Section 2414 - Requirements for providing debt management servicesA 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:(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.2008, Oct. 9, P.L. 1421, No. 117, §14, effective in 120 days [ 2/6/2009].