SENATE, No. 206

SECTION 1. Pursuant to Section 4A of chapter 180 of the General Laws, as appearing in the 2004 Official Edition, is hereby repealed.

SECTION 2. The General Laws, as so appearing, are hereby amended by 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 for smaller 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 in the 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 for the enforcement and administration of this chapter. 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 and charges under a consumer credit counseling services contract. If, upon review, t The commissioner may from time to time review the fess and charges charged and if the commission er determines that shall determine that the fees or service charges set by the licensee are unreasonable, then it shall direct the licensee to make adjustments in said fees and service charges in accordance with its findings, which shall set forth a detailed factual basis and reasoning supporting such finding. The commission er may require a licensee to reimburse any unreasonable fees and charges if it deems it necessary and shall be in addition to any fines and penalties under section 13 and said reimbursement shall not limit a right of action by any individual or entity as a result of being charged an unreasonable fee as determined by the commissioner.

All fees paid to a consumer credit counseling service by consumers shall be deposited in one or more trust accounts maintained at a federally insured bank. 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.

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. The application shall be subject to a criminal offender record information check under section 172 of chapter 6. Each application for a license shall be accompanied by: 

(a) an investigation fee and license fee as determined annually by the secretary of administration under the provisions of section 3B of chapter 7;

(b) a form to be filed with the commission, that shall be provided to each consumer prior to an execution of a debt management plan, that contains the following disclosures to the consumer: (i) all fees charged by the applicant or contributions solicited by the applicant from the consumer; (ii) whether the applicant is a for-profit entity or nonprofit entity; and (iii) whether the applicant received financial support from creditors during the preceding calendar year.

• (c) the certificates and reports filed with the state secretary as required under section 4 of chapter 181, if applicable;

(d) the IRS exemption notice and a copy of the Form PC submitted to the attorney general stating nonprofit status, if applicable; and

(e) evidence of either: (i) a surety bond in a form approved by the commissioner and held by the state treasurer in the amount of $100,000 in the aggregate or the applicant's net worth for use by the commissioner and any person or persons who may have a cause of action against the applicant; or  (ii)  insurance coverage for liability to any person or persons who may have a cause of action against the applicant in an amount not less than $100,000, issued by a company rated at least ‘A-‘ or its equivalent by a nationally recognized rating organization, and having a deductible that does not exceed 10% of the face amount of the policy coverage.

• Section 4. Upon the filing of an application for a license, the commissioner shall make the decision to approve or deny an application for a license within 90 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.

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 20 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 14 of chapter 30A.

The commissioner shall make the decision to approve or deny an application for a license within 90 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 address at which the business is to be conducted and shall state fully the name of the licensee. If a licensee intends to carry on such business at any place other than the address on the license, he shall so notify the commissioner, in writing, at least 30 days prior thereto. Such notice shall contain the address of any such place and such other information as the commissioner may require; provided, however, that any such business 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 1 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 30 days prior to any 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 3B of chapter 7.

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 lawsuits, 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 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 8, no license shall be revoked or suspended except after notice and hearing pursuant to chapter 30A.

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.

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 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 under 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 therefore, and that within 20 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 30A.

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 30 days after receipt of an invoice therefore, shall be determined annually by the secretary of administration under the provisions of section 3B of chapter 7 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, photo static, 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, at 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 15 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 $50 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:

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

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

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

(4)               operate as a debt collector;

(5)               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.

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 $25,000 per violation, or by imprisonment for not more than 6 months, or both such fine and imprisonment.

Section 14. The provisions of this chapter shall not apply to attorneys , persons or entities that conduct this service for no fee, and certified public accountants provided debt management is not their exclusive practice, a bank as defined in section 1 of chapter 167, 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. 

Section 15.  Nothing this chapter shall limit the right of action of any individual or entity who has been injured as a result of any violation of this chapter by a licensee or any persons other than a licensee, or any person other than a licensee or exempt persons under section 14 , to bring action to recover damages or restitution in a court of competent jurisdiction.