Z-0124.1 _______________________________________________
SENATE BILL 5265
_______________________________________________
State of Washington 54th Legislature 1995 Regular Session
By Senators Pelz, Newhouse, Heavey, Wood and West; by request of Department of Licensing
Read first time 01/17/95. Referred to Committee on Labor, Commerce & Trade.
AN ACT Relating to deregulating debt adjusters; amending RCW 18.28.010, 18.28.080, 18.28.090, 18.28.100, 18.28.110, 18.28.120, 18.28.130, 18.28.150, 18.28.165, and 18.28.190; repealing RCW 18.28.020, 18.28.030, 18.28.040, 18.28.045, 18.28.050, 18.28.060, 18.28.070, 18.28.160, and 18.28.170; and prescribing penalties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
Sec. 1. RCW 18.28.010 and 1979 c 156 s 1 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, industrial)) consumer finance companies, consumer
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.))
Sec. 2. RCW 18.28.080 and 1979 c 156 s 4 are each amended to read as follows:
(1) By contract a ((licensee))
debt adjuster 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)).
However, the ((licensee)) debt adjuster 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))
debt adjuster shall not be entitled to retain any fee until notifying
all creditors listed by the debtor that the debtor has engaged the ((licensee))
debt adjuster in a program of debt adjusting.
Sec. 3. RCW 18.28.090 and 1967 c 201 s 9 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)) debt adjuster's contract
with the debtor shall be void and the ((licensee)) debt adjuster
shall return to the debtor the amount of all payments received from the debtor
or on ((his)) the debtor's behalf and not distributed to
creditors.
Sec. 4. RCW 18.28.100 and 1979 c 156 s 5 are each amended to read as follows:
Every contract between
a ((licensee)) debt adjuster 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 all ((of)) the ((licensee'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; and
(8) 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)) debt adjuster.
Sec. 5. RCW 18.28.110 and 1979 c 156 s 6 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)) attorney
general or ((his)) the attorney general's 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)) the creditor 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)) 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) Furnish the
director with all contracts, assignments, and forms as described in RCW
18.28.030 which are currently in use.))
Sec. 6. RCW 18.28.120 and 1967 c 201 s 12 are each amended to read as follows:
A ((licensee)) debt
adjuster 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 agent,)) 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 agent,)); or (((c)))
(b) 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. 7. RCW 18.28.130 and 1967 c 201 s 13 are each amended to read as follows:
Without limiting the
generality of the foregoing and other applicable laws, the ((licensee,
manager)) debt adjuster or an employee of ((a licensee))
the 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 or she 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. 8. RCW 18.28.150 and 1979 c 156 s 8 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)) the debt adjuster's
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. 9. RCW 18.28.165 and 1979 c 156 s 7 are each amended to read as follows:
For the purpose of
discovering violations of this chapter or securing information lawfully
required ((by him hereunder)) under this chapter, the ((director))
consumer protection division of the attorney general's office may at any
time((, either personally or by a person or persons duly designated by him,)):
Investigate the debt adjusting business and examine the books, accounts,
records, and files used therein((, of every licensee. For that purpose the
director and his duly designated representatives shall)); have free
access to the offices and places of business, books, accounts, papers, records,
files, safes, and vaults of all ((licensees. The director and all persons
duly designated by him may)) debt adjusters; and require the
attendance of and examine under oath all persons whomsoever whose testimony ((he
may require)) might be required relative to such debt adjusting
business or to the subject matter of any examination, investigation, or
hearing.
Sec. 10. RCW 18.28.190 and 1967 c 201 s 19 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)) adopted under this chapter or
any order or decision ((of the director hereunder, or any person who
operates as a debt adjuster without a license, shall be)) made under
this chapter, is guilty of a misdemeanor.
NEW SECTION. Sec. 11. The following acts or parts of acts are each repealed:
(1) RCW 18.28.020 and 1967 c 201 s 2;
(2) RCW 18.28.030 and 1985 c 7 s 18, 1975 1st ex.s. c 30 s 23, 1971 ex.s. c 266 s 6, & 1967 c 201 s 3;
(3) RCW 18.28.040 and 1967 c 201 s 4;
(4) RCW 18.28.045 and 1967 c 156 s 2;
(5) RCW 18.28.050 and 1967 c 201 s 5;
(6) RCW 18.28.060 and 1979 c 156 s 3, 1971 ex.s. c 292 s 20, 1967 ex.s. c 141 s 1, & 1967 c 201 s 6;
(7) RCW 18.28.070 and 1967 c 201 s 7;
(8) RCW 18.28.160 and 1967 c 201 s 16; and
(9) RCW 18.28.170 and 1979 c 156 s 9 & 1967 c 201 s 17.
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