Letter dated May 1, 1967, to the Speaker of the House of Representa- tives, transmitting draft of proposed legislation (introduced as Letter dated May 9, 1967, to Chairman McMillan, reporting on H.R. 38 Finance Management Co., Rock Island, Ill., R. A. Bowers, general manager, Family Financial Counseling Service of Greater Chicago, Price Patton, 130 Federation of Citizens Associations of the District of Columbia, John R. 158 142 160 Macomb Credit Adjusters, Mount Clemens, Mich., Erwin R. King, letter National Better Business Bureau, Inc., K. B. Wilson, president, letter dated September 18, 1967, to Donald J. Tubridy and enclosures Navy Federal Credit Union, Ronald L. Shellings, director, Member Services Standards for Advertising Services of Consumer Credit Counseling, issued Stewart, Robert A., Esq., of Bogle, Gates, Dobrin, Wakefield & Long, Seattle, Wash., letter dated September 12, 1967, to Congressman Brock Adams, enclosing Washington State law on debt adjusting.. Washington Star, series entitled “Debtor Beware," by Miriam Ottenberg.. 133 DEBT ADJUSTING BUSINESS THURSDAY, SEPTEMBER 14, 1967 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE No. 5 OF THE COMMITTEE ON THE DISTRICT OF COLUMBIA, Washington, D.C. The Subcommittee met, pursuant to notice, at 10 o'clock a.m. in room 1310, Longworth House Office Building, Hon. B. F. Sisk (Subcommittee Chairman) presiding. Members Present: Representatives Sisk (Chairman), Whitener, Walker, Horton, and Gude, also Representative Broyhill. Also Present: James T. Clark, Clerk; Hayden S. Garber, Counsel; Donald Tubridy, Minority Clerk; and Leonard O. Hilder, Investigator. Mr. SISK. Subcommittee No. 5 will come to order. The first order of business before the Subcommittee this morning has to do with the subject of debt adjusting. There has been a considerable amount of discussion about apparent problems that have developed in the District of Columbia regarding this subject. Over the last several Congresses legislation has been introduced dealing with this subject. Early this session a bill, H.R. 8929, was introduced by our colleague from Michigan, Mr. Diggs, calling for the regulation of the debt. adjustment business in the District. Without objection I will ask that that bill be made a part of the record. Later a bill, H.R. 9806, was introduced by our colleague from Virginia, Mr. Broyhill, to prohibit the business of debt adjustment. Without objection, that bill will be made a part of the record at this point. (H.R. 8929 and H.R. 9806 follow :) [H.R. 8929, 90th Cong., 1st sess., by Mr. Diggs on April 20, 1967] A BILL To regulate the business of debt adjusting in the District of Columbia other than as an incident to the practice of law Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That as used in this Act the term (1) "Debt adjusting" means an activity, whether referred to by the term "budget counseling", "budget planning", "budget service", "credit advising". "debt adjusting", "debt counseling", "debt help", "financial adjusting." "financial arranging", 'prorating", or some other term of like import, which involves a particular debtor's entering into an express or implied contract whereby the debtor agrees to pay an amount or amounts of money periodically or otherwise to a person who agrees, for a consideration, to distribute such money among specified creditors in accordance with a plan agreed upon between the debtor and the person to whom the debtor makes or agrees to make such payments. (2) "Person" does not include an individual admitted to the bar of the United States District Court for the District of Columbia. "(3) "Partnership" does not include a partnership all the members of which are admitted to the bar of the United States District Court for the District of Columbia. SEC. 2. (a) No person, partnership, association, or corporation shall engage in the business of debt adjusting in the District of Columbia other than under the conditions and subject to the restrictions contained in this Act. (b) Any person engaged in debt management shall be deemed to be rendering financial planning service, but this Act shall not apply to the following when engaged in the regular course of their respective businesses and professions. (1) Attorneys at law. (2) Banks and fiduciaries, as duly authorized and admitted to transact business in the District of Columbia and performing credit and financial adjusting in the regular course of their principal business. (3) Title insurers and abstract companies, while doing an escrow business. (4) Employees of licensees under this Act. (5) Judicial officers or others acting under court orders. (6) Nonprofit religious, fraternal, or cooperative organizations offering debt management service exclusively for their members. (c) After January 1, 1964, it shall be unlawful for any person to engage in the business of debt management without first obtain a license as required in this Act. (d) Any person desiring to obtain a license to engage in the debt management business in the District of Columbia shall file with the Board of Commissioners an application in writing, under oath, setting forth his business name, the exact location of his office, names and addresses of all officers and directors if an association or a corporation, and if a partnership, the partnership name and the names and addresses of all partners, and a copy of the certificate of assumed name or certificate of copartnership or articles of incorporation. At the time of filing the application the applicant shall pay to the Board of Commissioners a license fee of $50 for each office and an investigation fee of $100. At the time of filing the application the applicant shall furnish a bond to the people of the District of Columbia in the sum of $5,000, conditioned upon accounts entrusted to such person engaged in debt management, and their employees and agents. The bond or bonds shall be approved by the Board of Commissioners and filed in their office. No person, firm, or corporation shall engage in the business of debt management until a good and sufficient bond is filed in accordance with the provisions of this Act. (e) Each licensee shall furnish with his application a blank copy of the contract he intends to use between himself and the debtor and shall notify the Board of Commissioners of all charges and amendments thereto. (f) The license issued under this Act shall expire on December 31 next following its issuance unless sooner surrendered, revoked, or suspended, but may be renewed as provided in this Act. (g) The application shall be accompanied by an appointment of the Board of Commissioners as agent of the applicant for service of process in the District of Columbia. Service upon the Board of Commissioners shall be sufficient service upon any licensee under this Act. (h) Upon the filing of the application and the payment of the fees and the approval of the bond, the Board of Commissioners shall investigate the facts, and if they find that the financial responsibility, experience, character, and general fitness of the applicant and of the members thereof, if the applicant is a partnership or an association and of the officers and directors thereof, if the applicant is a corporation, are such as to command the confidence of the community to warrant belief that the business will be operated fairly and honestly within the purposes of this Act and that the applicant or the applicant and the members thereof or the applicant and the officers and directors thereof have not been convicted of any crime involving moral turpitude, or that such person has not had a record of having defaulted in the payment of money collected for others. including the discharge of such debts through bankruptcy proceedings, the Board of Commissioners shall issue the applicant a license to engage in the debt management business in acccordance with the provisions of the Act. The Board of Commissioners may require as part of the application a credit report and other information. (i) Each licensee on or before December 1, may make application to the Board of Commissioners for renewal of its license. The application shall be on the form prescribed by the Board of Commissioners and shall be accompanied by a fee of $50, together with a bond as in the case of an original application. A separate application shall be made for each office. SEC. 3. Any person lawfully engaged in debt management in the District of Columbia of at least two years immediately prior to the effective date of this Act shall be entitled to receive a license within the provisions of this Act by filing an application, furnishing a bond, and paying the annual fee as herein specified within ninety days after the effective date of this Act. SEC. 4. (a) The Board of Commissioners may deny, revoke, or suspend any license issued or applied for under this Act for the following causes: (1) Conviction of a felony or a misdemeanor involving mortal turpitude. (2) For violating any of the provisions of this Act. (3) For fraud or deceit in procuring the issuance of a license under this Act. (4) For indulging in a continuous course of unfair conduct. (5) For insolvency, filing in bankruptcy, receivership, or assigning for the benefit of creditors by any licensee or applicant for a license under this Act. (b) The denial, revocation, or suspension shall only be made upon specific charges in writing, under oath, filed with the Board of Commissioners, whereupon a hearing shall be had as to the reasons for any denial, revocation, or suspension and a certified copy of the charges shall be served on the licensee or applicant for license not less than ten days prior to the hearing. (c) No license shall be transferable or assignable. SEC. 5. Each licensee shall make a written contract between himself and a debtor and immediately furnish the debtor with a true copy of the contract. The contract shall set forth the complete list of debtor's obligations to be adjusted, a complete list of the creditors holding such obligations, the total charges agreed upon for the services of the licensee, and the beginning and expiration date of the contract. No contract shall extend for a period longer than twenty-four months. SEC. 6. Each licensee shall maintain a separate bank account for the benefit of debtors in which all payments received from the debtor 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. Every licensee shall keep, and use in his business, books, accounts, and records which will enable the Board of Commissioners to determine whether such licensee is complying with the provisions of this Act and with the rules and regulations of the Board of Commissioners. Every licensee shall preserve such books, accounts, and records for at least seven years after making the final entry on any transaction recorded therein. SEC. 7. (a) The Board of Commissioners may examine upon five-day notice given the licensee the condition and affairs of said licensee. In connection with any examination, the Board of Commissioners may examine on oath any licensee, and any director, officer, employee, customer, creditor, or stockholder of a license. concerning the affairs and business of the licensee. The Board of Commissioners shall ascertain whether the licensee transacts its business in the manner prescribed by law and the rules and regulations issued thereunder. The licensee shall pay the cost of the examination as determined by the Board of Commissioners, which fee shall not exceed the sum of $50 per day of examination; said fee shall be deposited in the Treasury of the United States to the credit of the District of Columbia. Failure to pay the examination fee within thirty days of receipt of demand from the Board of Commissioners shall automatically suspend the license until the fee is paid. (b) In the investigation of alleged violations of this Act, the Board of Commissioners may compel the attendance of any person or the production of any books, accounts, records, and files used therein; and may examine under oath all persons in attendance pursuant thereto. SEC. 8. (a) The fee of the licensee shall be agreed upon in advance and stated in the contract and provision for settlement in case of cancellation or prepayment shall be clearly stated in the contract. The fee of the licensee shall not exceed 12 per centum of the total indebtedness of the debtor. The fee of the licensee shall be prorated monthly over the life of the contract. In addition to the prorated amount, the licensee shall be allowed to deduct from the first month payments a reasonable amount for filing fees, said amount not to exceed $25. In the event of total payment of the contract before the term of the contract has expired, the licensee shall be entitled to an amount equal to not more than 25 per centum of the remaining fee. (b) Each licensee shall— (1) Keep complete and adequate records during the term of the contract and for a period of seven years from the date of cancellation or completion of the contract with each debtor, which records shall contain complete information regarding the contract, extensions thereof, payments, disbursements, and charges, which records shall be open to inspection by the Board of Commissioners during normal business hours. (2) Make remittances to creditors within two working days after receipt of any funds, less fees and costs, unless the reasonable payment of one or more of the debtor's obligations requires that such funds be held for a longer period so as to accumulate a sum certain. (3) Upon request furnish the debtor a written statement of his account each ninety days, or a verbal accounting at any time the debtor may request it during normal business hours. (c) No licensee shall accept an account unless a written and thorough budget analysis indicates that the debtor can reasonably meet the requirements required by the budget analysis. (d) In the event a compromise of a debt is arranged by the licensee with any one or more creditors, the debtor shall have the full benefit of that compromise. (e) No licensee shall (1) Purchase from a creditor any obligation of a debtor. (2) Operate as a collection agent and as a licensee as to the same debtor's account. (3) Execute any contract or agreement to be signed by the debtor unless the contract or agreement is fully and completely filled in and finished. (4) Receive or charge any fee in the form of a promissory note or other promise to pay, or receive or accept any mortgage or other security for any fee, both as to real or personal property. (5) Pay any bonus or other consideration to any person for the referral of a debtor to his business nor shall he accept or receive any bonus, commission, or other consideration for referring any debtor to any person for any reason. (6) Advertise his services, display, distribute, broadcast, or televise or permit to be displayed, advertised, distributed, broadcasted, or televised his services in any manner inconsistent with existing law. SEC. 9. (a) Any person, partnership, association, corporation, or any other group of individuals, however organized, or any owner, partner, member, officer, director, employee, agent, or representative thereof who willfully or knowingly engages in the business of debt management without the license required by this Act, is guilty of a misdemeanor and shall be fined not more than $1,000 for each violation or imprisoned for not more than six months, or both. (b) Any licensee under this Act who violates any provision of this Act is guilty of a misdemeanor and shall be fined not more than $1,000 for the first offense. and for each subsequent offense a like fine or imprisonment not to exceed one year, or both. (c) Prosecution for violations of this Act shall be conducted in the name of the District of Columbia by the Corporation Counsel or any of his assistants. [H.R. 9806, 90th Cong., 1st sess., by Mr. Broyhill on May 9, 1967] A BILL To prohibit the business of debt adjusting in the District of Columbia except as an incident to the lawful practice of law or as an activity engaged in by a nonprofit corporation or association Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That as used in this Act the term (1) "Debt adjusting" means an activity, whether referred to by the term "budget counseling", "budget planning", "budget service", "credit advising". "debt adjusting", "debt counseling", "debt help", "financial adjusting", "financial arranging”, “prorating" or some other term of like import, which involves a particular debtor's entering into an express or implied contract whereby the debtor agrees to pay an amount or amounts of money periodically or otherwise to a person who agrees, for a consideration, to distribute such money among specified creditors in acocrdance with a plan agreed upon between the debtor and the person to whom the debtor makes or agrees to make such payments. (2) "Person" does not include an individual admitted to the bar of the United States District Court for the District of Columbia. (3) "Partnership" does not include a partnership all the members of which are admitted to the bar of the United States District Court for the District of Columbia. |