On July 17, 2006, Governor Ruth Ann Minner signed into law
the Delaware
Uniform Debt Management Services Act
("law"). Beginning January 17, 2007, the
Attorney General of the State of Delaware will be
responsible for issuing licenses and examining providers
of debt management services and for enforcement of the
law. The Director of Consumer Protection will implement
and administer the new law by designation of the Attorney
General.
Applicants for licensure as providers of debt management
services are encouraged to review this law in its entirety
and to consult with legal counsel. This advisory is
intended to provide general information only and does not
constitute legal advice. Reliance on any information in
this advisory will not excuse violations of the law.
Unless exempted under the law, providers of debt
management services must be licensed to do business with a
person they know to be a Delaware resident even if the
service is performed over the internet or on the telephone
from another state rather than in person. Both 'for
profit' and 'non-profit' providers who offer debt
management services must be licensed.
All fees charged by providers must be fully disclosed to
consumers. A provider of debt management services which
receives no compensation from or on behalf of the
consumer, or from a creditor of the consumer, is not
required to be licensed.
Forms for applicants that are available at this site
include the application and surety bond. You can request
fingerprint cards so that we can obtain the required
criminal records checks. Instructions and authorization
forms will be mailed with the cards to the address you
provide.
Criminal records checks cannot be processed under the new
law until January 17, 2007, the effective date of the law.
The Director of Consumer Protection may review
applications and may grant conditional licenses to be
effective on January 17, 2007 pending receipt of the
criminal records check. If the criminal records check is
satisfactory, the applicant will receive an unconditional
license in the mail. The original date on the conditional
license will determine the license renewal date. If the
criminal records check is unsatisfactory, the conditional
license may be revoked after the applicant has an
opportunity for a hearing.
A criminal records check obtained for the purpose of doing
business in any state, that was issued within the last 12
months and based on the fingerprints of the officer or
person with access to the trust account, satisfies this
requirement if the criminal records check is provided by
the licensing state and received by that state from a
central repository.
The following are highlights only of the Delaware Uniform
Debt Management Services Act found in 6 Del.C. Chapter
24A. It important to read the entire act and the rules
when they become available.
' 2402A. The definition section describes
terms used in the law.
"Debt management services" are services provided
by an intermediary between an individual and
1 or more creditors of the individual for the purpose of
obtaining concessions, but does not
include:
(A) Legal services provided in an attorney-client
relationship by an attorney licensed or otherwise
authorized to practice law in this State;
(B) Accounting services provided in an accountant-client
relationship by a certified public accountant licensed to
provide accounting services in this State; ...
' 2403A. This section provides for exemptions for some
providers.
' 2405A. An application must be on the form provided by
the Attorney General and include the non-refundable
application fee of $2000, evidence of the required bond,
and evidence of insurance that is in compliance with the
law in the amount of $500,000 against the risks of
dishonest, fraud, theft, and other misconduct on the part
of the applicant or a director, employee, or agent of the
applicant
' 2406A. Some of the information required in the
application is:
* an audited review by a certified public accountant of
the applicant's financial statements;
* evidence of accreditation by an independent accrediting
organization approved by the Attorney General;
* evidence that, within 12 months after initial
employment, each of the applicant's counselors becomes
certified as a certified counselor;
* a description of the applicant's financial analysis and
initial budget plan, including any form of electronic
model, used to evaluate the financial condition of
individuals;
* a copy of each form of agreement that the applicant will
use with individuals who reside in Delaware;
* the schedule of fees and charges that the applicant will
used with individuals who reside in Delaware;
* at the applicant's expense, the results of a criminal
records check, including fingerprints, conducted within
the immediately preceding 12 months, covering every
officer of the applicant and every employee or agent of
the applicant who is authorized to have access to any
trust account.
'2413A. Every applicant must file a surety bond of at
least $50,000. The bond may be increased at the discretion
of the Attorney General based on the value of the
provider's business in Delaware and the value of the trust
accounts. The bond shall run to the State for the benefit
of the Attorney General and all consumers injured by any
wrongful act, omission, default, fraud or
misrepresentation by a licensed provider in the course of
its activity as a licensed provider.
'2416A. A licensed provider must maintain a toll-free
communication system staffed at a level that allows a
consumer to speak to a certified counselor or customer
service representative during ordinary business hours.
'2417A. Before providing services, a licensed provider
must give the consumer a clear and conspicuous list of
goods and services and the itemized charges for each. The
list must be in a record that the consumer can keep. The
maximum fee can be no more that 18% of the principal
amount of the debt.
Before a licensee can provide debt management services, a
certified counselor must provide reasonable education
about the management of personal finance and prepare a
financial analysis. If the service will require a consumer
to make regular, periodic payments, the counselor
must:
* prepare a plan for the consumer;
* make a determination that the plan is suitable for the
consumer and that he or she will be able to meet the
payment obligations or that the creditor will likely
engage in negotiation with the provider;
* believe that each listed creditor will accept likely
payment of the debts as provided in the plan.
Before a consumer can agree to engage in the plan, the
provider must
* provide the consumer with a copy of the analysis and
plan in a record that identifies the provider that the
consumer may keep;
* inform the consumer of the availability, at the option
of the consumer, assistance by a toll free communication
system or in person to discuss the financial analysis and
plan;
* inform the consumer that some of the creditors may be
unwilling to negotiate with the provider.
Before a consumer can agree to engage in the plan, the
provider shall inform the consumer, in a separate record
that the consumer may keep
* of the name and business address of the provider;
* that the plans are not suitable for all individuals and
that the individual may ask the provider about other ways,
including bankruptcy, to deal with indebtedness;
* that establishment of the plan may adversely affect the
individual's credit rating or credit scores;
* that nonpayment of debt may lead creditors to increase
finance and other charges or undertake collection
activity, including litigation;
* unless it is not true, that the provider may receive
compensation from the creditors or the individual; and
* that unless the individual is insolvent, if a creditor
settles for less that the full amount of the debt, the
plan may result in the creation of taxable income to the
individual, even though the individual does not receive
any money.
'2419A. The agreement must include the information and
terms required in the statute and be signed, dated, and
delivered to the consumer.
The agreement must disclose the services, itemized fees, a
schedule of payments from the consumer and to the creditor
if provided under a plan, identity of creditors not
included in a plan, provisions for cancellation or
termination.
The agreement must advise the consumer that he or she can
contact the Attorney General with questions or complaints
about the provider. The address, telephone number, and
Internet address or website of the Attorney General must
be included in the agreement.
The complete list of requirements and disclosures for the
agreement are found in the law.
'2422A. Funds paid to providers by or on behalf of
consumers pursuant to a plan for distribution to creditors
are held in trust and must be deposited within 2 business
days of receipt into a trust account that shall at all
times maintain a balance equal to the sum of the balances
of the individual consumer's accounts. All providers shall
have overdraft notification agreements that require the
bank to notify the Attorney General when an instrument is
presented for payment and there are insufficient funds in
the account.
'2424A. A provider may not solicit a voluntary
contribution from an individual or an affiliate of the
individual for any service provided to the individual. A
provider may accept a contribution only if the amount is
within the limitation of fees the provider may charge or
the contribution is made more than 30 days after
completion or termination of the plan.
'2428A. A provider may not:
* misappropriate or misapply money held in trust;
* settle a debt for more that 50% of the amount owned to a
creditor unless the consumer agrees after the creditor has
agreed;
* take a power of attorney authorizing it to settle a debt
unless the power expressly limits the provider's authority
to settle debts for not more that 50% of the amount owed
to the creditor;
* exercise a power of attorney after an agreement is
terminated;
* initiate a transfer from a consumer's account at a bank
unless it is a return of money to the consumer or a
properly authorized payment to creditor under a plan or a
fee;
* offer a gift, bonus, premium, reward or other
compensation to a consumer for executing an agreement;
* offer a gift, bonus, premium, reward or other
compensation to a person for referring a prospective
customer if the person making the referral has a financial
interest in the outcome of the debt managements services
unless neither the provider nor the person making the
referral communicates to the prospective customer, the
source of the referral;
* receive a bonus, commission, or other benefit for
referring an individual to a person;
* structure a plan in a manner that would result in a
negative amortization of any of an individual's debts
unless a creditor that is owned a negatively amortizing
debt agrees to refund or waive the finance charge upon
payment of the principal amount of the debt;
* compensate its employees on the basis of a formula that
incorporates the number of individual the employee induces
to enter into agreements;
* settle a debt or lead an individual to believe that a
payment to a creditor is in settlement of a debt unless at
the time of settlement the individual receives a
certification by the creditor that the payment is in full
settlement of the debt;
* make a representation that the provider will furnish
money to pay bills or prevent attachments, that payment of
a certain amount will permit satisfaction or a certain
amount or range of indebtedness, or that participation in
a plan will or may prevent litigation, garnishment,
attachment, repossession, foreclosure, eviction, or loss
of employment;
* misrepresent that it is authorized or competent to
furnish legal advice or legal services;
* represent that it is a non-for-profit entity unless it
is organized and properly operating as a not-for-profit
under the law of the state in which it was formed or that
it is a tax-exempt entity unless it has received
certification of tax-exempt status from the IRS;
* take a confession of judgment or power of attorney to
confess a judgment against an individual; or
* employ an unfair, unconscionable, or deceptive act or
practice including the knowing omission of any material
information.
A provider who provides debt management services to a
consumer may not directly, or indirectly:
* purchase a debt or obligation of the individual;
* receive from or on behalf of the individual a promissory
note or other instrument other that a check or a demand
draft which may not be post-dated;
* lend money or provide credit to the individual except as
a deferral of a settlement fee at no additional expense to
the individual;
* except where permitted by federal law, disclose the
identity or identifying information of individual or his
or her creditors except to the Attorney General, a
creditor of the individual to secure the cooperation of
the creditor in a plan, or as necessary to administer the
plan;
* except as otherwise provided in '2423A(f), provide the
individual less that the full benefit of a compromise of a
debt arranged by the provider;
* charge the individual for or provide credit or other
insurance, coupons for goods or services, membership in a
club, access to computers or the Internet, or any other
matter not directly related to debt-management services or
education services concerning personal finance;
* furnish legal advice or perform legal services;
* advise, encourage, or suggest to the individual not to
make payment to creditors while under the plan.
'2431. A provider is liable for the conduct of its
employees or independent contractors who violate an
agreement or the Delaware Uniform Debt Management Services
Act.
'2432A - '2334A. These sections specify the powers of the
Attorney General and the remedies for violations.
NOTE that these are highlights of the Delaware Uniform
Debt Management Services Act. You must read the act for
all of the law's provisions.
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Debt
Management Services Act:
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Consumer
Protection Phone List:
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Consumer
Protection Hotline:
800-220-5424 (Toll-Free)
302-577-8600
Consumer
Protection Fax:
302-577-6499
Consumer Protection Email:
consumer.protection@state.de.us
Consumer Protection Wilmington:
820 N. French Street 5th
floor
Wilmington, DE 19801
Consumer Protection Dover:
102 W. Water St.
Dover, DE 19904
Consumer
Protection Georgetown:
114 E. Market St.
Georgetown, DE 19947
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