Debt Settlement Consumer Protection Act of 2010 - Amends the Consumer Credit Protection Act to prohibit debt settlement providers from providing a debt settlement service or receiving a fee from a consumer without a signed written contract meeting specified requirements.
Prohibits debt settlement providers from engaging in certain acts or practices, including: (1) making loans or offering credit or soliciting or accepting any note, mortgage, or negotiable instrument other than a check signed by the consumer and dated no later than the date of signature; (2) taking a confession of judgment or power of attorney to confess judgment against the consumer or appearing as the consumer or on the consumer's behalf in any judicial or non-judicial proceedings; (3) taking any release or waiver of an obligation to be performed on the part of the debt settlement provider or any right of the consumer; (4) receiving any third-party compensation for providing the consumer with a debt settlement service; or (5) purchasing debts or engaging in debt collection.
Permits debt settlement providers to charge enrollment and settlement fees, but no others.
Requires a debt settlement provider who receives funds from a consumer to hold them for a consumer settlement account in a properly designated trust account in a federally insured depository institution not affiliated with the provider.
Permits a consumer to cancel a contract with a debt settlement provider at any time, in accordance with specified requirements and procedures.
Declares void and unenforceable: (1) a consumer's waiver of any consumer protection or right provided under this Act; and (2) any contract for a debt settlement service that does not comply with this Act.
Prohibits a debt settlement provider from engaging in certain advertising, marketing, or other communication practices except in accordance with specified requirements.
Authorizes the Federal Trade Commission (FTC) to prescribe rules governing advertising and marketing practices, record retention, and provision of accountings to consumers, as well as debt relief service rules.
Subjects a debt settlement provider to civil liability (including punitive damages) for noncompliance with this Act.
Empowers the FTC to enforce this Act. Authorizes a state to bring a civil action in federal court on behalf of its residents for noncompliance with this Act.
[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5387 Introduced in House (IH)]
111th CONGRESS
2d Session
H. R. 5387
To amend the Consumer Credit Protection Act to provide for regulation
of debt settlement services, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
May 25, 2010
Mr. Gutierrez (for himself, Ms. Moore of Wisconsin, and Mr. Ellison)
introduced the following bill; which was referred to the Committee on
Financial Services
_______________________________________________________________________
A BILL
To amend the Consumer Credit Protection Act to provide for regulation
of debt settlement services, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Debt Settlement Consumer Protection
Act of 2010''.
SEC. 2. REGULATION OF DEBT SETTLEMENT SERVICES.
(a) In General.--The Consumer Credit Protection Act (15 U.S.C. 1601
et seq.) is amended by adding at the end the following:
``TITLE X--DEBT SETTLEMENT SERVICES
``Sec. 1001. Definitions.
``Sec. 1002. Required acts.
``Sec. 1003. Prohibited acts.
``Sec. 1004. Fees.
``Sec. 1005. Consumer settlement accounts.
``Sec. 1006. Cancellation of contract.
``Sec. 1007. Obligation of good faith.
``Sec. 1008. Invalidation of contracts.
``Sec. 1009. Advertising, marketing, and communication practices.
``Sec. 1010. Rulemaking by Federal Trade Commission.
``Sec. 1011. Civil liability.
``Sec. 1012. Enforcement by Federal Trade Commission.
``Sec. 1013. Action by States.
``Sec. 1014. Statute of limitations.
``Sec. 1015. Relation to State law.
``SEC. 1001. DEFINITIONS.
``In this title:
``(1) Attorney general of a state.--The term `attorney
general of a State' means the attorney general or other chief
law enforcement officer of a State.
``(2) Commission.--The term `Commission' means the Federal
Trade Commission.
``(3) Consumer.--The term `consumer' means any person.
``(4) Consumer settlement account.--The term `consumer
settlement account' means any account or other means or device
in which payments, deposits, or other transfers from a consumer
are held or transferred to a debt settlement provider for the
accumulation of the consumer's funds in anticipation of
proffering an adjustment or settlement of a debt or obligation
of the consumer to a creditor on behalf of the consumer.
``(5) Debt settlement program.--The term `debt settlement
program' means the actions and activities undertaken by a debt
settlement provider and a consumer in connection with the
provision of debt settlement service.
``(6) Debt settlement provider.--
``(A) In general.--Except as provided in
subparagraph (B), the term `debt settlement provider'
means any person or entity engaging in, or holding
itself out as engaging in, the business of providing
debt settlement services in exchange for a fee or
compensation, or any person who solicits for or acts on
behalf of any person or entity engaging in, or holding
itself out as engaging in, the business of providing
debt settlement services in exchange for any fee or
compensation.
``(B) Exception.--The term `debt settlement
provider' does not include the following:
``(i) Attorneys when--
``(I) acting in the ordinary
practice of their professions;
``(II) acting through any entity in
the ordinary practice of their
profession;
``(III) acting in the States where
they are licensed to practice their
profession; and
``(IV) not holding themselves out
as debt settlement providers or
providing debt settlement service.
``(ii) Escrow agents, accountants, broker
dealers in securities, or investment advisors
in securities, when acting--
``(I) in the ordinary practice of
their professions; and
``(II) through any entity in the
ordinary practice of their profession.
``(iii) Any bank, agent of a bank, trust
company, savings and loan association, savings
bank, credit union, crop credit association,
development credit corporation, industrial
development corporation, title insurance
company, or insurance company operating or
organized under the laws of a State or the
United States.
``(iv) Mortgage servicers (as such term is
defined in section 6(i) of the Real Estate
Settlement Procedures Act of 1974 (12 U.S.C.
2605(i)(2)) carrying out mortgage loan
modifications.
``(v) Any person who performs credit
services for such person's employer while
receiving a regular salary or wage when the
employer is not engaged in the business of
offering or providing debt settlement service.
``(vi) An organization that is described in
section 501(c)(3) and subject to section 501(q)
of the Internal Revenue Code of 1986 and exempt
from tax under section 501(a) of such Code.
``(vii) Public officers while acting in
their official capacities and persons acting
under court order.
``(viii) Any person while performing
services incidental to the dissolution, winding
up, or liquidating of a partnership,
corporation, or other business enterprise.
``(7) Debt settlement service.--
``(A) In general.--Except as provided in
subparagraph (B), the term `debt settlement service'
means--
``(i) offering to provide advice or
service, or to act or acting as an intermediary
between or on behalf of a consumer and one or
more of a consumer's creditors, where the
primary purpose of the advice, service, or
action is to obtain a settlement, adjustment,
or satisfaction of the consumer's debt to a
creditor in an amount less than the full amount
of the principal amount of the debt or in an
amount less than the current outstanding
balance of the debt; or
``(ii) offering to provide services related
to or providing services advising, encouraging,
assisting, or counseling a consumer to
accumulate funds for the primary purpose of
proposing, obtaining, or seeking to obtain a
settlement, adjustment, or satisfaction of the
consumer's debt to a creditor in an amount less
than the full amount of the principal amount of
the debt or in an amount less than the current
outstanding balance of the debt.
``(B) Exception.--The term `debt settlement
service' does not include services of an attorney in
providing information, advice, or legal representation
with respect to filing a case or proceeding under title
11, United States Code.
``(8) Enrollment fee.--The term `enrollment fee' means any
fee, obligation, or compensation paid or to be paid by the
consumer to a debt settlement provider in consideration of or
in connection with establishing a contract or other agreement
with a consumer related to the provision of debt settlement
service.
``(9) Maintenance fee.--The term `maintenance fee' means
any fee, obligation, or compensation paid or to be paid by a
consumer on a periodic basis to a debt settlement provider in
consideration of maintaining the relationship and services to
be provided by a debt settlement provider in accordance with a
contract with a consumer related to the provision of debt
settlement service.
``(10) Principal amount of the debt.--The term `principal
amount of the debt' means the total amount or outstanding
balance owed by a consumer to one or more creditors for a debt
that is included in a contract for debt settlement service at
the time when the consumer enters into a contract for debt
settlement service pursuant to section 1002(a).
``(11) Settlement fee.--The term `settlement fee' means any
fee, obligation, or compensation paid or to be paid by a
consumer to a debt settlement provider in consideration of or
in connection with an agreement or other arrangement on the
part of a creditor to accept less than the principal amount of
the debt as satisfaction of the creditor's claim against the
consumer.
``SEC. 1002. REQUIRED ACTS.
``(a) Contract Required.--
``(1) In general.--A debt settlement provider may not
provide a debt settlement service to a consumer or receive any
fee from a consumer for a debt settlement service without a
written contract described in paragraph (2) that is signed by
the consumer.
``(2) Contract contents.--A contract described in this
paragraph is a contract between a debt settlement provider and
a consumer for debt settlement services that includes the
following:
``(A) The name and address of the consumer.
``(B) The date of execution of the contract.
``(C) The legal name of the debt settlement
provider, including any other business names used by
the debt settlement provider.
``(D) The corporate address and regular business
address, including a street address, of the debt
settlement provider.
``(E) The license or registration number under
which the debt settlement provider is licensed or
registered if the consumer resides in a State that
requires a debt settlement provider to obtain a license
or registration as a condition of providing debt
settlement service in that State.
``(F) The telephone number at which the consumer
may speak with a representative of the debt settlement
provider during normal business hours.
``(G) A complete list of the consumer's accounts,
debts, and obligations covered under the debt
settlement service covered by the contract, including
the name of each creditor and principal amount of each
debt.
``(H) A description of the services to be provided
by the debt settlement provider, including the expected
timeframe for settlement for each account, debt, or
obligation included in subparagraph (G).
``(I) A clear and conspicuous itemized list of all
fees, including any enrollment fee and settlement fees
to be paid by the consumer to the debt settlement
provider, and the date, approximate date, or
circumstances under which each fee will become due.
``(J) A clear and conspicuous statement of a good
faith estimate of the total amount of all fees to be
collected by the debt settlement provider from the
consumer for the provision of debt settlement service
under the contract.
``(K) A clear and conspicuous statement of the
proposed savings goals for the consumer, stating the
amount to be saved per month or other period, the time
period over which the savings goals extend, and the
total amount of the savings expected to be paid by the
consumer pursuant to the terms of the contract.
``(L) A notice to the consumer that unless the
consumer is insolvent, if a creditor settles a debt for
an amount less than the consumer's current outstanding
balance at the time of settlement, the consumer may
incur a tax liability.
``(M) A written notice to the consumer, which
includes a form that the consumer may use and the
address to which the form may be returned to the debt
settlement provider, that the consumer may cancel the
contract pursuant to the provisions of section 1006.
``(N) A clear and conspicuous written notice to the
consumer that--
``(i) the consumer may cancel the
contract--
``(I) within 90 days of--
``(aa) the execution of the
contract; or
``(bb) the provision of the
notice of the right to cancel
and cancellation form; or
``(II) at any time in the event of
a violation of this title on the part
of the debt settlement provider; and
``(ii) in the case the consumer cancels the
contract as described in clause (i)--
``(I) the consumer will be entitled
to a full refund--
``(aa) of all fees and
compensation paid by the
consumer to the debt settlement
provider, except any settlement
fee; and
``(bb) of all funds
provided by the consumer to the
debt settlement provider for a
consumer settlement account,
except for funds actually paid
to a creditor on behalf of the
consumer, under the terms of
the contract for debt
settlement service; and
``(II) all powers of attorney
granted to the debt settlement provider
by the consumer will be revoked and
voided.
``(b) Notification Required.--A debt settlement provider shall,
before the earlier of the date of entering into a written contract with
a consumer for debt settlement services or rendering debt settlement
services to a consumer, provide to the consumer in writing the
following:
``(1) An individualized financial analysis of the consumer,
including an assessment of the consumer's income, expenses, and
debts.
``(2) A description of the debt settlement service being
offered to the consumer by the debt settlement provider,
including the following:
``(A) A description of the debt settlement program
being offered as part of the service.
``(B) A list of each of the consumer's debts,
creditors, and debt collectors that will be covered
under the program.
``(3) A statement containing the following:
``(A) A good-faith estimate of the length of time
it will take to achieve settlement of each debt covered
under the program.
``(B) The specific time by which the debt
settlement service provider will make a bona fide
settlement offer to each creditor and debt collector
covered under the program.
``(C) The total amount of debt owed by the consumer
to each creditor covered under the program.
``(D) An estimate of the total and the monthly
savings the consumer will be required to accumulate to
complete the program.
``(4) A clear and conspicuous statement that--
``(A) the consumer remains legally obligated to
make periodic or scheduled payments to creditors while
participating in a debt settlement program; and
``(B) the debt settlement provider will not make
any periodic or scheduled payments to creditors on
behalf of the consumer.
``(5) A clear and conspicuous notice to the consumer that--
``(A) the utilization of debt settlement service
may not be suitable for all consumers;
``(B) the utilization of debt settlement service
may adversely impact the consumer's credit history and
credit score;
``(C) the consumer may inquire about other means of
dealing with indebtedness, including nonprofit credit
counseling and bankruptcy;
``(D) the failure to make periodic or scheduled
payments to a creditor--
``(i) is likely to affect adversely the
consumer's creditworthiness;
``(ii) may result in continued collection
activity by creditors or debt collectors;
``(iii) may result in the consumer being
sued by one or more creditors or debt
collectors, and in the garnishment of the
consumer's wages; and
``(iv) may increase the amount of money the
consumer owes to one or more creditors or debt
collectors due to the imposition by the
creditor of interest charges, late fees, and
other penalty fees; and
``(E) any savings the consumer realizes from use of
a debt settlement service may be taxable income.
``(c) Determination of Benefit to Consumers Required.--A debt
settlement provider may not enter into a written contract with a
consumer unless the debt settlement provider makes written
determinations, supported by the financial analysis, that--
``(1) the consumer can reasonably meet the requirements of
the proposed debt settlement program included in the debt
settlement service offered to the consumer, including the fees
and the periodic savings amounts set forth in the savings goals
under the program;
``(2) there is a net tangible financial benefit to the
consumer of entering into the proposed debt settlement program;
and
``(3) the debt settlement program is suitable for the
consumer at the time the contract is to be signed.
``(d) Choice of Language.--If a debt settlement provider
communicates with a consumer primarily in a language other than
English, the debt settlement provider shall furnish to the consumer a
translation of the disclosures and documents required by this title in
that other language.
``(e) Monthly Statements Required.--A debt settlement provider
shall, not less frequently than monthly, provide each consumer with
which it has a contract for the provision of debt settlement service a
statement of account balances, fees paid, settlements completed,
remaining debts, and any other term considered appropriate by the
Commission.
``SEC. 1003. PROHIBITED ACTS.
``(a) Loans.--A debt settlement provider may not make loans or
offer credit or solicit or accept any note, mortgage, or negotiable
instrument other than a check signed by the consumer and dated no later
than the date of signature.
``(b) Confession of Judgment.--A debt settlement provider may not
take any confession of judgment or power of attorney to confess
judgment against the consumer or appear as the consumer or on behalf of
the consumer in any judicial or non-judicial proceedings.
``(c) Release or Waiver of Obligation.--A debt settlement provider
may not take any release or waiver of any obligation to be performed on
the part of the debt settlement provider or any right of the consumer.
``(d) Receipt of Third-Party Compensation.--A debt settlement
provider may not receive any cash, fee, gift, bonus, premium, reward,
or other compensation from any person other than the consumer
explicitly for the provision of debt settlement service to that
consumer, without prior disclosure of such to the consumer.
``(e) Confidentiality.--A debt settlement provider may not (without
prior written consent of the consumer) disclose to anyone the name or
any personal information of a consumer for whom the debt settlement
provider has provided or is providing debt settlement service other
than to a consumer's own creditors or the debt settlement provider's
agents, affiliates, or contractors for the purpose of providing debt or
settlement service.
``(f) Misrepresentation, Omission, and False Promises.--A debt
settlement provider may not misrepresent, directly or by implication,
any material fact, make a material omission, or make a false promise
directed to one or more consumers in connection with the solicitation,
offering, contracting or provision of debt settlement service,
including the following:
``(1) The total costs to purchase, receive, or use the
services, or the nature of the services to be provided.
``(2) Any material restriction, limitation, or condition to
receive the offered debt settlement service.
``(3) Any material aspect of the performance, efficacy,
nature, or central characteristics of the offered debt
settlement service.
``(4) Any material aspect of the nature of terms of the
seller's cancellation policies.
``(5) Any claim of affiliation with, or endorsement or
sponsorship by, any person or government entity.
``(6) Any material aspect of any debt settlement service,
including the following:
``(A) The amount of time necessary to achieve
settlement of all debt.
``(B) The amount of money or the percentage of the
debt amount that the consumer must accumulate before
the provider will initiate attempts with the consumer's
creditors or debt collectors to settle the debt.
``(C) The effect of the service on a consumer's
creditworthiness.
``(D) Whether the provider is a nonprofit or a for-
profit entity.
``(g) Purchasing of Debts.--A debt settlement provider may not
purchase debts or engage in the practice or business of debt
collection.
``(h) Secured Debt.--A debt settlement provider may not include in
a debt settlement agreement any secured debt.
``(i) Unfair or Deceptive Acts or Practices.--A debt settlement
provider may not employ any unfair, unconscionable, or deceptive act or
practice, including the knowing omission of any material information.
``(j) Limitation on Communication.--A debt settlement provider may
not--
``(1) obtain a power of attorney or other authorization
from a consumer that prohibits or limits the consumer or any
creditor from communication directly with one another; or
``(2) represent, expressly or by implication, that a
consumer cannot or should not contact or communicate with any
creditor.
``SEC. 1004. FEES.
``(a) Types of Fees Permitted.--The types of fees that a debt
settlement provider may charge a consumer are the following:
``(1) Enrollment fees.
``(2) Settlement fees.
``(b) Types of Fees Prohibited.--All fee types not included under
subsection (a) are prohibited, including maintenance fees.
``(c) Enrollment Fee Amounts.--The amount of an enrollment fee
charged by a debt settlement provider shall not exceed the lesser of--
``(1) the amount that is reasonable and commensurate to the
debt settlement service provided to a consumer; and
``(2) $50.
``(d) Debt Settlement Fee Amounts.--The amount of a settlement fee
charged by a debt settlement provider shall not exceed the lesser of--
``(1) the amount that is reasonable and commensurate to the
debt settlement service provided to a consumer; and
``(2) the amount that is 5 percent of the difference
between--
``(A) the principal amount of that debt; and
``(B) the amount--
``(i) paid by the debt settlement provider
to the creditor pursuant to a settlement
negotiated by the debt settlement provider on
behalf of the consumer as full and complete
satisfaction of the creditor's claim with
regard to that debt; or
``(ii) negotiated by the debt settlement
provider and paid by the consumer to the
creditor pursuant to a settlement negotiated by
the debt settlement provider on behalf of the
consumer as full and complete satisfaction of
the creditor's claim with regard to that debt.
``(e) Timing of Debt Settlement Fees.--A debt settlement provider
shall not collect any debt settlement fee from a consumer until--
``(1) a creditor enters into a legally enforceable
agreement with the consumer to accept funds in a specific
dollar amount as full and complete satisfaction of the
creditor's claim with regard to that debt; and
``(2) those funds are provided--
``(A) by the debt settlement provider on behalf of
the consumer; or
``(B) directly by the consumer to the creditor
pursuant to a settlement negotiated by the debt
settlement provider.
``SEC. 1005. CONSUMER SETTLEMENT ACCOUNTS.
``(a) Trust Account Required.--A debt settlement provider who
receives funds from a consumer shall hold all funds received for a
consumer settlement account in a properly designated trust account in a
federally insured depository institution. Such funds shall remain the
property of the consumer until the debt settlement provider disburses
the funds to a creditor on behalf of the consumer as full or partial
satisfaction of the consumer's debt to the creditor or the creditor's
claim against the consumer.
``(b) Independent Administration of Account.--A debt settlement
provider may not hold funds received for a consumer settlement account
under subsection (a) in an account administered by an entity that--
``(1) is owned by, controlled by, or in any way affiliated
with the debt settlement service provider; or
``(2) gives or accepts any money or other compensation in
exchange for referrals of business involving the debt
settlement service provider.
``(c) Limitations.--A debt settlement service provider shall not--
``(1) be named on a consumer's bank account;
``(2) take a power of attorney in a consumer's bank
account;
``(3) create a demand draft on a consumer's bank account;
``(4) exercise any control over any bank account held by or
on behalf of the consumer; or
``(5) obtain any information about a consumer's bank
account from any person other than the consumer.
``SEC. 1006. CANCELLATION OF CONTRACT.
``(a) In General.--A consumer may cancel a contract with a debt
settlement provider at any time.
``(b) Refunds.--
``(1) Cancellation within 90 days or upon violation of this
title.--If a consumer cancels a contract with a debt settlement
provider not later than 90 days after the date of the execution
of the contract or at any time upon a violation of a provision
of this title by the debt settlement provider, the debt
settlement provider shall refund to the consumer all--
``(A) fees paid to the debt settlement provider by
the consumer, with the exception of any earned
settlement fee; and
``(B) funds paid by the consumer to the debt
settlement provider that--
``(i) have accumulated in a consumer
settlement account; and
``(ii) the debt settlement provider has not
disbursed to creditors.
``(2) Cancellations after 90 days.--If a consumer cancels a
contract with a debt settlement provider later than 90 days
after the date of the execution of the contract and for any
reason other than for a violation of a provision of this title
by the debt settlement provider, the debt settlement provider
shall refund to the consumer--
``(A) half of all of the fees collected from the
consumer, with the exception of any earned settlement
fees; and
``(B) all funds paid by the consumer to the debt
settlement provider that have accumulated in a consumer
settlement account and which the debt service provider
has not disbursed to creditors.
``(3) Timing of refunds.--A debt settlement provider shall
make any refund required under this subsection not later than 5
business days after a notice of cancellation is made on behalf
of the consumer under subsection (d).
``(4) Statement of account.--A debt settlement provider
making a refund to a consumer under this subsection shall
include with such refund a full statement of account showing
the following:
``(A) The fees received by the debt settlement
provider from the consumer.
``(B) The fees refunded to the consumer by the debt
settlement provider.
``(C) The savings of the consumer held by the debt
settlement provider.
``(D) The payments made by the debt settlement
provider to creditors on behalf of the consumer.
``(E) The settlement fees earned, if any, by the
debt settlement provider by settling debt on behalf of
the consumer.
``(F) The savings of the consumer refunded to the
consumer by the debt settlement provider.
``(c) Revocation of Powers of Attorney and Direct Debit
Authorizations.--Upon cancellation of a contract by a consumer--
``(1) all powers of attorney and direct debit
authorizations granted to the debt settlement provider by the
consumer are revoked and voided; and
``(2) the debt settlement provider shall immediately take
any action necessary to reflect cancellation of the contract,
including notifying the recipient of any direct debit
authorization.
``(d) Notice of Cancellation to Creditors.--Upon the cancellation
of a contract under this section of the Act, the debt settlement
provider shall provide timely notice of the cancellation of such
contract to each of the creditors with whom the debt settlement
provider has had any prior communication on behalf of the consumer in
connection with the provision of any debt settlement service.
``SEC. 1007. OBLIGATION OF GOOD FAITH.
``A debt settlement provider shall act in good faith in all matters
under this title.
``SEC. 1008. INVALIDATION OF CONTRACTS.
``(a) Consumer Waivers Invalid.--A waiver by a consumer of any
protection provided or any right of the consumer under this title--
``(1) is void; and
``(2) may not be enforced by any other person.
``(b) Attempt To Obtain Waiver.--Any attempt by any person to
obtain a waiver from any consumer of any protection provided by or any
right or protection of the consumer or any obligation or requirement of
the debt settlement provider under this title shall be considered a
violation of a provision of this title.
``(c) Contracts Not in Compliance.--Any contract for a debt
settlement service that does not comply with the provisions of this
title--
``(1) shall be treated as void;
``(2) may not be enforced by any other person; and
``(3) upon notice of a void contract, a refund by the debt
settlement provider to the consumer shall be made as if the
contract had been cancelled as provided in section 1006(b)(1)
of this title.
``SEC. 1009. ADVERTISING, MARKETING, AND COMMUNICATION PRACTICES.
``A debt settlement provider shall not state or imply claims,
results, or outcomes in any advertising, marketing, or other
communication with consumers that represent or reflect results or
outcomes, including about the percentage or dollar amount by which debt
may be reduced or the amount a consumer may save or the historical
experience of its customers with respect to debt reduction, that--
``(1) are materially different from the actual average
result or outcome achieved by that debt settlement provider on
all of the debt of consumers who enter the program; or
``(2) are not verified by an independent audit that
documents that the described result or outcome was achieved for
all debt enrolled in the program by at least 80 percent of the
customers who began the service in the most recent 2 calendar
year period.
``SEC. 1010. RULEMAKING BY FEDERAL TRADE COMMISSION.
``(a) In General.--The Commission may prescribe rules with respect
to advertising and marketing practices, record retention, provision of
accountings to consumers, and such other matters as the Commission
considers necessary to improve the consumer experience with debt
settlement providers.
``(b) Debt Relief Service Rules.--
``(1) In general.--Except as provided in paragraph (2), the
Commission may prescribe rules with respect to the providers of
debt relief service not otherwise covered by this title.
``(2) Exception.--Any rule prescribed under paragraph (1)
shall not be applicable to or otherwise include services
provided by those persons or entities identified in section
1001(6)(B) or section 1001(7)(B).
``(3) Debt relief service defined.--In this subsection, the
term `debt relief service' means any service represented,
directly or by implication, to renegotiate, or in any way alter
the terms of payment or other terms of the debt between a
consumer and one or more unsecured creditors or debt
collectors, including a reduction in the balance, interest
rate, or fees owed by a consumer to an unsecured creditor or
debt collector.
``(c) Procedure.--All rulemaking under this title shall be
conducted in accordance with section 553 of title 5, United States
Code, and shall not be subject to other procedures set forth in section
18 of the Federal Trade Commission Act (15 U.S.C. 57a).
``SEC. 1011. CIVIL LIABILITY.
``(a) Liability Established.--Any debt settlement provider who
fails to comply with any provision of this title with respect to any
consumer shall be liable to such consumer in an amount equal to the sum
of the amounts determined under each of the following:
``(1) Actual damages.--The greater of--
``(A) the amount of any actual damage sustained by
such consumer as a result of such failure; or
``(B) any amount paid by the consumer to the debt
settlement provider.
``(2) Statutory damages.--An amount determined by the court
of not less than $1,000 nor more than $5,000 per violation.
``(3) Punitive damages.--
``(A) Individual actions.--In the case of any
action by an individual, such additional amount as the
court may allow.
``(B) Class actions.--In the case of a class
action, the sum of--
``(i) the aggregate of the amount which the
court may allow for each named plaintiff; and
``(ii) the aggregate of the amount which
the court may allow for each other class
member, without regard to any minimum
individual recovery.
``(4) Attorneys' fees.--In the case of any successful
action to enforce any liability under paragraph (1), (2), or
(3), the costs of the action, together with reasonable
attorneys' fees.
``(b) Factors To Be Considered in Awarding Punitive Damages.--In
determining the amount of any liability of any debt settlement provider
under subsection (a)(2), the court shall consider, among other relevant
factors--
``(1) the frequency and persistence of noncompliance by the
debt settlement provider;
``(2) the nature of the noncompliance;
``(3) the extent to which such noncompliance was
intentional; and
``(4) in the case of any class action, the number of
consumers adversely affected.
``SEC. 1012. ENFORCEMENT BY FEDERAL TRADE COMMISSION.
``(a) In General.--The Commission shall enforce the provisions of
this title in the same manner, by the same means, and with the same
jurisdiction, powers, and duties as though all applicable terms and
provisions of the Federal Trade Commission Act (15 U.S.C. 41 et seq.)
were incorporated into and made part of this title.
``(b) Unfair or Deceptive Acts or Practices.--A failure to comply
with a provision of this title or a violation of a rule prescribed
under section 1010 shall be treated as a violation of a rule defining
an unfair or deceptive act or practice prescribed under section
18(a)(1)(B) of the Federal Trade Commission Act (15 U.S.C.
57a(a)(1)(B)).
``SEC. 1013. ACTION BY STATES.
``(a) In General.--In any case in which the attorney general of a
State has reason to believe that an interest of the residents of the
State has been or is threatened or adversely affected by the engagement
of any person subject to a provision of this title or a rule prescribed
under section 1010 in a practice that violates such provision or rule,
the State may, as parens patriae, bring a civil action on behalf of the
residents of the State in an appropriate district court of the United
States or other court of competent jurisdiction--
``(1) to enjoin that practice;
``(2) to enforce compliance with the provision or rule; or
``(3) to obtain damages under section 1011 on behalf of
residents of the State.
``(b) Attorneys' Fees.--In the case of any successful action under
paragraph (1), (2), or (3) of subsection (a), the attorney general of
the State bringing the action shall be awarded the costs of the action
and reasonable attorneys' fees as determined by the court.
``(c) Rights of Federal Trade Commission.--
``(1) Notice to federal trade commission.--
``(A) In general.--Except as provided in
subparagraph (C), the attorney general of a State shall
notify the Federal Trade Commission in writing of any
civil action under subsection (a), prior to initiating
such civil action.
``(B) Contents.--The notice required by
subparagraph (A) shall include a copy of the complaint
to be filed to initiate such civil action.
``(C) Exception.--If it is not feasible for the
attorney general of a State to provide the notice
required by subparagraph (A), the State shall provide
notice immediately upon instituting a civil action
under subsection (a).
``(2) Intervention by federal trade commission.--Upon
receiving notice required by paragraph (1) with respect to a
civil action, the Commission may--
``(A) intervene in such action; and
``(B) upon intervening--
``(i) be heard on all matters arising in
such civil action;
``(ii) remove the action to the appropriate
district court of the United States; and
``(iii) file petitions for appeal of a
decision in such action.
``(d) Investigatory Powers.--Nothing in this section may be
construed to prevent the attorney general of a State from exercising
the powers conferred on such attorney general by the laws of such State
to conduct investigations or to administer oaths or affirmations or to
compel the attendance of witnesses or the production of documentary and
other evidence.
``(e) Effect of Action by Federal Trade Commission.--If the Federal
Trade Commission institutes a civil action or an administrative action
to enforce a violation of a provision of this title or a rule
prescribed under section 1010, no State may, during the pendency of
such action, bring a civil action under subsection (a) against any
defendant named in the complaint of the Commission for violation of a
provision of this title or rule prescribed under section 1010 that is
alleged in such complaint.
``(f) Actions by Other State Officials.--
``(1) In general.--In addition to actions brought by an
attorney general of a State under subsection (a), an action may
be brought by officials in a State who are so authorized.
``(2) Savings provision.--Nothing contained in this section
may be construed to prohibit an authorized official of a State
from proceeding in a court of such State on the basis of an
alleged violation of any civil or criminal statute of such
State.
``SEC. 1014. STATUTE OF LIMITATIONS.
``Any action to enforce any liability under section 1011 may be
brought before the later of--
``(1) the end of the 5-year period beginning on the date of
the occurrence of the violation involved; or
``(2) in any case in which any debt settlement provider has
materially and willfully misrepresented any information that
the debt settlement provider is required, by any provision of
this title, to disclose to any consumer and that is material to
the establishment of the debt settlement provider's liability
to the consumer under this title, the end of the 5-year period
beginning on the date of the discovery by the consumer of the
violation.
``SEC. 1015. RELATION TO STATE LAW.
``This title shall not annul, alter, affect, or exempt any person
subject to the provisions of this title from complying with the law of
any State except to the extent that such law is inconsistent with any
provision of this title, and then only to the extent of the
inconsistency. For purposes of this section, a State statute,
regulation, order, or interpretation is not inconsistent with the
provisions of this title if the protection such statute, regulation,
order, or interpretation affords any person is greater than the
protection provided under this title and any subsequent amendments.
Nothing in this title shall limit or prohibit a State from prohibiting
or otherwise restricting the provision of debt settlement services, or
imposing and administering a system of additional requirements,
prohibitions, registration, or licensure.''.
(b) Initial Regulations.--
(1) In general.--Not later than 60 days after the date of
the enactment of this Act, the Federal Trade Commission shall
commence a rulemaking to prescribe the following:
(A) The form of the written notices required under
subparagraphs (M) and (N) of subsection (a)(2) and
subsection (b)(5) of section 1002 of the Consumer
Credit Protection Act, as added by subsection (a) of
this section.
(B) The form of the statement required under
subsection (e) of such section 1002.
(2) Deadline.--The Federal Trade Commission shall complete
the rulemaking required by paragraph (1) not later than 1 year
after the date of the enactment of this Act.
(3) Procedure.--All rulemaking under paragraph (1) shall be
conducted in accordance with section 553 of title 5, United
States Code, and shall not be subject to other procedures set
forth in section 18 of the Federal Trade Commission Act (15
U.S.C. 57a).
(c) Effective Date.--Title X of the Consumer Credit Protection Act,
as added by subsection (a) of this section, shall take effect on the
date that is 60 days after the date of the enactment of this Act.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Financial Services.
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