BILL NUMBER: AB 350 AMENDED
BILL TEXT
AMENDED IN SENATE APRIL 5, 2010
AMENDED IN SENATE JUNE 23, 2009
AMENDED IN SENATE JUNE 18, 2009
AMENDED IN ASSEMBLY JUNE 1, 2009
AMENDED IN ASSEMBLY MARCH 31, 2009
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.
LEGISLATIVE COUNSEL'S DIGEST
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, 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 , signed
under penalty of perjury, 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 require a provider to submit
annual reports to the commissioner containing specified
information relating to its business in the previous calendar year.
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, and expand the
scope of the crime of perjury, 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
reimbursement.
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.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Division 21 (commencing with Section 60000) is added to
the Financial Code, to read:
DIVISION 21. DEBT SETTLEMENT SERVICES ACT
CHAPTER 1. SHORT TITLE
60000. This division shall be known and may be cited as the Debt
Settlement Services Act.
CHAPTER 2. DEFINITIONS
60001. As used in this division, the following definitions shall
apply:
(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.
(e) "Control" means the possession, direct or indirect, of the
power to direct or cause the direction of the management or policies
of a licensee, whether through the ownership of voting securities, by
contract, or otherwise. Control shall be presumed to exist if any
person or persons, directly or indirectly, owns, controls, holds with
the power to vote, or holds proxies representing, 10 percent or more
of the voting securities or other interest of any other licensee.
(f) "Debt settlement program" or "program" means a program or
strategy in which a provider furnishes debt settlement services.
(g) "Debt settlement services" means acting or offering to act as
an intermediary between an individual and one or more creditors of
the individual for the purpose of adjusting, settling, discharging,
reaching a compromise on, or obtaining a concession on the individual'
s unsecured debt or other unsecured obligation, in return for a fee
or other consideration, without receiving money from the individual
for distribution to the individual's creditors.
(h) "Department" means the Department of Corporations.
(f)
(i) "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 program.
(g)
(j) "Good faith" means honesty in fact and the
observance of reasonable standards of fair dealing.
(k) "Licensee" means any person licensed pursuant to this
division. "Licensee" does not include an employee regularly employed
by a licensee at the licensee's place of business.
(h)
(l) "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)
(m) "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)
(n) "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 in an attorney-client
relationship .
(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
individual.
(l)
(o) "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.
CHAPTER 3. GENERAL PROVISIONS
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
creditors.
(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.
(b) A financial institution under state or federal law, which is
limited to the following:
(1) Any bank or its agent, trust company, insurance company, or
industrial loan company doing business under the authority of or in
accordance with a license, certificate, or charter issued by the
United States or any state, district, territory, or commonwealth of
the United States that is authorized to transact business in this
state.
(2) A federally chartered savings and loan association, federal
savings bank, or federal credit union that is authorized to transact
business in this state.
(3) A savings and loan association, savings bank, or credit union
organized under the laws of this or any other state that is
authorized to transact business in this state.
(4) A person engaged solely in business, commercial, or
agricultural mortgage lending.
(5) A wholly owned service corporation of a savings and loan
association or savings bank organized under the laws of this state or
the wholly owned service corporation of a federally chartered
savings and loan association or savings bank that is authorized to
transact business in this state.
(c) A title insurer, escrow company, or other person
California licensed title insurer or escrow company in
good standing that provides bill paying services if the person
does not provide debt settlement services.
(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 when debt settlement services are provided in the
course of a loan origination .
(f) A nonprofit community service organization that fulfills the
requirements of Section 12104 and is exempt from the requirements of
Division 3 (commencing with Section 12000).
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 general rules and
regulations necessary to implement and
specific rulings, demands, orders, and findings necessary to
administer, implement, and enforce 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).
CHAPTER 4. LICENSING
60005. (a) No person shall offer or 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
General.
(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. accompanied by all of the
following:
(1) The sum of one thousand dollars ($1,000) as a fee for
investigating the application, the sum of not less than one thousand
dollars ($1,000) as an application fee, subject to adjustment under
Section 60007, and the cost of fingerprint processing. The
investigation fee and application fee are not refundable. Unused
application fee funds shall be used to cover the cost of the program.
(2) Evidence of a surety bond in the amount of fifty thousand
dollars ($50,000), which shall be maintained by the provider during
the term of the license.
(3) Financial statements prepared in accordance with generally
accepted accounting principles and reviewed by an independent,
third-party licensed accountant.
(b) As a substitute for the bond required in paragraph (2) of
subdivision (a), a licensee may file either of the following with the
commissioner in the same amount required under paragraph (2) of
subdivision (a):
(1) An irrevocable letter of credit, issued or confirmed by a bank
approved by the administrator, payable upon presentation of a
certificate by the administrator stating that the provider or its
agent has not complied with this division.
(2) Bonds or other obligations of the United States or guaranteed
by the United States or bonds or other obligations of this state or a
political subdivision of this state, to be deposited and maintained
with a bank approved by the administrator for this purpose.
(c) Upon licensure as a provider, the bond required under this
section shall be payable to the commissioner and issued by an insurer
authorized to do business in this state. A copy of the bond,
including any and all riders and endorsements executed subsequent to
the effective date of the bond, shall be filed with the commissioner
for review and approval within 10 days of execution. The bond shall
be used for the recovery of losses or damages incurred by individuals
as the result of a licensee's noncompliance with the requirements of
this division or for the recovery of expenses, fines, and fees
levied by the commissioner, a district attorney, city attorney, or
the Attorney General.
(d) The bond required under this section shall remain in force and
effect until the surety is released from liability by the
commissioner, or until the bond is canceled by the surety.
(e) A licensee shall maintain a minimum net worth of one hundred
thousand dollars ($100,000) at all times as evidenced by the
financial statement.
(f) A licensee shall annually file financial statements along with
the annual report to the commissioner required under Section
60029.5.
60007. (a) The commissioner shall set an annual deadline for the
submission of applications for licensure. The
Notwithstanding paragraph (1) of subdivision (a) of Section 60006,
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 commissioner.
(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. In the levying and collection of the
assessment, a licensee shall neither be assessed for, nor be
permitted to pay less than, one thousand dollars ($1,000) per year.
(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 , under penalty of perjury, as
true any material matter pursuant to this
submitted on the 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 , at a
minimum, 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 of each executive officer and director of the
applicant and each person that owns at least 10 percent of
the applicant. or controls, directly or indirectly, at
least 10 percent or more of the outstanding equity interests of the
applicant and any other information necessary for the investigation
pursuant to Section 60008.5.
(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, employees, 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)
(f) At the applicant's expense, via
pursuant to 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).
(g) Disclosure of common ownership by any person owning or
controlling, directly or indirectly, 10 percent or more of the
outstanding interests or equity securities in the applicant by the
following persons:
(1) Any person who advertises any service to assist consumers with
reducing or eliminating debt.
(2) Any person who provides banking or similar depository services
to consumers of debt settlement services providers.
(3) Any person, other than individuals employed by the applicant,
with whom the applicant contracts to provide debt settlement
services, or parts thereof, to consumers.
(h) An authorization for disclosure of financial records of the
applicant pursuant to Section 7473 of the Government Code.
(i) The name and contact information of the risk manager for
individual complaints as provided in Section 60026.
(j) A sample agreement and disclosures used by the applicant.
(h)
(k) Any other information that the commissioner
reasonably requires to determine whether to issue a license.
60008.5. (a) Upon filing the application and payment of fees
pursuant to paragraph (1) of subdivision (a) of Section 60006 and
approval of the bond pursuant to Section 60006, the commissioner
shall investigate and examine the following:
(1) The background and experience of the applicant and of the
partners or members owning or controlling, directly or indirectly, 10
percent or more of the outstanding interests if the applicant is a
partnership, association, or limited liability company.
(2) The background and experience of the applicant and officers,
directors, and persons owning or controlling, directly or indirectly,
10 percent or more of the outstanding equity securities or interests
if the applicant is a corporation, trust, or association, including
an unincorporated organization.
(b) If the commissioner determines that the applicant has
satisfied the provisions of this division and does not find facts
constituting reasons for denial as specified in Section 60011, the
commissioner shall issue and deliver a license to the applicant to
engage in business in accordance with the provisions of this
division.
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 proprietary and
personal information, including, but not limited to, financial
statements, sample agreements, fee schedules, and home addresses
supplied to the commissioner in connection with the application
for licensure shall be held confidential by the commissioner.
60010. An applicant or licensed provider shall notify the
department in writing at least 10 days prior to any change
in the information specified in paragraph (2) of subdivision
(b) of (a) of, or in 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) , (e),
(g), or (h) 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. any omission or
false statement of material fact or is 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.
general partner, member, or person owning or controlling,
directly or indirectly, 10 percent or more of the outstanding
interests or equity securities of the applicant has been convicted of
or pleaded nolo contendere to a crime, or suffered a civil judgment
or any administrative judgment by any public agency involving a
finding of fraud, deceit, or dishonesty or has violated state or
federal securities or consumer protection laws, or any regulatory
scheme of the state or has been convicted of any other offense
reasonably related to the qualifications, functions, or duties of a
person engaged in the business in accordance with the
provisions of this division.
(3) An applicant or any officer, director, general partner,
member, or person owning or controlling, directly or indirectly, 10
percent or more of the outstanding interests or equity securities of
the 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.
(9) An applicant or any officer, director, or general partner,
member, or person owning or controlling, directly or indirectly, 10
percent or more of the outstanding interests or equity securities of
the applicant has violated any provision of this division or the
rules or any order thereunder or any similar regulatory scheme of the
state or a foreign jurisdiction.
(c) The commissioner shall deny licensure if the application is
not accompanied by the fee established by the commissioner.
(d) The application shall be considered withdrawn within the
meaning of this section if the applicant fails to respond to a
written notification of a deficiency in the application within 90
days of the date of the notification.
60012. (a) The commissioner shall approve or deny an initial
license as a provider within 60 days after the receipt of
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 , the receipt of
criminal history background information
from the Department of Justice, and the payment of
required fees. Within 30 calendar 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 4.5 (commencing with Section
11340) 11400) of Part 1 of Division 3
of Title 2 of the Government Code).
60013. (a) A provider shall obtain a renewal of its license
annually.
(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.
60013. A license is not transferable or assignable without the
consent of the commissioner.
60013.5. No licensee shall provide debt settlement services in
this state under any other name, or through an Internet Web site
address other than those named in the license or except pursuant to a
currently effective written order of the commissioner authorizing
the other name or Internet Web site address.
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
that do not constitute providing debt settlement services .
60014.5. In any proceeding under this division, the burden of
proving an exemption or exception is upon the person claiming it.
CHAPTER 5. REGULATIONS
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
hours.
60015.5. (a) Every provider that offers a debt settlement program
to an individual shall have reasonable grounds to believe that the
individual is qualified for the debt settlement program and can
reasonably meet the requirements of the program on the basis of
information furnished by the individual after reasonable inquiry
concerning the individual's financial situation and needs, including
a financial analysis pursuant to Section 60016, and any other
information known by the provider.
(b) In the furtherance of subdivision (a), and pursuant to a
written policy, a provider shall consult with the individual and
consider the following:
(1) Whether the individual's monthly income exceeds basic living
expenses by an amount that permits the individual to meet the savings
goals of the program.
(2) Whether the individual's creditors are likely to agree to the
settlement of the individual's debts.
(3) Whether the individual is current or delinquent on debts.
(4) Any other consideration required by rule of the commissioner.
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 in not less than 12-point type
a written financial analysis specific to the individual. The
financial analysis shall be written in plain language and delivered
to the individual prior to the individual assenting to the agreement.
(2) Provide in not less than 12-point type 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 that
are necessary to complete the program.
(3) Based upon the completed financial analysis, make a
determination supported by the financial analysis that the
individual is qualified for a debt settlement program and that the
individual can reasonably meet the requirements of the program
pursuant to Section 60015.5 .
(4) Inform the individual in not less than 12-point type
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 creditors may continue to charge interest, late
fees, over the limit fees, and other fees and nonpayment of
debt may lead creditors to increase finance and other charges or
undertake collection activity, including litigation and
garnishment of wages .
(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 12-point type, in its
debt settlement program agreements:
"Complaints related to this agreement may be directed to the
Department of Corporations by calling (866) ASK-CORP or by logging on
to their Internet Web site at www.corp.ca.gov."
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
purposes.
(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)(1)).
(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) (a) of Section 60016 shall appear on one or
more screens that satisfy both all 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.
(3) The individual has not been required to submit personal
information, including information regarding debts, prior to
accessing the disclosures.
(e) At the time of providing the materials and agreement required
by subdivisions (a), (b), and (c) subdivision
(a) 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).
(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 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 ,
including an explanation of how this amount will be collected from
the indi vidual .
(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
applicable.
(F) The total amount of fees that may be charged under the
contract.
(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
agreement.
(C) The terms and conditions of the agreement modification
process.
(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.
(5) Contain a hold harmless clause excusing a provider's duties
under this division.
(6) Contain assignment of, or order for payment of, wages or other
assignment of compensation for services.
(7) Contain an acceleration provision not authorized under this
division.
(8) Contain an unconscionable provision.
(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.
60021. (a) A provider may charge one of the
following, the terms of which shall be clearly disclosed in the
agreement:
(1) With respect to an agreement that provides for a flat fee,
total fees shall not exceed 18 percent of the principal amount of the
debt enrolled in the debt settlement program which shall be
collected at a rate of no more than 1 percent of the principal amount
of debt per month, or if the program is less than 18 months in
length, in equal monthly payments for the term of the program. The
debtor may voluntarily accelerate or prepay any unpaid installment
payment of fees, and the provider may collect fees on a pro rata
basis once the provider has finalized settlements from any creditors.
(2) With respect to agreements in which fees are calculated as a
percentage of the amount saved by an individual, a provider may
charge the following:
(A) A fee for consultation, obtaining a credit report, and setting
up an account, in an amount not exceeding the lesser of four hundred
dollars ($400) or 4 percent of the debt in the program at the
inception of the program or a higher amount set forth in regulation.
(B) A monthly service fee, not to exceed fifty dollars ($50)
total, or a higher amount authorized by the commissioner, in any
month.
(C) A settlement fee that shall not exceed 30 percent of the
excess of the outstanding amount of each debt over the amount
actually paid to the creditor, as calculated at the time of
settlement. Settlement fees authorized under subparagraph (B) shall
become billable only as debts are settled.
(D) A provider shall not impose or receive fees under both
subparagraphs (A) and (B).
(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
60020.
(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
void.
(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. the provider makes
whatever adjustments in the account are necessary to correct the
error within 14 days of knowledge of the error.
60023. If an individual who has entered into a fee agreement
fails for 60 days to make payments pay fees
required by the agreement, a provider may terminate the
agreement on the 60th day if a 30-day notice and opportunity to
cure has been provided . The provider may not earn additional
fees or charge an individual a termination fee 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
program.
(3) The amount of the debt when the creditor agreed to the
settlement.
(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.
(e) A provider that receives an individual's monthly billing
statements from the individual's creditor shall provide the
individual with monthly statements of the individual's outstanding
debt.
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) Acquire any power of attorney other than to authorize 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 this division.
(2)
(3) Exercise or attempt to exercise a power of attorney
after an agreement has been cancelled or terminated.
(3)
(4) Initiate a transfer of funds to or from an
individual's bank or other financial institution, unless the transfer
is one of the following:
(A) A return of money to the individual.
(B) Before termination of an agreement, properly authorized by the
agreement and this division, and in compliance with other rules
and law governing direct debits to an individual's account,
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)
(5) 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)
(6) Make a representation that:
(A) The provider will furnish money to pay bills or prevent
attachments.
(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)
(7) 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,
(8) Employ an unconscionable or
deceptive act or practice, including the knowing
omission of any material information.
(8)
(9) 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)
(10) Require an individual participating in a debt
settlement program to utilize additional ancillary services.
(10)
(11) Receive financial incentives or additional
compensation based on the outcome of the debt settlement program in
excess of the fee cap.
(11)
(12) 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
following:
(A) A promissory note or other negotiable instrument other than a
check.
(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
institution.
(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
debt.
(13) Engage in the business of debt collection on behalf of an
individual's creditor.
(14) Engage in the business of debt buying for an individual
represented by the provider.
(c) This division does not authorize any person to engage in the
practice of law.
60026. (a) 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
individuals 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.
(b) Every provider shall have an employee to review internal
complaints pursuant to the process set forth in this section.
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. (a) 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 deceptive.
(b) No advertising shall be used after its use has been
disapproved by the commissioner and the licensee is notified in
writing of the disapproval.
(c) The commissioner may require licensees to maintain a file of
all advertising copy for a period of 90 days from the date of its
use. The file shall be available to the commissioner upon request.
(d) No licensee shall place an advertisement disseminated
primarily in this state for debt settlement services unless the
licensee discloses in the printed text of the advertisement, or the
oral text in the case of a radio or television advertisement, that
the licensee is licensed by the department pursuant to this division.
60029. (a) The Each licensee shall keep
and use books, accounts, and records in accordance with generally
accepted accounting practices and good business practice that will
enable the commissioner to determine if the licensee is complying
with the provisions of this division and with the rules and
regulations promulgated by the commissioner. Each licensee shall
maintain any other records as required by the commissioner.
(b) 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
(c) For the purpose of discovering
violations of this division or securing information required by the
commissioner in the administration and enforcement of this division,
the commissioner may investigate and examine once
every two at any time, but not less than once every
four years, in this state or elsewhere, by subpoena ,
report, 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. For the purposes of
examination, the commissioner and the commissioner's representatives
shall have access to the offices and places of business, books,
accounts, papers, records, and files of all these persons.
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 or provider the reasonable
expenses necessarily incurred to conduct the examination. The
commissioner may maintain an action for the recovery of expenses in
any court of competent jurisdiction.
(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.
(d) For the purpose of any investigation or proceeding under this
law, the commissioner or any officer designated by the commissioner
may administer oaths and affirmations, subpoena witnesses, compel
their attendance, take evidence, and require the production of any
books, papers, correspondence, memoranda, agreements, or other
documents or records that the commissioner deems relevant or material
to the inquiry. If the books, records, and supporting data are
located out of this state they shall be made available for
examination by the commissioner in this state within 10 days after a
written demand.
(e) A provider shall maintain all records for five years following
the last entry on a debt settlement transaction and shall enable the
commissioner to review the recordkeeping and reconcile each
individual debt settlement transaction with documentation maintained
in the individual's debt settlement file records. Failure to keep the
records for five years following the last entry shall authorize the
commissioner to assess and collect a penalty of up to ten thousand
dollars ($10,000) for each year that the records are not kept.
(c)
(f) 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 provider.
60029.5. (a) On or before March 15 of each year, beginning March
2012, each licensee shall file an annual report with the commissioner
pursuant to procedures that the commissioner shall establish by
rule. The licensee shall submit with the annual report a declaration
that conforms to Section 2015.5 of the Code of Civil Procedure, is
executed by an official authorized by the licensee, and that states
that the licensee complies with this section. The licensee's annual
report shall be kept confidential pursuant to Chapter 3.5 (commencing
with Section 6250) of Division 7 of Title 1 of the Government Code
and any regulations adopted thereunder. For the previous calendar
year, the report shall include the following:
(1) The total amount of debt for all individuals for whom a
licensee is providing debt settlement services, as of December 31.
(2) The total principal amount of debt of all individuals that
entered into agreements.
(3) The total number of individuals that entered into agreements.
(4) The total number of individuals with outstanding debt
settlement service agreements in California.
(5) The total number of debts settled by the provider.
(6) The total dollar amount of debts settled by the provider, as
follows:
(A) The dollar amount of the settled debt, as of the establishment
of the program.
(B) The dollar amount of the settled debt at the time of
settlement, without debtor concessions.
(C) The dollar amount of the settled debt with debtor concessions.
(7) The total amount of fees collected from California
individuals.
(8) Any other information required by rule.
(b) The commissioner shall prepare an annual consolidated report
of the reports submitted by licensees pursuant to subdivision (a) and
shall make the consolidated report available to the public.
60029.9. (a) It is unlawful for any person to knowingly alter,
destroy, mutilate, conceal, cover up, falsify, or make a false entry
in any record, document, or tangible object with the intent to
impede, obstruct, or influence the administration or enforcement of
any provision of this division.
(b) It is unlawful for any person to knowingly make an untrue
statement or omit to state a fact necessary in order to make the
statements made, in the light of the circumstances under which they
were made, not misleading to the commissioner during the course of
licensing, investigation, or examination, with the intent to impede,
obstruct, or influence the administration or enforcement of any
provision of this division.
60030. (a) The commissioner may enforce this division and rules
adopted under this division by taking one or more of the following
actions:
(1) Ordering a provider or a director, employee, or other
agent of a provider to desist and refrain from any violations.
any person to desist and refrain from engaging in debt
settlement services or from further violating this division.
(2) Ordering a provider or a any
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) Issuing a citation to a provider or any person in writing,
describing with particularity the basis of the citation. Each
citation may contain an order to desist and refrain and may include
any other orders, such as an assessment of an administrative penalty
pursuant to paragraph (4).
(3)
(4) 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)
(5) Prosecuting a civil action to do either or both of
the following:
(A) Enforce an order.
(B) Obtain restitution or an injunction or other equitable relief,
or both.
(b) If a person Any person who
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 shall be liable for a
civil penalty not exceeding ten thousand dollars ($10,000) for
each violation , which shall be assessed and recovered in a
civil action brought in the name of the people of the State of
California by the commissioner in any court of competent jurisdiction
.
(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.
(e) After the exhaustion of the review procedures provided for in
this section, the commissioner may apply to the appropriate superior
court for a judgment in the amount of the administrative penalty,
cost, fee, or any forfeiture of charge or fee in connection with the
transaction and order compelling the cited person to comply with the
order of the commissioner. The application, which shall include a
certified copy of the final order of the commissioner, shall
constitute a sufficient showing to warrant the issuance of the
judgment and order.
60030.5. (a) Whenever the commissioner believes from evidence
satisfactory to the commissioner that any person has violated or is
about to violate a provision of this division, or a provision of any
order, license, decision, demand, requirement, or any regulation
adopted pursuant to this division, the commissioner may, in the
commissioner's discretion, bring an action in the name of the people
of the State of California against that person to enjoin that person
from continuing that violation or doing any act in furtherance of the
violation or to enforce compliance with this law or any rule or
order thereunder. Upon a proper showing, a permanent or preliminary
injunction, restraining order, or writ of mandate shall be granted
and a receiver, monitor, conservator, or other designated fiduciary
or officer of the court may be appointed for the defendant or the
defendant's assets, or any other ancillary relief may be granted as
appropriate. A receiver, monitor, conservator, or other designated
fiduciary or officer of the court appointed by the superior court
pursuant to this section may, with the approval of the court,
exercise any or all of the powers of the defendant's officers,
directors, partners, trustees, or persons who exercise similar powers
and perform similar duties, including the filing of a petition for
bankruptcy. No action at law or in equity may be maintained by any
party against the commissioner, or a receiver, monitor, conservator,
or other designated fiduciary or officer of the court, by reason of
their exercising these powers or performing these duties pursuant to
the order of, or with the approval of, the superior court.
(b) If the commissioner determines that it is in the public
interest, the commissioner may include in any action authorized by
subdivision (a) a claim for ancillary relief, including, but not
limited to, a claim for restitution, disgorgement, or damages on
behalf of the persons injured by the act or practice constituting the
subject matter of the action. The commissioner may include in any
action authorized by subdivision (a) a claim for costs, including
reasonable attorney's fees and expenses, and the court shall have
jurisdiction to award that relief and any other additional relief.
60031. (a) In this section, "insolvent" means any of the
following:
(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 or revoke 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 or an officer, director, general partner,
manager, or person owning or controlling, directly or indirectly, 10
percent or more of the outstanding interests or equity securities of
the provider has committed a material violation of this
division or a rule or order of the commissioner under this
division or any similar regulatory scheme of this
state or a foreign jurisdiction, or has caused material
damage to individuals who have agreements with the provider or to the
public .
(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 or an officer, director, general partner,
manager, or person owning or controlling, directly or indirectly, 10
percent or more of the outstanding interests or equity securities of
the provider has been convicted of a crime that
involves dishonesty, fraud, or deceit, and that is substantially
or pleaded nolo contendere to any crime, or has been
held liable in any civil action by final judgment, or any
administrative judgment by any public agency, if that crime or civil
or administrative judgment involved any offense involving dishonesty,
fraud, or deceit, or any other offense reasonably related to
the qualifications, functions, or duties of the licensed activity.
(7) The provider has failed to comply with any demand, ruling, or
requirement of the commissioner made pursuant to and within the
authority of this division.
(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
4.5 (commencing with Section 11340)
11400) of Part 1 of Division 3 of Title 2 of the
Government Code).
(d) A provider shall not knowingly permit a person suspended or
barred under this section from engaging in any business activity
requiring a license under this division on the premises where the
provider is conducting business.
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
following:
(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
claim.
(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 order.
60038. A provider shall act in good faith in all matters under
this division.
60038.5. After an examination, investigation, or hearing under
this division, if the commissioner deems it of public interest or
advantage, the commissioner may certify a record to the proper
prosecuting official of the city, county, or city and county in which
the act complained of, examined, or investigated occurred. The data
and records shall be kept confidential pursuant to Chapter 3.5
(commencing with Section 6250) of Division 7 of Title 1 of the
Government Code and any regulations adopted thereunder.
60038.9. The rights, remedies, and penalties established by this
division are cumulative to the rights, remedies, or penalties
established under other laws. It is not necessary to exhaust
administrative remedies in order to pursue the civil remedies
provided for in this division. As applied to the penalties for acts
in violation of this division, the remedies provided by this division
are not exclusive and may be sought and employed in any combination
to enforce the provisions of this division.
60039. This division shall become operative on January 1, 2012.
CHAPTER 6. MISCELLANEOUS
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. The Legislature finds and declares that
Section 1 of this act imposes a limitation on the public's right of
access to the meetings of public bodies or the writings of public
officials and agencies within the meaning of Section 3 of Article I
of the California Constitution. Pursuant to that constitutional
provision, the Legislature makes the following findings to
demonstrate the interest protected by this limitation and the need
for protecting that interest:
In order to allow the Department of Corporations to fully
accomplish their goals, it is imperative to protect the interests of
those persons submitting information to the department to ensure that
any personal or sensitive business information that this act
requires those persons to submit is protected as confidential
information.
SEC. 2. SEC. 3. 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 Constitution.
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