INTRODUCED BY   Assembly Member Lieu
   (Coauthor: Senator Florez)

                        FEBRUARY 19, 2009

   An act to add Division 21 (commencing with Section 60000) to the
Financial Code, relating to debt.


   AB 350, as amended, Lieu. Debt management and settlement.
   Existing law, the Check Sellers, Bill Payers and Proraters Law,
provides for licensure and regulation by the Commissioner of
Corporations of persons engaged in, among other activities, the
business of receiving money as an agent of the obligor for the
purpose of paying bills, invoices, or accounts for the obligor.
   This bill would enact the Debt Settlement Services Act and would,
commencing January 1,  2011  2012  ,
provide for the licensing and regulation by the commissioner of
providers, defined as persons who provide, offer to provide, or agree
to provide debt settlement services, as defined, directly or through
others. The bill would require a provider to submit specified fees
and an application for licensure with the commissioner. An applicant,
and any person who signs an application on behalf of an applicant,
who knowingly misrepresents or submits any material matter that is
false, or a person who otherwise willfully violates a provision of
the act, would be guilty of a misdemeanor. The bill would specify the
conditions under which the commissioner may issue or deny licensure
as a provider, would require renewal of a provider's license on an
annual basis, and would require a provider to satisfy certain
requirements before entering into an agreement with an individual for
the provision of debt settlement services, including providing
specified disclosures. The bill would require an agreement for debt
settlement services to contain specified terms and would impose
limits on the fees charged by providers. The bill would prohibit
providers from engaging in specified practices. The bill would
authorize the commissioner to take enforcement actions against a
provider for violations of the bill's provisions and would also
authorize an injured individual to recover specified damages from a
provider that violates the bill's provisions. The bill would enact
other related provisions.
   Because the bill would create a new crime, it would impose a
state-mandated local program.
   The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
   This bill would provide that no reimbursement is required by this
act for a specified reason.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.


  SECTION 1.  Division 21 (commencing with Section 60000) is added to
the Financial Code, to read:



   60000.  This division shall be known and may be cited as the Debt
Settlement Services Act.

   60001.  As used in this division, the following definitions shall
   (a) "Agreement" means an agreement between a provider and an
individual for the performance of debt settlement services.
   (b) "Applicant" means any person who submits an application to the
department for the purpose of seeking licensure to become a debt
settlement provider.
   (c) "Commissioner" means the Commissioner of Corporations.
   (d) "Concessions" means assent to repayment of an unsecured debt
on terms more favorable to an individual than the terms of the
contract between the individual and a creditor.
   (e) "Debt settlement services" means services as an intermediary
between an individual and one or more creditors of the individual for
the purpose of obtaining concessions on behalf of the individual,
but without receiving money from the individual for distribution to
the individual's creditor.
   (f) "Financial analysis" means the review of an individual's
budget and income and expenses in order to make a determination about
the individual's qualification for a provider's debt settlement
   (g) "Good faith" means honesty in fact and the observance of
reasonable standards of fair dealing.
   (h) "Person" means an individual, corporation, business trust,
estate, trust, partnership, limited liability company, association,
joint venture, or any other legal or commercial entity. The term does
not include a public corporation, government, or governmental
subdivision, agency, or instrumentality.
   (i) "Principal amount of the debt" means the amount of a debt at
the time of the execution of the agreement.
   (j) "Program" means a program or strategy in which a provider
furnishes debt settlement services.
   (k) "Provider" means a person that provides, offers to provide, or
agrees to provide debt settlement services directly or through
others. "Provider" does not include either of the following:
   (1) The services of a person licensed to practice law in this
state, when the person renders services in the course of his or her
practice as an attorney-at-law.
   (2) The services of a person licensed as a certified public
accountant or a public accountant in this state, when the person
renders services in the course of his or her practice as a certified
public accountant or a public accountant.
   (3) A family member of an individual that negotiates financial
concessions, with or without compensation, from the creditors of the
   (l) "Record" means information that is inscribed on a tangible
medium or that is stored in an electronic or other medium and is
retrievable in perceivable form.

   60002.  This division shall not apply to the following persons or
their employees when the person or the employee is engaged in the
regular course of the person's business or profession:
   (a) A judicial officer, a person acting under an order of a court
or an administrative agency, or an assignee for the benefit of
   (b) A bank, bank holding company, or the subsidiary, agent, or
affiliate of either, or a credit union or other financial institution
licensed under state  or federal  law.
   (c) A title insurer, escrow company, or other person that provides
bill paying services if the person does not provide debt settlement
   (d) Financial planning services provided in a financial
planner-client relationship by a member of a financial planning
profession whose members the commissioner determines are licensed
under Chapter 3 (commencing with Section 25230) of Part 3 of Division
4 of the Corporations Code.
   (e) A person licensed or registered to originate loans secured by
real property.
   60003.  All fees collected by the commissioner pursuant to this
division shall be deposited in the State Treasury to the credit of
the State Corporations Fund. The administration of this division
shall be supported out of the State Corporations Fund upon
appropriation by the Legislature.
   60004.  The commissioner may adopt rules and regulations necessary
to implement this division in accordance with the provisions of the
Administrative Procedure Act (Chapter 3.5 (commencing with Section
11340) of Part 1 of Division 3 of Title 2 of the Government Code).

   60005.  (a) No person shall provide debt settlement services to an
individual who it reasonably should know resides in this state at
the time it agrees to provide the services, unless the provider is
licensed under this division.
   (b) The commissioner shall maintain and publicize a list of the
names of all licensed providers, which shall be published by the
commissioner within 180 days of the operative date of this division.
   60006.  (a) An application for licensure as a provider shall be in
a form prescribed by the commissioner.
   (b) Subject to adjustment of dollar amounts pursuant to
subdivision (a) of Section 60007, an application for licensure as a
provider shall be accompanied by the following:
   (1) The fee established by the commissioner.
   (2) Evidence of a surety bond or minimum coverage of insurance, in
an amount specified by the commissioner, which bond or insurance
shall be maintained by the provider during the term of the license.
The bond shall state that it is held for the benefit of the
individuals who contract for debt settlement services, and can be
claimed under by those individuals and by persons acting with respect
to this division on behalf of those individuals, including the
commissioner, a district attorney, city attorney, or the Attorney
   (3) Proof that the applicant has filed appropriate documents with
either the Secretary of State or the county in which the applicant is
located to conduct a business in California.
   60007.  (a) The commissioner shall set an annual deadline for the
submission of applications for licensure. The commissioner shall set,
prior to the annual application deadline, based on its estimates of
the cost of administering the program and the estimated number of
license applicants, an application fee. Sixty days after the
licensing deadline for the initial license, the commissioner shall
determine, if necessary, a surcharge to cover the estimated costs for
the remainder of the year, plus any deficit, if any, from the year
prior, for administering this division. The surcharge shall be
charged as a pro rata share to each applicant granted a license
during that year based on the number of active enrolled California
residents in that licensee's debt settlement program, with a
reasonable minimum and maximum charge as determined by the
   (b) The commissioner shall notify each licensee by mail of the
amount of the surcharge assessed against it and that the amount shall
be paid within 30 days thereafter. If the licensee fails to pay the
assessment on or before the 30th day upon which payment is due, the
commissioner may by order summarily suspend or revoke the license
issued to the licensee.
   (c) Any applicant that files its application after the deadline
shall be charged the initial application fee plus the pro rata
surcharge specified in subdivision (a), and the application fee for
that applicant shall not be adjusted to account for any partial year.

   60008.  Every application for licensure shall be signed by the
applicant and shall declare as true any material matter pursuant to
this application for licensure. Any applicant, and any person who
signs an application on behalf of an applicant, who knowingly
misrepresents or submits any material matter that is false is guilty
of a misdemeanor. The application form shall contain a statement
informing the applicant that a false or dishonest answer to a
question may be grounds for denial or subsequent suspension or
revocation of the applicant's license. An application for licensure
shall be in a form prescribed by the commissioner and shall include
the following:
   (a) The applicant's name, principal business address and telephone
number, and all other business addresses in this state, e-mail
addresses, and Internet Web site addresses.
   (b) All names under which the applicant conducts a debt settlement
business or a business for which licensure by the Department of
Corporations is required.
   (c) The address of each location in this state at which the
applicant shall provide debt settlement services or a statement that
the applicant will have no such location.
   (d) The name  and home address  of each executive
officer and director of the applicant and each person that owns at
least 10 percent of the applicant.
   (e) A statement describing, to the extent it is known or should be
known by the applicant, any material civil or criminal judgment
relating to financial fraud or misuse and any material administrative
or enforcement action by a governmental agency relating to financial
fraud or misuse in any jurisdiction against the applicant, any of
its officers, directors, owners, or agents.
   (f) Evidence of accreditation or certification by an independent
accrediting or certification organization approved by the
commissioner. If the applicant has not had the opportunity to obtain
accreditation or certification, the applicant shall provide proof of
registration with a recognized accrediting or certifying organization
along with a schedule under which it plans to obtain accreditation
or certification. The applicant shall obtain accreditation or
certification within six months of the date of its application. 
If an applicant fails to obtain accreditation as set forth in the
information provided to the   commissioner under this
subdivision,   the failure shall be a material violation of
this division and subject to subdivision (b) of Section 60031. 
   (g) At the applicant's expense, via the process in Section 60009,
the results of a national criminal history records check, including
fingerprints, provided pursuant to the Federal Bureau of
Investigation appropriation of Title II of Public Law 92-544 (28
U.S.C. Sec. 534) conducted within the immediately preceding 12
months, covering every executive officer of the applicant. The
commissioner shall be the authorized agency to receive information
regarding the results of the national criminal history records check
under Title II of Public Law 92-544 (28 U.S.C. Sec. 534).
   (h) Any other information that the commissioner reasonably
requires to determine whether to issue a license.
   60009.  (a) An applicant for licensure shall provide to the
commissioner, and the commissioner shall submit to the Department of
Justice, fingerprint images and related information required by the
Department of Justice of  all  applicants for licensure for
purposes of obtaining information as to the existence and content of
a record of state or federal convictions and state or federal arrests
and also information as to the existence and content of a record of
state or federal arrests for which the Department of Justice
establishes that the person is free on bail or on his or her own
recognizance pending trial or appeal.
   (b) When received, the Department of Justice shall forward to the
Federal Bureau of Investigation requests for federal  summary
 criminal history information received pursuant to this section.
The Department of Justice shall review the information returned from
the Federal Bureau of Investigation and compile and disseminate a
response to the Commissioner of Corporations.
   (c) The Department of Justice shall provide state and federal
responses to the commissioner pursuant to paragraph (1) of
subdivision (p) of Section 11105 of the Penal Code.
   (d) The commissioner may request from the Department of Justice
subsequent arrest notification service, as provided pursuant to
Section 11105.2 of the Penal Code, for a person described in
subdivision (a).
   (e) The Department of Justice shall charge a fee, to be paid by an
applicant for licensure, that is sufficient to cover the cost of
processing the request described in this section.
   (f) All information supplied to the commissioner in connection
with the application for licensure shall be held confidential by the
   60010.  An applicant or licensed provider shall notify the
department prior to any change in the information specified in
paragraph (2) of subdivision (b) of Section 60006 or in subdivision
(a)  , (b),  or (c) of Section 60008, or within 14 days
after any change in the information specified in subdivision  (d)
or  (e) of Section 60008, or any other information as required,
by rule, by the commissioner.
   60011.  (a) Except as otherwise provided in subdivisions (b) and
(c), the commissioner shall issue a certificate of licensure as a
provider to a person that complies with this division.
   (b) The commissioner may deny licensure for any of the following:
   (1) An application that contains information that is materially
erroneous or incomplete.
   (2) The applicant, an officer, director, or owner of the applicant
has been convicted of a crime, or suffered a civil judgment,
involving fraud, deceit, or dishonesty or the violation of state or
federal securities or consumer protection laws.
   (3) An applicant has made any false statement or representation to
the commissioner.
   (4) An applicant is or becomes insolvent.
   (5) An applicant refuses to reasonably comply with an
investigation or examination of the debt settlement service provider
by the commissioner.
   (6) An applicant has improperly withheld, misappropriated, or
converted funds received in the course of doing business.
   (7) An applicant has used fraudulent, coercive, or dishonest
practices, or demonstrated incompetence regarding debt settlement
services, or financial irresponsibility in this state or elsewhere.
   (8) An applicant has shown to have engaged in a pattern of failing
to perform services promised.
   (c) The commissioner shall deny licensure if the application is
not accompanied by the fee established by the commissioner.
   60012.  (a) The commissioner shall approve or deny an initial
license as a provider within 60 days after a complete application is
filed. In connection with a request pursuant to subdivision (h) of
Section 60008 for additional information, the commissioner may extend
the 60-day period for not more than 45 days. Within 10 business days
after denying an application, the commissioner, in a record, shall
inform the applicant of the reasons for the denial.
   (b) If the commissioner denies an application for licensure as a
provider or does not act on an application within the time prescribed
in subdivision (a), the applicant may appeal and request a hearing
pursuant to the California Administrative Procedure Act (Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title 2 of
the Government Code).
   60013.  (a) A provider shall obtain a renewal of its license
   (b) An application for renewal of licensure as a provider shall be
in a form prescribed by the commissioner and be filed no fewer than
30 and no more than 60 days before the license expires.
   (c) Application for renewal shall be accompanied by the fee
established by the commissioner in an amount reasonably necessary for
the administration of this division. The commissioner may, if
necessary, also include a surcharge to the licensure renewal fee that
shall be determined by the amount of the deficit, if any, for
reasonable expenses and costs incurred greater than the revenue
collected, in the administration of this division in the year
immediately preceding the renewal year. The surcharge shall be
charged to providers on a pro rata share based on the number of
California residents enrolled in the provider's debt settlement
services program.
   (d) The commissioner, by rule, may require a provider to submit
specific business information with the annual renewal application.
   60014.  A person or entity licensed as a provider under this
division shall be exempt from the requirements of Division 3
(commencing with Section 12000), except to the extent the person is
performing services and activities governed by Section 12000.

   60015.  A provider that is required to be licensed under this
division shall maintain a toll-free communication system, staffed at
a level that reasonably permits an individual to speak to a customer
service representative, as appropriate, during ordinary business
   60016.  (a) Before an individual assents to an agreement to engage
in a program, the provider shall do all of the following:
   (1) Prepare and provide a written financial analysis specific to
the individual.
   (2) Provide a written good faith estimate of the length of time it
will take to complete the program and a statement of the total
amount of debt owed to each creditor included in the program. The
estimate shall include a statement of the monthly savings goals for
the individual to complete the program.
   (3) Based upon the completed financial analysis, make a
determination that the individual is qualified for a debt settlement
program and that the individual can reasonably meet the requirements
of the program.
   (4)  Inform the individual in writing of all of the following:
   (A) The name and business address of the provider.
   (B) That some programs are not suitable for some individuals.
   (C) That the conduct of a program may negatively affect the
individual's credit rating or credit scores.
   (D) That nonpayment of debt may lead creditors to increase finance
and other charges or undertake collection activity, including
   (E) That unless the individual is insolvent, if a creditor settles
for less than the full amount of the debt, the program may result in
the creation of taxable income to the individual, even though the
individual does not receive any money.
   (F) That specific results cannot be predicted or guaranteed.
   (G) That a program requires an individual to meet certain savings
goals in order to maximize settlement results.
   (H) That a provider, who is not otherwise authorized or
professionally licensed, does not provide accounting or legal advice
to individuals.
   (I) That a provider does not receive compensation from an
individual's creditors, banks, or third-party collection agencies.
   (J) That a provider cannot force negotiations or settlements with
creditors but will advocate solely on behalf of an individual.
   (K) That if an individual terminates an agreement pursuant to
paragraph (1) of subdivision (b) of Section 60019, no additional fees
will be due.
   (L) That the use of debt settlement services may not stop a
creditor from filing or pursuing a lawsuit against an individual.
   (M) That the consumer may owe fees upon signing an agreement
whether or not any debts are reduced under the program.
   (b) The provider shall insert the following statement, in not less
than 10-point type, in its debt settlement program agreements:

   "Complaints related to this agreement may be directed to the
Department of Corporations by  telephone and its Internet Web
site address   calling (866) ASK-CORP or by logging on
to their Internet Web site at  ."

   60017.  (a) For purposes of this section, the following
definitions apply:
   (1) "Consumer" means an individual who seeks or obtains goods or
services that are used primarily for personal, family, or household
   (2) "Federal act" means the Electronic Signatures in the Global
and National Commerce Act (15 U.S.C. Sec.7001 et seq.).
   (b) A provider may satisfy the requirements of Section 60016,
60019, 60020, or 60024 by means of the Internet or other electronic
means if the provider obtains a consumer's consent in the manner
provided by Section 101(c)(1) of the federal act (15 U.S.C. Sec. 7001
   (c) The disclosures and materials required by Section 60016,
60019, 60020, or 60024 shall be presented in a form that is capable
of being printed and accurately reproduced for later reference.
   (d) With respect to disclosure by means of an Internet Web site,
the disclosure of the information required by subdivision (d) of
Section 60016 shall appear on one or more screens that satisfy both
of the following:
   (1) The screen contains no other information.
   (2) An individual shall be able to see the screen before
proceeding to assent to formation of a program.
   (e) At the time of providing the materials and agreement required
by subdivisions (a), (b), and (c) of Section 60016, Section 60019,
and Section 60024, a provider shall inform the individual  ,
pursuant to Section 60020,  that upon electronic, telephonic, or
written request, it will send the individual a written copy of the
materials, and shall comply with a request as provided in subdivision
   (f) If a provider is requested, before the expiration of 90 days
after a program is completed or terminated, to send a written copy of
the materials required by subdivisions (b) and (c) of Section 60016,
Section 60019, and Section 60024, the provider shall send them 
, pursuant to Section 60020,  at no charge within three
business days after the request, but the provider shall not be
required to comply with a request more than once per calendar month
or if it reasonably believes the request is made for purposes of
harassment. If a request is made more than 90 days after a program is
completed or terminated, the provider shall send within a reasonable
time a written copy of the materials requested.
   60018.  A provider shall maintain an Internet Web site and shall
disclose all of the following on the home page of its Internet Web
site or on a page that is clearly and conspicuously connected to the
home page by a link that clearly reveals its contents:
   (a) Its name, business address, telephone number, and e-mail
address, if any.
   (b) Its license number under this division and a link to the
department's Internet Web site.
   (c) All other disclosures required by law.
   60019.  (a) An agreement under this division shall satisfy all of
the following requirements:
   (1) Be in writing, dated, and signed by the individual.
   (2) Include the name of the individual and the address where the
individual resides.
   (3) Include the name, business address, and telephone number of
the provider and, if this does not include a street address in
California, the name and address of its California agent for service
of process.
   (4) Be delivered to the individual immediately upon formation of
the agreement. For purposes of this paragraph, delivery of an
electronic record occurs when it is sent to the individual and made
available in a format in which the individual may retrieve, save, and
print, and the individual is notified that it is available.
   (5) Include all disclosures required under Section 60016.
   (6) Disclose all of the following:
   (A) The list required under subdivision (a) of Section 60016.
   (B) The amount, and method of determining the amount, of all fees,
individually itemized, to be paid by the individual.
   (C) How the provider will comply with its obligations under
subdivision (a) of Section 60024.
   (D) That the individual may contact the  commissioner
 Department of Corporations  with any questions or
complaints regarding the provider.
   (7) Display the following provisions, which shall appear
prominently and clearly on the front page:
   (A) The total amount of the debt brought into the program.
   (B) The setup fee amount to be paid by the individual, if any.
   (C) The monthly fee to be paid by the individual, if any.
   (D) The estimated number of months for which a monthly fee is
required by the agreement.
   (E) An estimate of the total amount of fees reasonably anticipated
to be paid by the individual over the term of the agreement, as
   (F) The total amount of fees that may be charged under the
   (b) An agreement under this division shall provide the following:
   (1) That the individual has a right to terminate the agreement at
any time by giving the provider written or electronic notice.
Termination of the agreement becomes effective immediately upon
receipt by the provider, at which time all powers of attorney granted
by the individual to the provider are revoked and ineffective.
   (2) That the individual can cancel an agreement and receive a full
refund of any moneys paid to the provider before midnight of the
fifth business day after the individual assents to it. Notice of
cancellation is effective upon proof of sending the notice prior to
the deadline. Upon cancellation the provider shall refund all fees no
later than 10 business days from the date of cancellation.
   (3) That any power of attorney only authorizes the provider, as
reasonably necessary, to communicate with creditors for the purposes
of negotiating settlement offers and to initiate transfer of funds in
accordance with Section 60025.
   (4) That the provider shall notify the individual within three
business days after learning of a creditor's decision to cease final
negotiation with the provider. This notification shall include both
of the following:
   (A) The identity of the creditor.
   (B) The right of the individual to modify or terminate the
   (C) The terms and conditions of the agreement modification
   (c) An agreement shall not do any of the following:
   (1) Provide for application of the law of any jurisdiction other
than this state.
   (2) Except as permitted by the California Arbitration Act (Title 9
(commencing with Section 1280) of Part 3 of the Code of Civil
Procedure), contain a provision that modifies or limits otherwise
available forums or procedural rights, including the right to trial
by jury, that are generally available to the individual under law
other than as provided in this division.
   (3) Contain a provision that restricts the individual's remedies
under this division or under another law of this state.
   (4) Contain a provision that does any of the following:
   (A) Limits or releases the liability of any person for not
performing the agreement or for violating this division.
   (B) Indemnifies any person for liability arising under the
agreement or this division.
   (C) Require the individual to be responsible for payment of
attorney's fees of the provider.
                                                     (d) All rights
and obligations specified in subdivision (b) exist even if not
provided in the agreement. A provision in an agreement that violates
subdivision (b) or (c) is void.
   60020.  If a provider communicates with an individual primarily in
a language other than English, the provider shall furnish a
translation into the other language of the disclosures and documents
required by this division.
   60021.  (a) The total of all fees charged by a provider shall not
exceed 20 percent of the principal amount of debt which includes a
maximum total set up fee specific to the individual of up to 5
percent. The provider's total fees must be spread over at least half
the length of the program or until offers of settlement by creditors
are obtained on at least half of the debts enrolled to the provider.
In no case shall total fees exceed 20 percent of the principal debt,
and the total fees plus settlements cannot exceed the principal
amount of the debt. However, this section shall not preclude an
individual from voluntarily prepaying fees earned by the provider.
   (b) A provider shall not impose, directly or indirectly, a fee or
other charge on an individual or receive money from or on behalf of
an individual for debt settlement services except as permitted by
this section.
   (c) A provider shall not impose charges or receive payment for
debt settlement services until the provider and the individual have
signed an agreement that complies with Sections 60016, 60019, and
   (d) If a payment to a provider by an individual under this
division is dishonored, a provider may impose a reasonable charge on
the individual, not to exceed fifteen dollars ($15). Any charge
pursuant to this subdivision shall be limited to one per payment due.

   60022.  (a) If a provider imposes a fee or other charge or
receives money or other payments not authorized by Section 60021, the
agreement is void and the individual may recover as provided in
Section 60032.
   (b) If a provider is not licensed as required by this division
when an individual assents to an agreement, the agreement shall be
   (c) If an agreement is void pursuant to subdivision (a) or (b),
the provider shall not have a claim against the individual for breach
of contract or for restitution.
   (d) Subdivision (a) shall not apply to an error in computation in
the amount of an authorized fee if (1) the provider shows by a
preponderance of evidence that the violation was not willful and
resulted from a good faith error, notwithstanding the maintenance of
procedures reasonably adapted to avoid that error, and (2) within 60
days of discovering the error the provider notifies the individual of
the error and makes whatever adjustments in the account are
necessary to correct the error.
   60023.  If an individual who has entered into a fee agreement
fails for 60 days to make payments required by the agreement, a
provider may terminate the agreement. The provider may not earn
additional fees on or after termination.
   60024.  (a) A provider shall provide the accounting required by
subdivision (b), as follows:
   (1) Upon settlement of a debt.
   (2) Within five business days after a request by an individual,
but the provider shall not be required to comply with more than one
request in any calendar month.
   (3) Upon cancellation or termination of an agreement.
   (b) A provider, in a record, shall provide the following to each
individual for whom it has established a program if a creditor has
agreed to accept as payment in full an amount less than the principal
amount of the debt owed by the individual:
   (1) The total amount and terms of the settlement.
   (2) The amount of the debt when the individual assented to the
   (3) The amount of the debt when the creditor agreed to the
   (4) The fee, and the calculation of the fee, if any, charged to
the individual based on a percentage of the settlement of debt or
based on a percentage of the savings realized by the individual.
   (c) A provider shall maintain records for each individual for whom
it provides debt settlement services for five years after the final
payment made by the individual. A provider shall produce a copy of
those records and provide them to the individual within a reasonable
time after a request for the records. The provider may use electronic
or other means of storage of the records.
   (d) A provider shall provide the individual with a copy of the
written documentation from the creditor of a debt that has been
successfully settled, when available to the provider.
   60025.  (a) A provider shall not, directly or indirectly, do any
of the following:
   (1) Exercise or attempt to exercise a power of attorney not
authorized by the agreement.
   (2) Exercise or attempt to exercise a power of attorney after an
agreement has been cancelled or terminated.
   (3) Initiate a transfer of funds to or from an individual's bank
or other financial institution, unless the transfer is one of the
   (A) A return of money to the individual.
   (B) Before termination of an agreement, properly authorized by the
agreement and this division, for payment of a fee.
   (C) A transaction that has been expressly approved in writing, or
recorded statement, by the individual after the transaction has been
presented to the individual for approval.
   (D) A transaction expressly directed by the individual to the bank
or financial institution.
   (4) Settle a debt or lead an individual to believe that a payment
to a creditor is in settlement of a debt to the creditor unless, at
the time of settlement, the individual or provider receives a
certification or confirmation by the creditor that the payment is in
full settlement, or is part of a payment plan that is in full
settlement, of the debt.
   (5) Make a representation that:
   (A) The provider will furnish money to pay bills or prevent
   (B) Payment of a certain amount will guarantee satisfaction of a
certain amount or range of indebtedness.
   (C) Participation in a program will or may prevent litigation,
garnishment, attachment, repossession, foreclosure, eviction, or loss
of employment.
   (6) Represent that it is a not-for-profit entity unless it is
organized and properly operating as a not-for-profit entity 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 Internal Revenue Service.
   (7) Knowingly employ an unfair, unconscionable, or deceptive act
or practice, including the knowing omission of any material
   (8) Fail to respond to and research any complaint initiated by an
individual within 20 days of receipt of the complaint and resolve
each complaint in a prompt and reasonable manner.
   (9) Require an individual participating in a debt settlement
program to utilize additional ancillary services.
   (10) Receive financial incentives or additional compensation based
on the outcome of the debt settlement program in excess of the fee
   (11) Pay referral fees to creditors or potential creditors who
refer new clients to the provider.
   (b) If a provider furnishes debt settlement services to an
individual, the provider may not, directly or indirectly, do any of
the following:
   (1) Purchase a debt or obligation of the individual.
   (2) Receive from or on behalf of the individual either of the
   (A) A promissory note or other negotiable instrument other than a
   (B) A postdated check.
   (3) Lend money or provide credit to the individual, except as a
deferral of a fee at no additional expense to the individual, or
advance a settlement payment for the individual at no additional
expense to the individual.
   (4) Obtain a mortgage or other security interest from any person
in connection with the services provided to the individual.
   (5) Force or otherwise require an individual to deposit his or her
funds into a specific financial institution. A provider must also
state to the individual that the individual is free to choose any
FDIC-insured  or NCUA-insured  financial institution.
However, this shall not prevent a provider from furnishing the
individual with a list of FDIC-insured  or NCUA-insured 
financial institutions from which the individual may choose or
explaining the benefits of using any particular financial
   (6) Except as permitted by federal and California law, disclose
the identity or identifying information of the individual or the
identity of the individual's creditors, except to:
   (A) The commissioner, upon proper demand.
   (B) A creditor of the individual, to the extent necessary to
secure the cooperation of the creditor in a program.
   (C) The extent necessary to administer the program.
   (7) Except as otherwise provided in Section 60021, provide the
individual less than the full benefit of a compromise of a debt
arranged by the provider.
   (8) 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 settlement services or educational services
concerning personal finance.
   (9) Furnish legal advice or perform legal services, unless the
person furnishing that advice to or performing those services for the
individual is licensed to practice law.
   (10) Advise individuals to stop payment on any of the accounts
being handled by the provider.
   (11) Hold an individual's funds in trust.
   (12) Include in any debt settlement services agreement any secured
   (c) This division does not authorize any person to engage in the
practice of law.
   60026.  Each provider shall establish an internal formal complaint
policy that creates a process for the provider to receive, review,
and address or resolve formal complaints internally. The availability
of this process shall be communicated in writing to individuals
enrolled in the provider's program. This policy shall include a
provision that all consumers who file a formal complaint shall
receive a response from the provider within 20 days from the provider'
s receipt of the complaint. The provider shall maintain a file for
each formal complaint that documents the complaint, its handling, and
the resolution, if any, of the complaint and the provider shall
disclose the file to the commissioner upon request.
   60027.  No later than 30 days after a provider has been served
with notice of a civil action for violation of this division by or on
behalf of an individual who resides in this state at either the time
of an agreement or the time the notice is served, the provider shall
notify the commissioner in a record that it has been sued.
   60028.  Any advertising concerning debt settlement services shall
not contain any false, misleading, or deceptive statement or omit to
state any fact necessary to make the statements made, in light of
circumstances under which they are made, not false, misleading, or
   60029.  (a) The commissioner may act on his or her own initiative
or in response to complaints and may receive complaints, take action
to obtain voluntary compliance with this division, refer cases to the
Attorney General, or any other law enforcement agency, and seek or
provide remedies as provided in this division.
   (b) The commissioner may investigate and examine once every two
years, in this state or elsewhere, by subpoena or otherwise, the
activities, books, accounts, and records of a person that provides or
offers to provide debt settlement services, or a person to which a
provider has delegated its obligations under an agreement or under
this division, to determine compliance with this division.
Information that identifies individuals who have agreements with the
provider shall not be disclosed to the public. In connection with the
investigation, the commissioner may do either of the following:
   (1) Charge the person the reasonable expenses necessarily incurred
to conduct the examination.
   (2) Require or permit a person to file a statement under oath as
to all the facts and circumstances of a matter to be investigated.
   (c) The commissioner may enter into cooperative arrangements with
any other federal or state agency having authority over providers and
may exchange with any of those agencies information about a
provider, including information obtained during an examination of the
   60030.  (a) The commissioner may enforce this division and rules
adopted under this division by taking one or more of the following
   (1) Ordering a provider or a director, employee, or other agent of
a provider to desist and refrain from any violations.
   (2) Ordering a provider or a person that has caused a violation to
correct the violation, including making restitution of money or
property to a person aggrieved by a violation.
   (3) Imposing an administrative penalty not exceeding two thousand
five hundred dollars ($2,500) for each violation on a provider or a
person that has caused a violation.
   (4) Prosecuting a civil action to do either or both of the
   (A) Enforce an order.
   (B) Obtain restitution or an injunction or other equitable relief,
or both.
   (b) If a person knowingly violates or knowingly authorizes,
directs, or aids in the violation of a final order issued under
paragraph (1) or (2) of subdivision (a), the commissioner may impose
an administrative penalty not exceeding ten thousand dollars
($10,000) for each violation.
   (c) The commissioner may recover the reasonable costs of enforcing
this division under subdivisions (a) and (b), including attorney's
fees based on the hours reasonably expended and the hourly rates for
attorneys of comparable experience in the community.
   (d) In determining the amount of a penalty to impose under
subdivision (a) or (b), the commissioner shall consider the
seriousness of the violation, the good faith of the violator, any
previous violations by the violator, the deleterious effect of the
violation on the public, the net worth of the violator, and any other
factor the commissioner considers relevant to the determination of
the civil penalty.
   (e) Any penalties or other amounts recovered by the commissioner
under this section shall be paid into the State Corporations Fund.
   60031.  (a) In this section, "insolvent" means any of the
   (1) The inability to pay debts in the ordinary course of business
other than as a result of good faith dispute.
   (2) Being unable to pay debts as they become due.
   (3) Being insolvent within the meaning of the federal bankruptcy
law (11 U.S.C. Sec. 101 et seq.).
   (b) The commissioner may suspend, revoke, or deny renewal of a
provider's license if:
   (1) A fact or condition exists that, if it had existed when the
licensee applied for licensure as a provider, would have been a
reason for denying the license.
   (2) The provider has committed a material violation of this
division or a rule or order of the commissioner under this division.
   (3) The provider is insolvent.
   (4) The provider or an employee or affiliate of the provider has
refused to permit the commissioner to make an examination authorized
by this division, failed to comply with paragraph (2) of subdivision
(b) of Section 60029 within 15 days after request, or made a material
misrepresentation or omission in complying with paragraph (2) of
subdivision (b) of Section 60029.
   (5) The provider has not responded within a reasonable time and in
an appropriate manner to communications from the commissioner.
   (6) The provider has been convicted of a crime that involves
dishonesty, fraud, or deceit, and that is substantially related to
the qualifications, functions, or duties of the licensed activity.
   (c) If the commissioner suspends or revokes a provider's license,
the provider may appeal and request a hearing pursuant to the
California Administrative Procedure Act (Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
   60032.  (a) If an agreement is void pursuant to subdivision (a) or
(b) of Section 60022, the individual may recover in a civil action
all money paid by or on behalf of the individual pursuant to the
agreement, in addition to the recovery under subdivision (b).
   (b) An individual with respect to whom a provider violates this
division may recover the following in a civil action from the
provider and any person that caused the violation:
   (1) Compensatory damages for injury caused by the violation.
   (2) Reasonable attorney's fees and costs.
   60033.  If an act or practice of a provider violates both this
division and Chapter 5 (commencing with Section 17200) of Part 2 of
Division 7 of the Business and Professions Code, an individual may
not recover under both for the same act or practice.
   60034.  (a) An action brought under this division shall be
commenced within three years after the latest of one of the
   (1) The last transmission of money to a provider by or on behalf
of the individual.
   (2) The date on which the individual discovered or reasonably
should have discovered the facts giving rise to the individual's
   (b) The period prescribed in paragraph (2) of subdivision (a)
shall be tolled during any period during which the provider or, if
different, the defendant has materially misrepresented information
required by this division to be disclosed to the individual, if the
information so misrepresented is material to the establishment of the
liability of the defendant under this division.
   60035.  This division shall not apply to a debt settlement
agreement between an individual and a provider for the performance of
debt settlement services that was entered into prior to the
operative date of this division.
   60036.  The commissioner may make general rules and regulations
and specific rulings, demands, and findings for the enforcement of
this division.
   60037.  Any person, including a partner or officer of an entity
that is a licensee, who willfully violates any provision of this
division or who willfully violates any rule or order adopted pursuant
to this division, shall, upon conviction, be punished by a fine of
not more than ten thousand dollars ($10,000), or by imprisonment in a
county jail for not more than one year, or by both that fine and
imprisonment. However, no person may be imprisoned for the violation
of any rule or order unless he or she had knowledge of the rule or
   60038.  A provider shall act in good faith in all matters under
this division.
   60039.  This division shall become operative on January 1,
 2011.   2012. 

   60050.  The provisions of this division are severable. If any
provision of this division or its application is held invalid, that
invalidity shall not affect other provisions or applications that can
be given effect without the invalid provision or application.
  SEC. 2.  No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California