H.F. 321 Section 1. Section 533A.1, subsection 2, Code 2019, is 1 amended by adding the following new paragraph: 2 NEW PARAGRAPH . e. Serving as an intermediary between a 3 debtor and one or more creditors or loan servicers of the 4 debtor for the purpose of seeking modification of the terms of 5 an educational loan. 6 Sec. 2. Section 533A.1, Code 2019, is amended by adding the 7 following new subsections: 8 NEW SUBSECTION . 5A. “Educational loan” means the same as 9 defined in section 261F.1. 10 NEW SUBSECTION . 8A. “Loan servicer” means a person who is 11 engaged in the direct collection of payments on a loan from 12 the debtor or holds the right to undertake direct collection 13 of payments on a loan from the debtor, including but not 14 limited to receiving scheduled periodic payments from the 15 debtor pursuant to the terms of the loan or holding the right 16 to service the loan, such as by contracting with or otherwise 17 arranging for another person to service the loan. 18 Sec. 3. NEW SECTION . 533A.8A Educational loan debt 19 management services —— contract requirements —— prohibitions —— 20 remedies. 21 1. In addition to any other requirements applicable to a 22 licensee pursuant to this chapter, a licensee engaging in the 23 business of debt management in connection with educational 24 loans, as described in section 533A.1, subsection 2, paragraph 25 “e” , shall do so in accordance with this section. The 26 provisions of this section are not exclusive and do not relieve 27 persons or a contract from compliance with other applicable 28 law. 29 2. A licensee shall not receive any compensation for 30 providing educational loan debt management services until after 31 the licensee has fully performed all services that the licensee 32 contracted to perform or represented the licensee would 33 perform, and shall not request any payment from the debtor or 34 require the debtor to provide payment to any third party prior 35 -1- LSB 1274HV (1) 88 gh/rn 1/ 8

H.F. 321 to fully performing all services. 1 3. a. A debtor has an unconditional right to cancel a 2 contract with a licensee for educational loan debt management 3 services at any time prior to midnight of the third business 4 day following the date a contract which complies with this 5 section is signed and executed. 6 b. Cancellation of a contract occurs when the debtor 7 delivers, by any means, written notice of cancellation to the 8 address specified in the contract. Notice of cancellation, 9 if delivered by mail, is effective when deposited in the 10 mail properly addressed with postage prepaid. Notice of 11 cancellation delivered by electronic mail is effective upon 12 transmission. Notice of cancellation delivered personally is 13 effective upon delivery. Notice of cancellation given by the 14 debtor need not take the particular form as provided in the 15 contract and, however expressed, is effective if the notice of 16 cancellation indicates the intention of the debtor not to be 17 bound by the contract. 18 4. A contract to provide debt management services in 19 connection with an educational loan shall be written in clear, 20 understandable language, shall clearly and conspicuously set 21 forth any and all terms, restrictions, and conditions governing 22 the contract, and shall describe fully and in detail all 23 services that the licensee contracts to perform for the debtor. 24 The contract shall be dated and signed by the debtor. The 25 contract shall set forth information required in this section 26 in at least ten point type. The following shall be included in 27 the contract: 28 a. The licensee’s name, the licensee’s electronic mail 29 address, and the physical address of the licensee’s place of 30 business to which the notice of cancellation is to be mailed 31 or otherwise delivered. A post office box does not constitute 32 a physical address. A post office box may be designated for 33 delivery by mail only if it is accompanied by a physical 34 address at which the notice could be delivered by a method 35 -2- LSB 1274HV (1) 88 gh/rn 2/ 8

H.F. 321 other than mail. 1 b. A disclosure statement in substantially the following 2 form shall appear in at least fourteen point boldface type 3 immediately above the place where the debtor is to sign: 4 You, the debtor, may cancel this contract at any time prior 5 to midnight of the third business day after the contract is 6 signed and executed. See the attached notice of cancellation 7 form for an explanation of this right. 8 c. A completed, easily detachable form in duplicate, 9 captioned “notice of cancellation”, as an attachment, in at 10 least fourteen point boldface type, containing the following 11 statement in substantially the following form and language: 12 NOTICE OF CANCELLATION 13 ........ 14 (date contract is signed and executed) 15 You, the debtor, may cancel this contract without any 16 penalty or obligation, within three business days from the 17 above date. 18 To cancel this contract, you may use any of the following 19 methods: (1) send by postal mail or otherwise deliver a 20 signed and dated copy of this cancellation notice, or any 21 other written notice of cancellation, to (physical address of 22 licensee’s place of business); or (2) send by electronic mail a 23 notice of cancellation to (licensee’s electronic mail address). 24 No later than midnight of (date). 25 I hereby cancel this contract. 26 ...... 27 (date) 28 ............ 29 (debtor’s signature) 30 d. A disclosure statement in substantially the following 31 form shall appear in at least fourteen point boldface type 32 immediately above the “Notice of Cancellation” form described 33 in paragraph “c” : 34 NOTICE REQUIRED BY IOWA LAW 35 -3- LSB 1274HV (1) 88 gh/rn 3/ 8

H.F. 321 (Insert name of licensee) or anyone working for (insert name 1 of licensee) CANNOT take payment directly from you or require 2 you to pay for or finance its services through a third party 3 until (insert name of licensee) has fully performed each and 4 every service that (insert name of licensee) contracted to 5 perform or represented that (insert name of licensee) would 6 perform. 7 5. A licensee engaging in the business of debt management 8 in connection with educational loans shall not do any of the 9 following: 10 a. Claim, demand, charge, collect, or receive compensation 11 until after the licensee has fully performed each and every 12 service the licensee contracted to perform or represented the 13 licensee would perform. 14 b. Execute a contract with a debtor for educational loan 15 debt management services in violation of this section. 16 c. Receive consideration from any third party in connection 17 with services rendered to a debtor unless the consideration is 18 first fully disclosed to the debtor. 19 d. Prohibit or impede a debtor from contacting any creditor, 20 lender, loan servicer, government entity, attorney, counselor, 21 individual, or company that may seek to help the debtor. Any 22 such provision is void and unenforceable. 23 e. Access or obtain a debtor’s federal student aid 24 information in violation of federal law. 25 f. Compensate employees, including independent contractors, 26 based on the number of debtors recruited by the employees or 27 enrolled in particular programs, or provide compensation to 28 employees on any other commission-based system. 29 g. Pay or offer to pay any compensation, bonus, gift, 30 commission, or other consideration to any person for the 31 referral of a debtor to the licensee’s business. 32 h. Accept or receive any compensation, bonus, gift, 33 commission, or other consideration for service to the 34 debtor from any person other than the debtor, the debtor’s 35 -4- LSB 1274HV (1) 88 gh/rn 4/ 8

H.F. 321 representative, or any third party providing financing that is 1 otherwise in compliance with the requirements of this section. 2 i. Disclose any information regarding a debtor to anyone 3 other than law enforcement, government entities, loan 4 servicers, creditors of the debtor, or as required by law. 5 j. Disclose any information regarding the creditor of 6 a debtor to anyone other than the debtor, the debtor’s 7 representative, or as required by law. 8 6. a. A violation of this section is an unlawful practice 9 pursuant to section 714.16, and all remedies of section 10 714.16 are available for such an action. A private cause of 11 action brought under this section by a debtor is in the public 12 interest. A debtor may bring an action against a licensee 13 for a violation of this section. If the court finds that the 14 licensee violated this section, the court shall award the 15 debtor actual damages, appropriate equitable relief, and the 16 costs of the action, and shall award reasonable fees to the 17 debtor’s attorney. 18 b. The rights and remedies provided in paragraph “a” are 19 cumulative to, and not a limitation of, any other rights and 20 remedies provided by law. Any action brought by a person other 21 than the attorney general or the superintendent pursuant to 22 this section must be commenced within four years from the date 23 of the alleged violation. 24 c. Notwithstanding any other provision of this section, 25 an action shall not be brought on the basis of a violation of 26 this section, except by a debtor against whom the violation was 27 committed or by the attorney general or superintendent. This 28 limitation does not apply to administrative action by either 29 the attorney general or the superintendent. 30 EXPLANATION 31 The inclusion of this explanation does not constitute agreement with 32 the explanation’s substance by the members of the general assembly. 33 This bill relates to debt management services in connection 34 with educational loans. 35 -5- LSB 1274HV (1) 88 gh/rn 5/ 8

H.F. 321 Current law requires persons engaged in the business of debt 1 management in Iowa, as defined, to be licensed and regulated by 2 the superintendent of the banking division of the department of 3 commerce under Code chapter 533A. 4 The bill expands the definition of “debt management” 5 by including in the definition the act of serving as an 6 intermediary between a debtor and one or more creditors or loan 7 servicers of the debtor for the purpose of modifying the terms 8 of an educational loan. The bill defines “educational loan” 9 as any loan that is made, insured, or guaranteed under Tit. 10 IV of the federal Higher Education Act solely for educational 11 purposes, or any private educational loan. 12 The bill provides that in addition to any other requirements 13 applicable to a licensed debt management services provider 14 pursuant to Code chapter 533A, a licensee engaging in the 15 business of debt management services in connection with 16 educational loans shall do so pursuant to the bill. The bill 17 specifies that the provisions of the bill are not exclusive and 18 do not relieve persons or contracts from compliance with other 19 applicable laws. 20 The bill provides that a licensee shall not receive 21 any compensation in connection with educational loan debt 22 management services until after the licensee has fully 23 performed all services that the licensee contracted to perform 24 or represented the licensee would perform, and shall not 25 request any payment or require payment to any third party prior 26 to fully performing all services. 27 The bill provides that a debtor has an unconditional right 28 to cancel a contract with a licensee for educational loan debt 29 management services at any time prior to midnight of the third 30 business day following the date a contract which complies with 31 the bill is signed and executed. Cancellation of a contract 32 occurs when the debtor delivers, by any means, written notice 33 of cancellation to the specified address. A written notice 34 delivered by mail is effective when deposited in the mail 35 -6- LSB 1274HV (1) 88 gh/rn 6/ 8

H.F. 321 properly addressed with postage prepaid. A written notice 1 delivered by electronic mail is effective upon transmission. A 2 written notice delivered personally is effective upon delivery. 3 A written notice of cancellation may take any form and is 4 effective if it indicates the debtor’s intent to cancel the 5 contract. 6 The bill provides that a contract to provide educational 7 loan debt management services shall be written in clear and 8 understandable language, clearly set forth all terms and 9 conditions, and fully describe all services that the licensee 10 contracts to perform for the debtor. The contract shall be in 11 at least 10 point type and shall include the following: the 12 licensee’s name, electronic mail address, and physical address 13 of the licensee’s place of business; a disclosure statement 14 located in the contract regarding the debtor’s cancellation 15 rights, as specified in the bill; an attached “notice of 16 cancellation” form regarding the debtor’s cancellation rights, 17 as specified in the bill; and a disclosure statement located 18 on the attached “notice of cancellation” form regarding the 19 requirement that a licensee fully perform all services prior 20 to receiving any payment from the debtor, as specified in the 21 bill. 22 The bill prohibits a licensee engaging in educational loan 23 debt management from doing any of the following: requesting or 24 receiving compensation prior to fully performing all contracted 25 or represented services; executing a contract in violation of 26 the bill; receiving consideration from any third party unless 27 the consideration is first fully disclosed to the debtor; 28 prohibiting or impeding a debtor from contacting any creditor, 29 lender, loan servicer, as defined in the bill, government 30 entity, attorney, or other individual that may seek to help the 31 debtor; accessing or obtaining a debtor’s federal student aid 32 information in violation of federal law; compensating employees 33 and independent contractors on a commission-based system; 34 paying or offering to pay any consideration to any person for 35 -7- LSB 1274HV (1) 88 gh/rn 7/ 8

H.F. 321 referring debtors to the licensee’s business; accepting or 1 receiving any consideration for service to the debtor from any 2 person other than the debtor, the debtor’s representative, or 3 certain third parties; disclosing any information regarding 4 a debtor to anyone other than certain specified entities, or 5 as required by law; or disclosing any information regarding 6 the creditor of a debtor to anyone other than the debtor, the 7 debtor’s representative, or as required by law. 8 A violation of the bill’s provisions constitutes an 9 unlawful practice under Code section 714.16, which relates 10 to consumer frauds. Pursuant to that Code section, the 11 attorney general may investigate, issue subpoenas, and commence 12 civil proceedings seeking restraining orders or injunctions 13 prohibiting persons from engaging in unlawful practices 14 or seeking termination of the business affairs of a person 15 engaging in unlawful practices. A court may further impose a 16 civil penalty of up to $40,000 per violation against a person 17 found guilty of committing an unlawful practice. The bill also 18 provides that a debtor may bring an action against a licensee 19 for a violation of the bill’s provisions. The debtor must 20 bring the action within four years from the date of the alleged 21 violation. If the court finds that a violation has occurred, 22 the court shall award actual damages, appropriate equitable 23 relief, court costs, and reasonable attorney fees. 24 In addition to the remedies provided in the bill, Code 25 section 533A.16 allows the superintendent to apply for an 26 injunction in district court upon the belief that a person 27 has engaged in or is about to engage in an act or practice 28 in violation of Code chapter 533A. The superintendent may 29 also investigate or initiate a complaint against a person 30 not licensed under Code chapter 533A to determine whether a 31 violation has occurred, issue an order requiring compliance 32 with Code chapter 533A after providing written notice and the 33 opportunity for a hearing, impose a penalty of up to $5,000 for 34 each violation, and order the person to pay restitution. 35 -8- LSB 1274HV (1) 88 gh/rn 8/ 8