SF 2298 (LSB 5596SV (1) 91)

SENATE FILE 2298

BY  COMMITTEE ON COMMERCE

(SUCCESSOR TO SSB 3090)

(COMPANION TO HF 2326 BY COMMITTEE ON COMMERCE)

A BILL FOR

An Act relating to debt management programs, services, fees, and licensee requirements.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 533A.8, subsection 5, paragraph a, Code 2026, is amended to read as follows:
   a.  Maintain a separate bank trust account or dedicated account in which all payments received from debtors for the benefit of creditors shall be deposited and in which all payments shall remain until a remittance is made to either the debtor or the creditor.
    Sec. 2.  Section 533A.8, subsection 5, paragraph d, Code 2026, is amended by striking the paragraph.
    Sec. 3.  Section 533A.8, subsection 6, Code 2026, is amended to read as follows:
   6.  If the debt management program is not based on a model which requires the licensee or any licensee to receive money or evidences thereof from the debtor to distribute to the debtor’s creditors, both of the following shall apply:
   a.  The the debtor shall maintain full control of and access to any moneys set aside for payment to creditors.
   b.  The licensee may not receive consideration from any third party in connection with services rendered to a debtor.
    Sec. 4.  Section 533A.9, subsection 4, Code 2026, is amended by striking the subsection and inserting in lieu thereof the following:
   4.  If a debt management program is not based on a model that requires the licensee or another licensee to receive money or evidences thereof from the debtor to distribute to the debtor’s creditors, a licensee may not request or receive payment of any fee or consideration for debt management services provided under a debt management program unless all of the following are true:
   a.  The licensee has renegotiated, resolved, reduced, or otherwise altered the terms of at least one debt pursuant to a resolution agreement or other contractual agreement executed by the debtor and the creditor.
   b.  The debtor has made at least one payment pursuant to the resolution agreement or other contractual agreement entered into under paragraph “a”.
   c.  To the extent that debts enrolled in the debt management program are renegotiated, resolved, reduced, or otherwise altered individually, the fee or consideration for the debt management service bears the same proportional relationship to the total fee or consideration for renegotiating, resolving, reducing, or otherwise altering the terms of the entire debt balance as the individual debt amount bears to the entire debt amount. The individual debt amount and the entire debt amount are those owed at the time the debt was enrolled in the debt management program. The percent charged is the same for each individual debt enrolled in the debt management program.
    Sec. 5.  Section 533A.9, subsection 5, Code 2026, is amended by striking the subsection.
    Sec. 6.  Section 538A.2, subsection 2, Code 2026, is amended by adding the following new paragraph:
   NEW PARAGRAPH.  i.  A person licensed to engage in the business of debt management under section 533A.2, when acting within the course and scope of that license.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill relates to debt management, services, fees, and licensee requirements.
   Under current law, if a debt management program (program) is based on a model which requires a licensee to receive money or evidences thereof from a debtor to distribute to the debtor’s creditors, the licensee who receives the money for distribution shall maintain a separate bank trust account in which all payments received from the debtor for the benefit of creditors shall be deposited and shall remain until a remittance is made to either the debtor or the creditor. Under the bill, a licensee shall maintain a separate bank account or dedicated account for such purpose.
   Under current law, if a debt management program is not based on a model which requires a licensee to receive money or evidences thereof from the debtor to distribute to the debtor’s creditors the debtor shall maintain full control of and access to any moneys set aside for payment to creditors, and the licensee may not receive consideration from any third party in connection with services rendered to a debtor. The bill eliminates the prohibition on a licensee receiving consideration from a third party in connection with services rendered to a debtor.
   Under current law, if a program is not based on a model that requires a licensee to receive money or evidences thereof from the debtor to distribute to the debtor’s creditors, a debtor may not be charged a fee exceeding the sum of the initiation fee plus 18 percent of the debtor’s enrolled debts, as detailed in Code section 533A.9(4). Under the bill, a licensee may not request or receive payment of a fee for services unless: (1) the licensee has renegotiated, resolved, reduced, or otherwise altered the terms of a debt pursuant to a resolution agreement or other contractual agreement between the debtor and the creditor; (2) the debtor has made at least one payment pursuant to the agreement; and (3) to the extent that debts enrolled in a service are renegotiated, resolved, reduced, or otherwise altered individually, the fee or consideration for the service bears the same proportional relationship to the total fee for altering the terms of the entire debt balance as the individual debt amount bears to the entire debt amount as owed at the time the debt was enrolled in the service, and the same percent is charged for each individual debt enrolled in the program. 
   Under the bill, a person licensed to provide debt management services is exempt from Code chapter 538A (credit services organizations).
   The bill strikes Code sections 533A.8(5)(d) (licensee requirements) and 533A.9(5) (fee agreed in advance).