principal who furnished the bond, and unless the principal shall, on or before the expiration of the thirty day period, file a new bond, the director shall forthwith cancel the principal's license. An applicant for a license under this act may furnish, file and deposit with the director, in lieu of the surety bond provided for herein, United States currency or bonds, respresenting obligations of the United States, or bonds of the state of Washington or any legal subdivision thereof, for which the faith of the United States, the state of Washington or any legal subdivision thereof is pledged, for the payment of both the principal and interest, equal in amount to the amount of the bond required by this act. The security deposited with the director in lieu of the surety bond shall be returned to the licensee at the expiration of three years after the license issued thereon has expired or been revoked if no legal action has been instituted against the licensee or on the bond at the expiration of said three years. New section. Sec. 5. If the licensee has failed to account to a debtor or distribute to the debtor's creditors such amounts as are required by this act and the contract between the debtor and licensee, the debtor, his legal representative or receiver, or the director, shall have, in addition to all other legal remedies, a right of action in the name of the debtor on the bond or the security given pursuant to the provisions of section 4 of this act, for loss suffered by the debtor, not exceeding the face of the bond or security, and without the necessity of joining the licensee in such suit or action. No action shall be brought upon any bond or security given under section 4 of this act after the expiration of three years from the revocation or expiration of the license issued thereon. Upon entering judgment for plaintiff in any action on the bond required under section 4 of this act, for more than the sum tendered in the court by the defendant, if any, the court shall include in the judgment reasonable compensation for services of plaintiff's attorney in the action. New section. Sec. 6. The director shall issue a license to an applicant if the following requirements are met: (1) The application is complete and the applicant has complied with section 3 of this act. (2) Neither an individual applicant, nor any of the applicant's members if the applicant is a partnership or association, nor any of the applicant's officers or directors if the applicant is a corporation: (a) Has ever been convicted of forgery, embezzlement, obtaining money under false pretenses, larcency, extortion, conspiracy to defraud or any other like offense, or has been disbarred from the practice of law; (b) has participated in a violation of this act or of any valid rules, orders or decisions of the director promulgated under this act; (c) has had a license to engage in the business of debt adjusting revoked or removed for any reason other than for failure to pay licensing fees in this or any other state; or (d) is an employee or owner of a collection agency, or process serving business. (3) An individual applicant is at least twenty-one years of age, a citizen of the United States, and a resident of this state for at least one year. (4) An applicant which is a partnership, corporation, or association is authorized to do business in this state. (5) An individual applicant for an original license as a debt adjuster has passed an examination administered by the director, which examination may be oral or written, or partly oral and partly written, and shall be practical in nature and sufficiently thorough to ascertain the applicant's fitness. Questions on bookkeeping, credit adjusting, business ethics, agency, contracts, debtor and creditor relationships, trust funds and the provisions of this act may be included in the examination. New section. Sec. 7. Each license shall: (1) Be in the form and size prescribed by the director; (2) Show the name of the licensee and the address at which the business of debt adjusting is to be conducted; (3) Show the date of expiration of the license as December 31st, and show such other matter as may be prescribed by the director: (4) While in force, be at all times conspicuously displayed in the outer office of the debt adjusting agency or branch thereof; and (5) Not be transferable or assignable. New section. Sec. 8. By contract a licensee may charge a reasonable fee for debt adjusting services, which fee may not exceed fifteen percent of the total debts reported to and listed with the licensee by the debtor and/or the debtor's listed creditors. The licensee may require an initial payment by the debtor of an amount not to exceed twenty-five dollars which initial payment shall be part of the total allowable fee contracted for, and may not otherwise take or receive for services performed for any one person more than fifteen percent of the amount received by it at any one time from or on behalf of that person. In the event of cancellation or default on performance of the contract by the debtor prior to its successful completition, the licensee may collect in addition to fees previously received, six percent of that portion of the remaining indebtedness listed on said contract which was due when the contract was entered into, but not to exceed seventy-five dollars. A licensee shall not be entitled to retain any fee until notifying all creditors listed by the debtor that the debtor has engaged the licensee in a program of debt adjusting. New section. Sec. 9. If a licensee contracts for, receives or makes any charge in excess of the maximums permitted by this act, except as the result of an accidental and bona fide error, the licensee's contract with the debtor shall be void and the licensee shall return to the debtor the amount of all payments received from the debtor or on his behalf and not distributed to creditors. New section. Sec. 10. Every contract between a licensee and a debtor shall: (1) List every debt to be handled with the creditor's name and disclose the approximate total of all known debts; (2) Provide in precise terms payments reasonably within the ability of the debtor to pay; (3) Disclose in precise terms the rate and amount of the licensee's charge; (4) Disclose the approximate number and amount of installments required to pay the debts in full; (5) Disclose the name and address of the licensee and of the debtor; and (6) Contain such other and further provisions or disclosures as the director shall determine are necessary for the protection of the debtor and the proper conduct of business by the licensee. New section. Sec. 11 Every licensee shall perform the following functions: (1) Make a permanent record of all payments by debtors, or on the debtor's behalf, and of all disbursements to creditors of such debtors, and shall keep and maintain in this state all such records, and all payments not distributed to creditors. No person shall intentionally make any false entry in any such record. or intentionally mutilate, destroy or otherwise dispose of any such record. Such records shall at all times be open for inspection by the director or his authorized agent, and shall be preserved as original records or by microfilm or other methods of duplication acceptable to the director, for at least six years after making the final entry therein. (2) Deliver a completed copy of the contract between the licensee and a debtor to the debtor immediately after the debtor executes the contract, and sign the debtor's copy of such contract. (3) Unless paid by check or money order, deliver a receipt to a debtor for each payment within five days after receipt of such payment. (4) Distribute to the creditors of the debtor at least once each forty days after receipt of payment during the term of the contract at least sixty percent of each payment received from the debtor. No more than twenty-five percent of any payment shall be allocated to the debtor's undistributed reserve account. In the event of cancellation or default on performance of the contract by the debtor. the licensee must distribute to the creditors of the debtor the funds of the debtor held by the licensee, less the amount retained by the licensee in accordance with section 8 of this act. (5) At least once every six months render an accounting to the debtor which shall indicate the total amount received from or on behalf of the debtor, the total amount paid to each creditor, the total amount which any creditor has agreed to accept as payment in full on any debt owed him by the debtor, the amount of charges deducted, and any amount held in reserve. The licensee shall in addition render such an account to a debtor within ten days after written demand. New section. Sec. 12. A licensee shall not: (1) Take any contract, or other instrument which has any blank spaces when signed by the debtor; (2) 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, whether as to real or personal property: (3) Lend money or credit: (4) Take any confession of judgment or power of attorney to confess judg ment against the debtor or appear as the debtor in any judicial proceedings; (5) Take, concurrent with the signing of the contract or as a part of the contract or as part of the application for the contract, a release of any obligation to be performed on the part of the licensee; (6) Advertise his services, display, distribute, broadcast or televise, or permit his services to be displayed, advertised, distributed, broadcasted or televised in any manner whatsoever wherein any false, misleading or deceptive statement or representation with regard to the services to be performed by the licensee, or the charges to be made therefor, is made; (7) Offer, pay, or give any cash, fee. gift, bonus, premiums, reward, or other compensation to any person for referring any prospective customer to the licensee; (8) Receive any cash, fee, gift, bonus, premium, reward, or other compensation from any person other than the debtor or a person in the debtor's behalf in connection with his activities as a licensee; or (9) Disclose to anyone, other than the director or his agent, the debtors who have contracted with the licensee; nor shall the licensee disclose the creditors of a debtor to anyone other than: (a) The debtor, or (b) the director or his agent, or (c) another creditor of the debtor and then only to the extent necessary to secure the cooperation of such a creditor in a debt adjusting plan. New section. Sec. 13. Without limiting the generality of the foregoing and other applicable laws, the licensee, manager or employee of a licensee shall not: (1) Prepare, advise, or sign a release of attachment or garnishment, stipulation, affidavit for exemption, compromise agreement or other legal or court document, nor furnish legal advice or perform legal services of any kind; (2) Represent that he is authorized or competent to furnish legal advice or perform legal services; (3) Assume authority on behalf of creditors or a debtor or accept a power of attorney authorizing it to employ or terminate the services of any attorney or to arrange the terms of or compensate for such services; or (4) Communicate with the debtor or creditor or any other person in the name of any attorney or upon the stationery of any attorney or prepare any form or instrument which only attorneys are authorized to prepare. New section. Sec. 14. Nothing in this act shall be construed as prohibiting the assignment of wages by a debtor to a licensee, if such assignment is otherwise in accordance with the law of this state. New section. Sec. 15. Any payment received by a licensee from or on behalf of a debtor shall be held in trust by the licensee from the moment it is received. The licensee shall not commingle such payment with his own property or funds, but shall maintain a separate trust account and deposit in such account all such payments received. All disbursements whether to the debtor or to the creditors of the debtor, or to the licensee, shall be made from such account. New section. Sec. 16. The director shall, upon reasonable opportunity to be heard, revoke any license issued pursuant to this act if he finds that: (1) The licensee has failed to renew its bond as required by this act ; (2) The licensee has violated any provision of this act or any rule, promulgated by the director under the authority of this act or any order or decision of the director hereunder; or (3) Any fact or condition exists which, if it had existed at the time of the original application for such license, reasonably would have warranted the director in refusing originally to issue such license. New section. Sec. 17. The director may promulgate rules, make specific decisions, orders and rulings, including therein demands and findings, and take other necessary action for the implementation and enforcement of this act. The director may include among rules promulgated, those which describe and forbid deceptive advertising. New section. Sec. 18. The administrative procedure act, Chapter 34.04 RCW, shall wherever applicable herein, govern the rights, remedies, and procedures respecting the administration of this act. New section. Sec. 19. Any person who violates any provision of this act or aids or abets such violation, or any rule lawfully promulgated hereunder or any order or decision of the director hereunder, or any person who operates as a debt adjuster without a license, shall be guilty of a misdemeanor. New section. Sec. 20. Notwithstanding any other actions which may be brought. under the laws of this state, the attorney general or the prosecuting attorney of any county within the state may bring an action in the name of the state against any person to restrain and prevent any violation of this act. New section. Sec. 21. The attorney general may accept an assurance of discontinuance of any act or practice deemed in violation of this act in the enforcement thereof from any person engaging in or who has engaged in such act or practice. Any such assurance shall be in writing and be filed with and subject to the approval of the superior court of the county in which the alleged violator resides or has his principal place of business, or in the alternative, in Thurston county. Failure to perform the terms of any such assurance shall constitute prima facie proof of a violation of this act for the purpose of securing any injunction as provided for in section 20 of this act: Provided, That after commencement of any action by a prosecuting attorney, as provided therein, the attorney general may not accept an assurance of discontinuance without the consent of said prosecuting attorney. New section. Sec. 22. Any person who violates any injunction issued pursuant to this act shall forfeit and pay a civil penalty of not more than one thousand dollars. For the purpose of this section the superior court issuing any injunction shall retain jurisdiction, and the cause shall be continued, and in such cases the attorney general acting in the name of the state may petition for the recovery of civil penalties. New section. Sec. 23. The provisions of this act shall not invalidate or make unlawful contracts between debt adjusters and debtors executed prior to the effective date of this act. New section. Sec. 24. If any provision of this act, or its application to any person or circumstance, is held invalid, the remainder of the act, or the application of the provision to other persons or circumstances, is not affected. Mr. SISK. The record will be kept open for at least a week or 10 days. There is some material that has been promised to the committee that will be made a part of the record. The record will be kept open for that purpose. Rather than close the hearing at this time, the Chair is going to recess these hearings subject to the call of the Chair. With that statement, the committee stands adjourned. (Whereupon, at 11:26 a.m., the subcommittee adjourned.) (Subsequently, the following Addendum was received for the record from the Bureau of Labor Standards of the Department of Labor :) ADDENDUM SUMMARY OF STATE LAWS PROHIBITING OR REGULATING THE BUSINESS OF DEBT POOLING Received too late for inclusion in the text is an Iowa law, effective July 1, 1967, regulating the business of debt management, bringing to 13 the number of States with regulatory laws. Twenty-two States prohibit this business as does the City of Baltimore, Maryland, by ordinance. Administration of the Iowa law is the responsibility of the Superintendent of Banking. The law requires an applicant who wishes to engage in the business to obtain a license for each office, renewable annually, at an initial cost of $50 and $100 for each renewal. An investigation fee of $100 is also required. Each application must be accompanied by a penal bond in the amount of $10,000 for each office. The Superintendent may require a larger bond, up to a maximum of $25,000. The exemptions are similar to those found in most of the regulatory laws, as are the prohibited practices (see pages 8 and 11). The maximum fee which a licensee may charge for his services is 12% percent of any payment made by the debtor and distributed to his creditors. There must be a written contract, containing specified information, and the debtor must be furnished a completed copy. A licensee may not receive any fee unless he has the consent of at least 50 percent of the total number of the creditors listed in the licensee's contract with the debtor, or such a like number of creditors have accepted a distribution of payment. The debtor must be informed of the creditors who have not agreed to the licensee's handling of the debtor's account. The licensee is required to furnish the debtor with a monthly written statement of disbursements made and fees deducted from his account. Funds received from the debtor are to be distributed to creditors within 30 days after receipt, except for the initial payment which may be remitted within 45 days. The licensee is required to maintain a separate trust account of funds received from the debtor. The Superintendent is authorized to examine the condition and affairs of each licensee, who must pay the cost of such examination, up to $100 a day. OCTOBER 3, 1967. Re Credit Advisors, Inc., 1413 K Street, N.W. 2nd floor, Washington, D.C., (bill to prohibit debt adjustment, No. H.R. 9806). Hon. JOEL T. BROYHILL, House of Representatives, MY DEAR MR. BROYHILL: As I understand, you have a Bill pending legislation to possibly curtail the activities of such companies, as the above. With respect to the same, I have been a victim of Credit Advisor's method of business dealings in that they advertise to relieve the constituent of their financial responsibilities in that all you have to do is give them your money, and they will make all the arrangements to make payments. But they do not relate, or tell you how they go about the same. They do make you sign a Contract, but the so called "contract" which they relate as meaning "nothing" and can be broken at any time, does not work just that way. It was necessary for me to take these people to Court, and the Judge said that I signed a Contract to let them do whatever they wanted with my money, and that I could not interfere within 90 days hence. So in the 90 days, what they proceed to do, is ruin ones credit rating. After only two weeks of Credit Advisors handling some $160.00 of my money, I was deluged and plagued by everyone whom I owed money, whereas heretofore I paid my bills on the stated dates and times that they were supposed to be paid. It became so embarrassing, they were phoning me at my Government office, at my home, sending me open face cards, so that I quickly took what cash I had available, even tho Credit Advisers had my money, and sent it to the people who wanted money. I quickly asked Credit Advisors to return all of my money to me, including the $25.00 Retainer fee, but they would not release it to me. The way they go about the same, Credit Advisors plan or tend to ruin ones credit rating by holding off all Creditors until where they come to the payees rescue. This they do not relate or tell you in the Contract. I did not need that kind of help; just wanted to be relieved of paying all the small bills, and by lumping it in one sum, would make it easier for me all around. However, that is not the way they go about it. In the ninety days they accumulate their constituents money, ruin their credit rating in the mean time, and then proceed to pay them as little as they possibly can, and embarrass the constituent all around. In taking them to Court I lost some $60.00 and could not retain the same. The Judge said that a Bill was pending; that is all about he could do. They got the best of me in the entire situation, by misrepresenting the bill of goods they sell in every which way. The Judge said that I gave them 90 days, in the Contract, leaveway to do whatever they wished with my money and to spend it the way they pleased. But this is not the way they sell their bill of goods. In lieu of the pending Bill, thought you would appreciate this kind of information, as I have since heard of a number of other people who have lost even more money than myself in dealing with these kind of companies. Respectfully, Miss MARY AGNES BLUM BAR ASSOCIATION OF THE DISTRICT OF COLUMBIA, Re H.R. 9806, to prohibit the business of debt adjusting in the District of Columbia; H.R. 8929, to regulate the business of debt adjusting in the District of Columbia. Hon. JOHN L. MOMILLAN, Chairman, Committee on the District of Columbia, DEAR CONGRESSMAN MOMILLAN: The Bar Association of the District of Columbia has considered the above-referenced Bills and desires to make known to the Committee on the District of Columbia that it supports enactment of H.R. 9806. This Bill, if enacted, would prohibit the business of debt adjusting in the |