S-4531 _______________________________________________
SUBSTITUTE SENATE BILL NO. 6553
_______________________________________________
State of Washington 50th Legislature 1988 Regular Session
By Senate Committee on Economic Development and Labor (originally sponsored by Senator Lee; by request of Department of Licensing)
Read first time 2/2/88.
AN ACT Relating to debt adjusting; amending RCW 18.28.010, 18.28.040, 18.28.050, 18.28.080, 18.28.090, 18.28.100, 18.28.110, 18.28.120, 18.28.130, 18.28.140, 18.28.150, and 18.28.190; adding new sections to chapter 18.28 RCW; repealing RCW 18.28.020, 18.28.030, 18.28.045, 18.28.060, 18.28.070, 18.28.160, and 18.28.165; and prescribing penalties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
Sec. 1. Section 1, chapter 201, Laws of 1967 as last amended by section 1, chapter 156, Laws of 1979 and RCW 18.28.010 are each amended to read as follows:
Unless a different meaning is plainly required by the context, the following words and phrases as hereinafter used in this chapter shall have the following meanings:
(1) "Debt adjusting" means the managing, counseling, settling, adjusting, prorating, or liquidating of the indebtedness of a debtor, or receiving funds for the purpose of distributing said funds among creditors in payment or partial payment of obligations of a debtor.
(2) "Debt adjuster", which includes any person known as a debt pooler, debt manager, debt consolidator, debt prorater, or credit counselor, is any person engaging in or holding himself out as engaging in the business of debt adjusting for compensation. The term shall not include:
(a) Attorneys at law, escrow agents, accountants, broker-dealers in securities, or investment advisors in securities, while performing services solely incidental to the practice of their professions;
(b) Any
person, partnership, association, or corporation doing business under and as
permitted by any law of this state or of the United States relating to banks,
((small loan companies)) consumer finance businesses, industrial
loan companies, trust companies, mutual savings banks, savings and loan
associations, building and loan associations, credit unions, crop credit
associations, development credit corporations, industrial development
corporations, title insurance companies, or insurance companies;
(c) Persons who, as employees on a regular salary or wage of an employer not engaged in the business of debt adjusting, perform credit services for their employer;
(d) Public officers while acting in their official capacities and persons acting under court order;
(e) Any person while performing services incidental to the dissolution, winding up or liquidation of a partnership, corporation, or other business enterprise;
(f) Nonprofit organizations dealing exclusively with debts owing from commercial enterprises to business creditors;
(g) Nonprofit organizations engaged in debt adjusting and which do not assess against the debtor a service charge in excess of fifteen dollars per month.
(3) "Debt adjusting agency" is any partnership, corporation, or association engaging in or holding itself out as engaging in the business of debt adjusting.
(4) (("License"
means a debt adjuster license or debt adjusting agency license issued under the
provisions of this chapter.
(5)
"Licensee" means a debt adjuster or debt adjusting agency to whom a
license has been issued under the provisions of this chapter.
(6))) "Director" means the director of the
department of licensing.
NEW SECTION. Sec. 2. A new section is added to chapter 18.28 RCW to read as follows:
(1) A person engaged in debt adjusting in this state must register with the department of licensing. Each registration application shall be submitted annually on a form provided by the department of licensing and shall include the following information:
(a) The name, residence address and telephone number, and business name, address, and telephone number of the registrant; and
(b) Proof that the registrant has the required surety bond under RCW 18.28.040.
(2) The department of licensing shall charge a fee for each application, to be set in accordance with RCW 43.24.086.
(3) Any persons advertising or representing themselves as having registered under this section who are not currently registered are guilty of a gross misdemeanor.
(4) If the surety on a bond cancels or refuses to renew the bond for a registrant during the period of registration, the surety company shall notify the department of licensing in writing of the termination of the bond and its effective date not less than thirty days before the effective date of termination.
(a) Upon receipt of a surety company termination notice, the department of licensing shall send written notice to the registrant that on the effective date of termination the department of licensing will suspend the registration unless proof of bonding as required by this section is filed with the department of licensing before the effective date of the termination.
(b) If a surety company fails to give notice of coverage termination, this failure shall not have the effect of continuing the coverage.
(c) The department of licensing may suspend or revoke registration under this section if the registrant fails to maintain in full force and effect the surety bond required by this chapter.
(5) The state of Washington is immune from any civil action arising from a registration under this section.
Sec. 3. Section 4, chapter 201, Laws of 1967 and RCW 18.28.040 are each amended to read as follows:
((The
bond, required in RCW 18.28.030, shall be)) A debt adjuster shall have
at all times a surety bond((, annually renewable on January 1st, to be
approved by the director as to form and content,)) in the sum of ((ten))
fifteen thousand dollars, executed by the ((applicant)) debt
adjuster as principal and by a surety company authorized to do business in
this state as a surety, whose liability shall not exceed the said sum in the
aggregate. Such bond shall run to the state of Washington as obligee for the
benefit of the state and of any person or persons who may have cause of action
against the principal of said bond under the provisions of this chapter. Such
bond shall be conditioned that said principal ((as licensee)) hereunder
will not commit any fraudulent act and will comply with the provisions of this
chapter and the rules lawfully adopted hereunder, and will pay to the state and
any such person or persons any and all moneys that may become due and owing
from such principal under and by virtue of the provisions of this chapter. The
surety on such bond shall be released and discharged from all liability
accruing on such bond after the expiration of ((thirty)) forty-five
days from the date upon which such surety ((shall have lodged with the
director a written request to be released and discharged, but)) has
notified the principal of the expiration or cancellation of the bond. This
provision shall not operate to relieve, release or discharge the surety from
any liability already accrued or which shall accrue before the expiration of
the ((thirty)) forty-five day period. ((The director shall
promptly upon receiving any such request notify the 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 chapter may furnish, file and deposit with
the director, in lieu of the surety bond provided for herein, United States
currency or bonds, representing 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 chapter. 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.)) Claims may be filed on the surety bond within three
years from the date of bond termination by serving by registered or certified
mail a copy of the complaint on the surety at the time the suit is started.
Failure to maintain a surety bond at the full amount required in this section
is a violation.
Sec. 4. Section 5, chapter 201, Laws of 1967 and RCW 18.28.050 are each amended to read as follows:
If the ((licensee))
debt adjuster has failed to account to a debtor or distribute to the
debtor's creditors such amounts as are required by this chapter and the
contract between the debtor and ((licensee)) debt adjuster, the
debtor((,)) or 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 RCW 18.28.040, for loss suffered by the debtor,
not exceeding the face of the bond ((or security)), and without the
necessity of joining the ((licensee)) debt adjuster in such suit
or action. No action shall be brought upon any bond ((or security))
given under RCW 18.28.040 after the expiration of three years from the ((revocation))
cancellation or expiration of the ((license issued thereon)) bond.
Upon entering judgment for plaintiff in any action on the bond required under
RCW 18.28.040, 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. 5. A new section is added to chapter 18.28 RCW to read as follows:
(1) No person may conduct debt adjusting or serve as a principal, officer, or director, or be an employee in a debt adjusting agency, if that person has:
(a) Been convicted of forgery, embezzlement, obtaining money under false pretenses, larceny, extortion, conspiracy to defraud, or any other like offense or disbarred from the practice of law;
(b) Violated this chapter or any rules, orders, or decisions promulgated under this chapter;
(c) Had a license to engage in the business of debt adjusting revoked or removed for any reason other than for failure to pay licensing renewal fees in this or any other state;
(d) Ownership in or is employed by a collection agency or process serving business.
(2) A debt adjusting agency that is a partnership, corporation, or association must be authorized to do business in this state.
Sec. 6. Section 8, chapter 201, Laws of 1967 as last amended by section 4, chapter 156, Laws of 1979 and RCW 18.28.080 are each amended to read as follows:
(1) By
contract, a ((licensee)) debt adjuster or debt adjusting
agency may charge a reasonable fee for debt adjusting services. The total
fee for debt adjusting services may not exceed fifteen percent of the total
debt listed by the debtor on the contract. The fee retained by the ((licensee))
debt adjuster from any one payment made by or on behalf of the debtor
may not exceed fifteen percent of the payment: PROVIDED, That ((the
licensee may make)) an initial charge of up to twenty-five dollars ((which))
shall be considered part of the total fee. If an initial charge is made, no
additional fee may be retained which will bring the total fee retained to date
to more than fifteen percent of the total payments made to date. No fee
whatsoever shall be applied against rent and utility payments for housing.
In the
event of cancellation or default on performance of the contract by the debtor
prior to its successful completion, the ((licensee)) debt adjuster
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 twenty-five dollars.
(2) ((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.)) No fee may be retained by a debt adjuster until all
creditors listed by the debtor have been notified by the debt adjuster that the
debtor has engaged the services of the debt adjuster or debt adjusting agency.
Sec. 7. Section 9, chapter 201, Laws of 1967 and RCW 18.28.090 are each amended to read as follows:
If a ((licensee))
debt adjuster contracts for, receives or makes any charge in excess of
the maximums permitted by this chapter, 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 shall be returned to the debtor.
Sec. 8. Section 10, chapter 201, Laws of 1967 as amended by section 5, chapter 156, Laws of 1979 and RCW 18.28.100 are each amended to read as follows:
Every
contract ((between a licensee and)) with 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 all of the ((licensee's))
debt adjuster's charges and fees;
(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)) debt adjuster
and of the debtor;
(6) Provide
that the ((licensee)) debt adjuster shall notify the debtor, in
writing, within five days of notification to the ((licensee)) debt
adjuster by a creditor that the creditor refuses to accept payment pursuant
to the contract between the ((licensee)) debt adjuster and the
debtor;
(7) Contain the following notice in ten point boldface type or larger directly above the space reserved in the contract for the signature of the buyer: NOTICE TO DEBTOR:
(a) Do not sign this contract before you read it or if any spaces intended for the agreed terms are left blank.
(b) You are entitled to a copy of this contract at the time you sign it.
(c) You may cancel this contract within three days of signing by sending notice of cancellation by certified mail return receipt requested to the debt adjuster at his address shown on the contract, which notice shall be posted not later than midnight of the third day (excluding Sundays and holidays) following your signing of the contract.
(d) This
contract is covered by the Washington Consumer Protection Act (chapter 19.86
RCW). You may contact the state attorney general's office if you believe that
a violation has occurred; ((and))
(8) Disclose to the debtor the name of the authorized surety company holding the required bond, the amount of the bond, the bond number, and process by which a claim can be made against the bond; and
(9)
Contain such other and further provisions or disclosures as ((the director
shall determine)) are required by rule or are necessary for the
protection of the debtor and the proper conduct of business by the ((licensee))
debt adjuster.
Sec. 9. Section 11, chapter 201, Laws of 1967 as amended by section 6, chapter 156, Laws of 1979 and RCW 18.28.110 are each amended to read as follows:
Every ((licensee))
debt adjuster shall perform the following functions:
(1) Make a
permanent record of all payments by debtors, or on the debtors' 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)) debt
adjuster 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 eighty-five percent of each payment received from the debtor.
(5) At
least once every month 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 trust. The ((licensee)) debt
adjuster shall in addition render such an account to a debtor within ten
days after written demand.
(6) Notify
the debtor, in writing, within five days of notification ((to the licensee))
by a creditor that the creditor refuses to accept payment pursuant to the
contract between the ((licensee)) debt adjuster and the debtor.
(((7)
Furnish the director with all contracts, assignments, and forms as described in
RCW 18.28.030 which are currently in use.))
Sec. 10. Section 12, chapter 201, Laws of 1967 and RCW 18.28.120 are each amended to read as follows:
A ((licensee))
debt adjuster or debt adjusting agency 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 judgment 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)) debt adjuster;
(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))
debt adjuster, 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))
debt adjuster;
(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)) debt adjuster; or
(9)
Disclose to anyone, other than the director or ((his)) the attorney
general or their agents, the debtors who have contracted with the ((licensee))
debt adjuster; nor shall the ((licensee)) debt adjuster
disclose the creditors of a debtor to anyone other than: (a) The debtor, or
(b) the director or ((his)) the attorney general or their agents,
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.
Sec. 11. Section 13, chapter 201, Laws of 1967 and RCW 18.28.130 are each amended to read as follows:
Without
limiting the generality of the foregoing and other applicable laws, the ((licensee,))
debt adjuster or manager or employee of a ((licensee)) debt
adjuster 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)) the debt adjuster 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.
Sec. 12. Section 14, chapter 201, Laws of 1967 and RCW 18.28.140 are each amended to read as follows:
Nothing in
this chapter shall be construed as prohibiting the assignment of wages by a
debtor to a ((licensee)) debt adjuster, if such assignment is
otherwise in accordance with the law of this state.
Sec. 13. Section 15, chapter 201, Laws of 1967 as amended by section 8, chapter 156, Laws of 1979 and RCW 18.28.150 are each amended to read as follows:
(1) Any
payment received by a ((licensee)) debt adjuster from or on
behalf of a debtor shall be held in trust by the ((licensee)) debt
adjuster from the moment it is received. The ((licensee)) debt
adjuster 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)) debt adjuster,
shall be made from such account.
(2) In the
event that the debtor cancels or defaults on the contract between the debtor
and the ((licensee)) debt adjuster, the ((licensee)) debt
adjuster shall close out the debtor's trust account in the following
manner:
(a) The ((licensee))
debt adjuster may take from the account that amount necessary to satisfy
any fees, other than any cancellation or default fee, authorized by this
chapter.
(b) After
deducting the fees provided in subsection (2)(a) of this section, the ((licensee))
debt adjuster shall distribute the remaining amount in the account to
the creditors of the debtor. The distribution shall be made within five days
of the demand therefor by the debtor, but if the debtor fails to make the
demand, then the ((licensee)) debt adjuster shall make the
distribution within thirty days of the date of cancellation or default.
Sec. 14. Section 19, chapter 201, Laws of 1967 and RCW 18.28.190 are each amended to read as follows:
Any person
who violates any provision of this chapter 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)) shall have his or her registration
revoked, and such conduct constitutes a misdemeanor.
NEW SECTION. Sec. 15. The following acts or parts of acts are each repealed:
(1) Section 2, chapter 201, Laws of 1967 and RCW 18.28.020;
(2) Section 3, chapter 201, Laws of 1967, section 6, chapter 266, Laws of 1971 ex. sess., section 23, chapter 30, Laws of 1975 1st ex. sess., section 18, chapter 7, Laws of 1985 and RCW 18.28.030;
(3) Section 2, chapter 156, Laws of 1979 and RCW 18.28.045;
(4) Section 6, chapter 201, Laws of 1967, section 1, chapter 141, Laws of 1967 ex. sess., section 20, chapter 292, Laws of 1971 ex. sess., section 3, chapter 156, Laws of 1979 and RCW 18.28.060;
(5) Section 7, chapter 201, Laws of 1967 and RCW 18.28.070;
(6) Section 16, chapter 201, Laws of 1967 and RCW 18.28.160; and