed with the state secretary as required in section 4 of chapter 181 of the general laws;

(c) the IRS exemption notice and a copy of the Form PC submitted to the Attorney General stating nonprofit status, if applicable; and

(d) evidence of a surety bond written by a surety authorized to write such bonds in this state, provided any applicant that files applications for licenses for more than one location shall file a single bond. For every applicant, the principal amount of the bond shall be the greater of (A) forty thousand dollars, or (B) twice the amount of the highest total payments received by the applicant from Massachusetts debtors in connection with the applicant’s debt adjustment activity in any month during the preceding twelve months ending March thirty-first of each year. Each licensee shall submit to the commissioner evidence that the bond complies with the provisions of the section annually.

If a licensee or applicant for renewal of a license establishes that such licensee or applicant is unable to comply with the bond required by this section, it may submit to the commissioner, a request for an alternative to such requirement. If the commissioner finds that the financial responsibility, character, reputation, integrity and general fitness of the applicant so warrant, the commissioner may permit the applicant or licensee to supplement the maximum surety bond that it can obtain, provided the principal amount of the surety bond shall be a minimum of forty thousand dollars, with such other bonds or insurance policies, in such amounts, for such period and subject to such conditions as the commissioner may approve. Any such bond or insurance policy shall be written or issued by a surety or insurance company authorized to write such bonds o sell such insurance in this state.

The form of any surety bond submitted pursuant to this section shall be approved by the Attorney General. Any surety bond filed under this section shall be conditioned upon the licensee faithfully performing all written agreements with debtors, truly and faithfully accounting for all funds received by the licensee in the licensee’s capacity as a debt adjuster. Any debtor who may be damaged by failure to perform any written agreements, or by the wrongful conversion of funds paid to a licensee, may proceed on any such surety bond against the principal or surety threreon, or both, to recover damages. The commissioner may proceed on any such surety bond against the principal or surety thereon, or both, to collect any civil penalty imposed upon the licensee. The proceeds of any bond or insurance policy, even if commingled with other assets of the licensee, shall be deemed to be held in trust for the benefit of such claimants against the licensee in the event of bankruptcy of the licensee and shall be immune from attachment by creditors and judgment creditors. Any bond or insurance policy required by this section shall be maintained during the entire period of the license granted to the applicant, and the aggregate liability under any such bond or insurance policy shall not exceed the principal amount of the bond or the limit of liability of the insurance policy.

The surety or insurance company shall have the right to cancel any bond or insurance policy written or issued under this section at any time by a written notice to the licensee, stating the date cancellation shall take effect. Such notice shall be sent by certified mail to the licensee at least thirty days prior to the date of cancellation. No such bond shall be cancelled unless the surety or insurance company notifies the commissioner in writing not less than thirty days prior to the effective date of cancellation. The commissioner shall automatically suspend the license on the date the cancellation takes effect, unless the bond or insurance policy has been replaced or renewed. The commissioner shall give the licensee notice of the automatic suspension pending proceedings for revocation or refusal to renew and an opportunity for a hearing.

Section 4. Upon the filing of an application for a license, if the commissioner finds that the financial responsibility, character, reputation, integrity and general fitness of the applicant, and of the partners or members thereof if the applicant is a partnership or association, and of the officers, directors and principal employees if the applicant is a corporation, are such as to warrant belief that the business will be operated honestly, fairly, soundly and efficiently in the public interest consistent with the purposes of this chapter, he shall thereupon issue the applicant a license to engage in the business of credit counseling. If the commissioner shall not so find, or if the application is incomplete or erroneous, he shall not issue a license and he shall notify the applicant of the denial. Within twenty days thereafter, he shall enter upon his records a written decision and findings containing the reasons supporting the denial and shall forthwith give written notice thereof by registered mail to the applicant. Any person or entity aggrieved by such denial may appeal pursuant to section fourteen of chapter thirty A.

The commissioner shall make the decision to approve or deny an application for a license within ninety days after the filing thereof; provided, however, that failure of the commissioner to act within such period shall not be deemed to be an approval of any such application.

Section 5. Each license shall state the addresses at which the business is to be conducted and shall state fully the name of the licensee. Business at all locations shall at all times be conducted in the name of the licensee as it appears on the license. A copy of such license shall be prominently displayed in each place of business of the licensee. Such copies for places of business at addresses other than that appearing on the license may be obtained at a reasonable cost, as determined by the commissioner. Such license shall not be transferable or assignable and shall be for a period of one year as of a date determined by the commissioner. Any change of location or closing of a place of business of the licensee, either at the address stated on the license or at a place other than said address stated on the license, shall require written notice thereof to the commissioner. Such notice shall set forth the reason therefore and shall be filed with the commissioner at least thirty days after such relocation or closing. A request for relocation or change in the area of operation shall also be accompanied by a relocation investigation fee to be determined annually by the secretary of administration under provisions of section three B of chapter seven.

If there shall be any change among the members, officers, partners or directors of any licensee, the licensee shall notify the commissioner in a timely manner of the name, address and occupation of each new member, principal officer, partner or director, and provide such other information as the commissioner may require, including but not limited to the criminal history of each new member, director, partner and principal officer, any pending law-suits, settled lawsuits, and judgments related to fraud. The Commissioner shall have the authority to investigate the new member, officer, partner or director and may revoke or suspend the license if the change would have resulted in a rejection of the license application under the provisions of section 4.

The commissioner shall establish regulations relative to the procedures for a licensee to renew its license.

Section 6. The commissioner may suspend or revoke any license issued pursuant to this chapter if said commissioner finds that: (a) the licensee has violated a provision of this chapter or any rule or regulation adopted hereunder or any other law applicable to the conduct of its business; or (b) a fact or condition exists which, if it had existed at the time of the original application for such license, would have warranted said commissioner in refusing to issue such license.

Except as provided in section eight, no license shall be revoked or suspended except after notice and hearing pursuant to chapter thirty A. A licensee may surrender a license by delivering to the commissioner written notice that it hereby surrenders such license, but such surrender shall not affect the civil or criminal liability of such licensee for acts committed before such surrender.

No revocation, suspension or surrender of any license shall impair or affect the obligation of any pre-existing lawful contract between the licensee and any person.

The commissioner may suspend or revoke only the particular license or licenses for particular places of business or locations with respect to which grounds for revocation occur or exist; provided, however, that if the commissioner shall find that such grounds for revocation are of general application to all places of business or locations of the licensee or that such grounds for fine, suspension or revocation have occurred or exist with respect to a substantial number of places of business or locations of such licensee, the commissioner may suspend, revoke or impose fines with respect to all of the licenses issued to such licensee.

The commissioner shall issue regulations to establish consumer recourse in the event of a revocation, suspension or surrender of a license.

Section 7. A licensee shall provide clearly written consent and full disclosure forms to each of its clients outlining all costs associated with the programs of the licensee and the methods used in such programs including, but not limited to, the total anticipated cost including set-up and handling fees and the process required to cancel the plan. A licensee shall also provide each client with a notice containing the appropriate address and phone number for the Division of Banks at which to direct any inquiries or complaints. A licensee shall send regular reports, to be determined by the commissioner but at least quarterly, to each of its clients, detailing the client's accounts, including reporting on funds received and disbursements made.

Prior to entering into a debt management plan, a licensee shall provide to a client a written notice describing the effect of credit counseling upon the client's consumer credit rating. Such written notice shall be printed in no less than 12-point typeface and shall be written in clear language.

There must be a DMP agreement signed by the consumer and the licensee that contains:

(i) the name and address of the consumer and the credit counseling agency;

(ii) a full description of all services to be performed for the consumer;

(iii) costs, highlighted in bold type;

(iv) a statement that the agreement can be terminated for any reason by the consumer, and that the consumer has no obligation to continue the arrangement unless satisfied with the services provided; and

(v) a complete list of the consumer’s and agency’s obligations that are subject to the agreement.

If a person or entity that provides consumer credit counseling services on the Internet is not licensed in the Commonwealth, the person or entity shall disclose on its website that it is not licensed in the Commonwealth and may not provide such services to Massachusetts residents.

A licensee shall not enter into a debt management plan with a client until a thorough and written budget analysis, on a form approved by the commissioner, is compiled and delivered to the client. A licensee shall not accept an account unless the budget analysis indicates the client can reasonably meet the requirements set forth by the budget analysis and will be benefited by any debt management plan.

A licensee must have executed a debt management plan with a client before collecting any debt management fees from the client.

The commissioner may establish standardized language to be used in all forms, notices and reports required by this section.

Section 8. (a) If the commissioner determines, after giving notice of and opportunity for a hearing, that a licensee has engaged in or is about to engage in an act or practice constituting a violation of a provision of this chapter or a rule, regulation or order hereunder, he may order such licensee to cease and desist from such unlawful act or practice and take such affirmative action as in his judgment will effect the purposes of this chapter.

(b) If the commissioner makes written findings of fact that the public interest will be irreparably harmed by delay in issuing an order under subsection (a) he may issue a temporary cease and desist order. Upon the entry of a temporary cease and desist order, the commissioner shall promptly notify, in writing, the licensee affected thereby that such order has been so entered, the reasons therefor, and that within twenty days after the receipt of a written request from such licensee, the matter will be scheduled for hearing to determine whether or not such temporary order shall become permanent and final. If no such hearing is requested and none is ordered by the commissioner, the order shall remain in effect until it is modified or vacated by the commissioner. If a hearing is requested or ordered, the commissioner, after giving notice of and opportunity for a hearing to the licensee subject to said order, shall, by written finding of facts and conclusions of law, vacate, modify or make permanent the order.

(c) No order under this section, except an order issued pursuant to subsection (b), may be entered without prior notice of and opportunity for a hearing. The commissioner may vacate or modify an order under this section upon finding that the conditions which required such an order have changed and that it is in the public interest to so vacate or modify. Any order issued pursuant to this section shall be subject to review as provided in chapter thirty A.

Section 9. For the purpose of discovering violations of this chapter or a rule or regulation promulgated hereunder, or for securing information lawfully required by him, the commissioner may, at any time, and as often as he may determine, investigate the business and examine the books, accounts, records and files used therein of a licensee. The total charge for such examination, which shall be paid by the licensee within thirty days after receipt of an invoice therefor, shall be determined annually by the secretary of administration under the provisions of section three B of chapter seven for each person participating in such examination.

For such purpose, the commissioner and his duly designated representative shall have access to the offices and places of business, books, accounts, papers, records, files, safes and vaults of all such licensees. The commissioner and any person designated by him may require the attendance of and examine under oath all persons whose testimony he may require relative to such business.

Copies of reports of such examinations of a licensee shall be furnished to such licensee and shall not be exhibited to any other person, organization or agency; provided, however, that the commissioner may, upon the request of a law enforcement agency made in the course of its official duties, provide copies of such reports to any such law enforcement agency.

Section 10. The licensee shall keep and use such books, accounts, and business records in such form and at such location as said commissioner shall, by regulation, determine, which shall enable said commissioner to determine whether such licensee is complying with the provisions of this chapter and any rules or regulations promulgated hereunder by said commissioner and any other law, rule or regulation applicable to the conduct of the business for which it is licensed under this chapter. Such regulations may contain provisions for such records to be recorded, copied or reproduced by photographic, photostatic, microfilm, microcard, miniature photographic, electronic, including, but not limited to, optical imaging, or other process which accurately reproduces or forms a durable medium for reproducing the original record or document or in any other form or manner authorized by the commissioner. Licensees shall preserve such books, accounts and records for at least three years. Notwithstanding the provisions of any general or special law or the Massachusetts Rules of Civil Procedure to the contrary, service of a subpoena for business records upon a licensee, delivered to an office of such licensee located within the commonwealth shall be deemed to have been served at the location, whether within or outside the commonwealth, where the original business records or documents are kept or maintained.

Each licensee shall, annually, on a date to be determined by the Commissioner, file a report with the commissioner providing such information as the commissioner may require concerning its business and operations during the preceding calendar year at each licensed place of business conducted by a licensee in the Commonwealth. A licensee neglecting to file such report or failing to amend the same within fifteen days of notice from the commissioner directing the same shall, unless such neglect or failure is due to justifiable cause and not due to willful neglect, pay to the Commonwealth fifty dollars for each day during which such neglect or failure continues.

Such reports shall not be exhibited to any other person, organization or agency; provided, however, that the commissioner may, upon the request of a law enforcement agency made in the course of its official duties, provide copies of such reports' to any such law enforcement agency. The commissioner shall evaluate such reports and make such recommendations, if any, as he deems necessary to the general court.

Section 11. The commissioner or an aggrieved party may enforce the provisions of this chapter, or restrain any violations thereof, by filing a civil action in a court of competent jurisdiction. A violation of this chapter or a rule or regulation adopted hereunder, shall constitute a violation of chapter 93A.

Section 12. Licensees may not:

(i) purchase any debt or obligation of a consumer;

(ii) lend money or provide credit to any consumer;

(iii) obtain a mortgage or other security interest in the property of a consumer;

(iv) operate as a debt collector;

(v) structure a debt management plan that, at the conclusion of the debt management plan, would result in negative amortization of any of the consumer's obligations to creditors. The licensee may not pay incentives to its employees for placing a consumer on a Debt Management Plan. And it may not enter into any contract or fee-for-service arrangement with any company or vendor that is owned, controlled or affiliated with an officer or director, or a relative of an officer or director, that materially personally benefits, enriches or insures benefit to an employee or director of the credit counseling agency.

Section 13. Whoever violates any provision of section 2, section 7, section 12, or any rule or regulation made thereunder by the commissioner shall be punished by a fine of not more than twenty-five thousand dollars per violation, or by imprisonment for not more than six months, or both such fine and imprisonment.

Section 14. The provisions of this chapter shall not apply to a bank as defined in section one of chapter one hundred and sixty-seven, a national banking association, a federally chartered credit union, a federal savings and loan association, a federal savings bank, or any subsidiary of the above, or to any bank, trust company, savings bank, savings and loan association, or credit union organized under the laws of any other state which is insured by a federal deposit insurer, or any subsidiary of the above.