Debt Management Licensing Advisory For Business
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.
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.
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 unsecured 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 $250,000 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 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.
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 likely accept 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.
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