HCS SCS SB 216 -- DEBT SETTLEMENT PROVIDERS

SPONSOR:  Scott (Cunningham)

COMMITTEE ACTION:  Voted "do pass" by the Committee on Financial
Institutions by a vote of 13 to 0.

This substitute changes the laws regarding debt settlement
providers.  In its main provisions, the substitute:

(1)  Requires a debt settlement provider to only provide debt
settlement services for compensation under a debt settlement
plan;

(2)  Defines "debt settlement services" as the negotiation,
settlement, or alteration of the terms of payment of a consumer's
unsecured debt with the consumer's creditor with or without
receiving or holding money from a consumer for the purpose of
distributing that money to the creditor;

(3)  Exempts debt adjusters from the definition of "debt
settlement provider" if the debt settlement service it provides
to a debtor contemplates that creditors will settle debts for
less than the principal amount of the debt enrolled in a debt
settlement plan;

(4)  Prohibits the provider from charging more than 4% of the
principal amount of the debt for an enrollment or set-up fee and
more than 20% of the principal amount of the debt in aggregate
fees.  The balance will be collected in equal payments over a
period determined by the provider as long as the last payment is
due no sooner than the median month in the plan.  Upon completion
of the plan, the aggregate fees cannot exceed the amount the plan
reduces the principal amount of the debt originally enrolled in
the plan.  The debtor may voluntarily prepay fees, and the
provider may collect fees on a pro rata basis once the provider
obtains reasonable offers of settlement from any creditors;

(5)  Requires the provider to maintain a separate trust account
for handling the funds with a depository institution insured by
the Federal Deposit Insurance Corporation when providers
establish plans where the provider receives or holds the debtor's
money for distribution;

(6)  Requires a provider to carry aggregate liability insurance
in the amount of at least $1 million; and

(7)  Authorizes the Attorney General to enforce the provisions of
the substitute and allows injunctions and orders for restitution
to be issued for violations.

FISCAL NOTE:  No impact on state funds in FY 2010, FY 2011, and
FY 2012.

PROPONENTS:  Supporters say that the bill will regulate debt
settlement providers and help consumers who are having financial
difficulties.

Testifying for the bill was Senator Scott.

OPPONENTS:  There was no opposition voiced to the committee.

Missouri House of Representatives
95th General Assembly, 1st Regular Session
Last Updated November 17, 2009 at 9:26 am