I 

108TH CONGRESS 

1ST SESSION H. R. 3331

To amend the Consumer Credit Protection Act to protect consumers from 

unfair and deceptive practices by organizations providing debt counseling, 

debt consolidation, or debt settlement services, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

OCTOBER 17, 2003

Ms. CARSON of Indiana (for herself, Mr. OWENS, Mr. LIPINSKI, Mrs. 

NAPOLITANO, Mrs. JONES of Ohio, Mr. RYAN of Ohio, Mr. DAVIS of Illinois, Mr. HINCHEY, Mr. THOMPSON of Mississippi, Ms. LEE, and Mr. 

SANDERS) introduced the following bill; which was referred to the Committee on Financial Services 

A BILL

To amend the Consumer Credit Protection Act to protect 

consumers from unfair and deceptive practices by organizations providing debt counseling, debt consolidation, or 

debt settlement services, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Debt Counseling, Debt 

5 Consolidation, and Debt Settlement Practices Improve6 ment Act of 2003’’. 
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1 SEC. 2. DEBT COUNSELING, DEBT CONSOLIDATION, AND 

2 DEBT SETTLEMENT PRACTICES. 

3 The Consumer Credit Protection Act (15 U.S.C. 

4 1601 et seq.) is amended by adding at the end the fol5 lowing new title: 

6 ‘‘TITLE X—DEBT COUNSELING, 

7 DEBT CONSOLIDATION, AND 

8 DEBT SETTLEMENT PRAC9 TICES 

10 ‘‘SEC. 1001. SHORT TITLE; TABLE OF CONTENTS. 

11 ‘‘(a) SHORT TITLE.—This title may be cited as the 

12 ‘‘Debt Counseling, Debt Consolidation, and Debt Settle13 ment Practices Act’’. 

14 ‘‘(b) TABLE OF CONTENTS.—The table of contents 

15 for this title is as follows:

‘‘TITLE X—DEBT COUNSELING, DEBT CONSOLIDATION, AND 

DEBT SETTLEMENT PRACTICES 

‘‘Sec. 1001. Short title; table of contents. 

‘‘Sec. 1002. Definitions. 

‘‘Sec. 1003. Prohibited practices. 

‘‘Sec. 1004. Debt counseling, debt consolidation, or debt settlement organization contracts. 

‘‘Sec. 1005. Right to cancel contract. 

‘‘Sec. 1006. Noncompliance with this title. 

‘‘Sec. 1007. Registration of organization. 

‘‘Sec. 1008. Civil liability. 

‘‘Sec. 1009. Administrative enforcement. 

‘‘Sec. 1010. Statute of limitations. 

‘‘Sec. 1011. Relation to State law. 

‘‘Sec. 1012. Effective date.

16 ‘‘SEC. 1002. DEFINITIONS. 

17 ‘‘For purposes of this title, the following definitions 

18 shall apply: 
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1 ‘‘(1) COMMISSION.—The term ‘Commission’ 

2 means the Federal Trade Commission. 

3 ‘‘(2) CONSUMER.—The term ‘consumer’ means 

4 an individual. 

5 ‘‘(3) CREDITOR.—The term ‘creditor’ has the 

6 same meaning as in section 103. 

7 ‘‘(4) DEBT CONSOLIDATION.—The term ‘debt 

8 consolidation’ means a transaction involving a loan 

9 or other extension of credit to a consumer for a pur10 pose that at least includes the repayment in full of 

11 2 or more existing loans or extensions of credit to 

12 the consumer, without regard to whether any of such 

13 existing loans or extensions of credit is in troubled 

14 condition. 

15 ‘‘(5) DEBT CONSOLIDATION ORGANIZATION.—

16 The term ‘debt consolidation organization’—

17 ‘‘(A) means any person who uses any in18 strumentality of interstate commerce or the 

19 mails to sell, provide, or perform (or represent 

20 that such person can or will sell, provide, or 

21 perform) any service, in return for the payment 

22 of money or other valuable consideration, for 

23 the express or implied purpose of—

24 ‘‘(i) engaging in a debt consolidation 

25 transaction with a consumer; or 
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1 ‘‘(ii) providing any advice or assist2 ance to any consumer with regard to any 

3 activity or service which results in or may 

4 result in a debt consolidation transaction; 

5 ‘‘(B) includes any nonprofit organization 

6 which is exempt from taxation under section 

7 501(c)(3) of the Internal Revenue Code of 1986 

8 other than an organization described in sub9 paragraph (C); and 

10 ‘‘(C) does not include—

11 ‘‘(i) any creditor, with respect to any 

12 consumer, to the extent the creditor is as13 sisting the consumer to restructure any 

14 debt owed by the consumer to the creditor; 

15 ‘‘(ii) any depository institution (as 

16 that term is defined in section 3 of the 

17 Federal Deposit Insurance Act) or any 

18 Federal or State credit union (as those 

19 terms are defined in section 101 of the 

20 Federal Credit Union Act), or any affiliate 

21 or subsidiary of such a depository institu22 tion or credit union; 

23 ‘‘(iii) any government-sponsored en24 terprise (as defined in section 1404(e)(1) 
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1 of the Financial Institutions Reform, Re2 covery, and Enforcement Act of 1989); 

3 ‘‘(iv) any attorney at law, if providing 

4 debt counseling, debt consolidation, or debt 

5 settlement services are incidental to, and 

6 not the principal business of, the practice 

7 of such attorney; 

8 ‘‘(v) any certified public accountant, if 

9 providing debt counseling, debt consolida10 tion, or debt settlement services are inci11 dental to, and not the principal business 

12 of, the accounting practice of such ac13 countant; 

14 ‘‘(vi) any title insurer or abstract 

15 company, while doing escrow business; or 

16 ‘‘(vii) a judicial officer or person act17 ing under court order. 

18 ‘‘(6) DEBT COUNSELING ORGANIZATION.—The 

19 term ‘debt counseling organization’ means any per20 son who—

21 ‘‘(A) uses any instrumentality of interstate 

22 commerce or the mails to provide education, 

23 counseling to individuals or groups, or debt 

24 management services to help consumers manage 

25 money and credit; and 
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1 ‘‘(B) is not a debt consolidation organiza2 tion or a debt settlement organization. 

3 ‘‘(7) DEBT SETTLEMENT.—The term ‘debt set4 tlement’ means any action or negotiation initiated or 

5 taken by or on behalf of any consumer with any 

6 creditor of the consumer for the purpose of obtain7 ing debt forgiveness of a portion of the credit ex8 tended by the creditor to the consumer, or troubled 

9 debt restructuring on terms that are more favorable 

10 to the consumer. 

11 ‘‘(8) DEBT SETTLEMENT ORGANIZATION.—The 

12 term ‘debt settlement organization’—

13 ‘‘(A) means any person who uses any in14 strumentality of interstate commerce or the 

15 mails to sell, provide, or perform (or represent 

16 that such person can or will sell, provide, or 

17 perform) any service, in return for the payment 

18 of money or other valuable consideration, for 

19 the express or implied purpose of—

20 ‘‘(i) providing any debt settlement 

21 service to, for, or on behalf of a consumer; 

22 or 

23 ‘‘(ii) providing any advice or assist24 ance to any consumer with regard to any 

25 activity or service described in clause (i); 
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1 ‘‘(B) includes any nonprofit organization 

2 which is exempt from taxation under section 

3 501(c)(3) of the Internal Revenue Code of 1986 

4 other than an organization described in sub5 paragraph (C); and 

6 ‘‘(C) does not include—

7 ‘‘(ii) any creditor, with respect to any 

8 consumer, to the extent the creditor is as9 sisting the consumer to restructure any 

10 debt owed by the consumer to the creditor; 

11 ‘‘(iii) any depository institution (as 

12 that term is defined in section 3 of the 

13 Federal Deposit Insurance Act) or any 

14 Federal or State credit union (as those 

15 terms are defined in section 101 of the 

16 Federal Credit Union Act), or any affiliate 

17 or subsidiary of such a depository institu18 tion or credit union; 

19 ‘‘(iv) any attorney at law, if providing 

20 debt counseling, debt consolidation, or debt 

21 settlement services are incidental to, and 

22 not the principal business of, the practice 

23 of such attorney; 

24 ‘‘(v) any certified public accountant, if 

25 providing debt counseling, debt consolida-
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1 tion, or debt settlement services are inci2 dental to, and not the principal business 

3 of, the accounting practice of such ac4 countant; 

5 ‘‘(vi) any title insurer or abstract 

6 company, while doing escrow business; or 

7 ‘‘(vii) a judicial officer or person act8 ing under court order. 

9 ‘‘SEC. 1003. PROHIBITED PRACTICES.

10 ‘‘(a) IN GENERAL.—A debt counseling organization, 

11 a debt consolidation organization and a debt settlement 

12 organization may not—

13 ‘‘(1) unreasonably disclose information to third 

14 parties regarding amounts owed by any consumer; 

15 ‘‘(2) make any fraudulent, deceptive, or mis16 leading representation to obtain information about 

17 any consumer, to solicit business with any consumer, 

18 or in connection with providing services for or on be19 half of any consumer; 

20 ‘‘(3) use any unconscionable means to obtain a 

21 contract with any consumer collect or attempt to col22 lect a debt owed to the seller; 

23 ‘‘(4) advertise, announce, solicit, or otherwise 

24 represent as free or available without charge (includ25 ing by use of other words of similar meaning) any 
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1 debt counseling, debt consolidation, or debt settle2 ment service for which the organization charges the 

3 consumer or receives consideration from a third 

4 party (including a related party); or 

5 ‘‘(5) engage in any unfair or deceptive act or 

6 practice in connection with any debt counseling, debt 

7 consolidation, or debt settlement service provided to 

8 any consumer, in offering or establishing any term 

9 or condition in any contract with a consumer for 

10 providing any such service, or any advertisement or 

11 solicitation relating to any such service. 

12 ‘‘(b) UNDISCLOSED RELATIONSHIP BETWEEN A

13 DEBT COUNSELING ORGANIZATION AND A DEBT CON14 SOLIDATION OR DEBT SETTLEMENT ORGANIZATION.—No 

15 debt counseling organization may offer any service to any 

16 consumer, or provide any advice or referral to any con17 sumer, with respect to any debt consolidation organization 

18 or any debt settlement organization of which the debt 

19 counseling organization is an affiliate, for which it is an 

20 agent, or with which the debt counseling organization has 

21 an on-going business relationship or any reciprocal refer22 ral agreement, unless the debt counseling organization—

23 ‘‘(1) fully discloses, orally and in writing, the 

24 existence of the affiliation, agency, or business rela-
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1 tionship or reciprocal referral agreement to the con2 sumer; 

3 ‘‘(2) fully discloses, orally and in writing, the 

4 detail of the financial relationship between the debt 

5 counseling organization and the debt consolidation 

6 or debt settlement organization, including the extent 

7 to which the debt counseling organization benefits fi8 nancially from any services or advice provided by the 

9 counseling organization to the consumer that results 

10 in any debt consolidation or debt settlement con11 tract, agreement, or transaction between the con12 sumer and the debt consolidation or debt settlement 

13 organization; and 

14 ‘‘(3) such other information as the Commission 

15 may require in regulations. 

16 ‘‘(c) DIVERSION OF PERIODIC PAYMENTS FROM

17 CREDITOR TO DEBT SETTLEMENT ORGANIZATION.—

18 ‘‘(1) OFFER OR ADVICE TO CONSUMER.—No 

19 debt counseling organization, debt consolidation or20 ganization, or debt settlement organization may sug21 gest or advise any consumer to stop making any 

22 payment or any portion of any payment, whether 

23 periodic or otherwise, due from the consumer to any 

24 creditor under the terms of a loan or extension of 

25 credit from the creditor to the consumer for the pur-
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1 pose of facilitating debt settlement negotiations with 

2 such creditor by or on behalf of the consumer, unless 

3 the organization provides full written disclosure to 

4 the consumer, and obtains a signed statement from 

5 the consumer that the consumer has read and un6 derstood the disclosure, that—

7 ‘‘(A) such action is or may be a violation 

8 of the terms of the agreement between the con9 sumer and the creditor if the creditor has not 

10 agreed in writing to a new payment arrange11 ment; 

12 ‘‘(B) the failure to make timely payments 

13 on any loan or extension of credit in accordance 

14 with the terms of the contract—

15 ‘‘(i) will be, or is likely to be, reported 

16 as a late payment or a nonpayment to a 

17 consumer reporting agency; 

18 ‘‘(ii) will, or is likely to have, an ad19 verse effect on the creditworthiness of the 

20 consumer such that the consumer may 

21 have difficulty obtaining credit; and 

22 ‘‘(C) if the consumer has not missed or 

23 failed to make payments to the creditor, such 

24 action may not be necessary in order for the 
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1 consumer to obtain debt settlement from the 

2 creditor. 

3 ‘‘(2) ACCEPTANCE OF PAYMENTS DIVERTED

4 FROM A CREDITOR.—No debt settlement organiza5 tion may accept or hold any payments from a con6 sumer intended for a creditor after a settlement has 

7 been reached between the creditor and the debt set8 tlement organization beyond a reasonable amount of 

9 time necessary solely for payment-processing pur10 poses. 

11 ‘‘(d) PAYMENT IN ADVANCE.—

12 ‘‘(1) IN GENERAL.—No debt counseling organi13 zation, debt consolidation organization, or debt set14 tlement organization may collect any payment from 

15 a consumer prior to the payment being earned as 

16 specifically defined in the contract between the par17 ties. 

18 ‘‘(2) FULL OR FINAL PAYMENT.—No debt 

19 counseling organization, debt consolidation organiza20 tion, or debt settlement organization may charge or 

21 receive full or final payment for the performance of 

22 any service which such organization has agreed to 

23 perform for any consumer before such service is fully 

24 performed by both parties in accordance with the 

25 contract between the parties. 
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1 ‘‘SEC. 1004. DEBT COUNSELING, DEBT CONSOLIDATION, OR 

2 DEBT SETTLEMENT ORGANIZATION CON3 TRACTS. 

4 ‘‘(a) WRITTEN CONTRACTS REQUIRED.—No services 

5 that require any payment, voluntary donation, fee, or 

6 other consideration may be provided by any debt coun7 seling organization, debt consolidation organization, or 

8 debt settlement organization for any consumer unless a 

9 written and dated contract (for the purchase of such serv10 ices) which meets the requirements of subsection (b) has 

11 been signed by the consumer. 

12 ‘‘(b) TERMS AND CONDITIONS OF CONTRACT.—No 

13 contract referred to in subsection (a) meets the require14 ments of this subsection unless such contract includes (in 

15 writing)—

16 ‘‘(1) the terms and conditions of payment, in17 cluding—

18 ‘‘(A) a reasonable estimate of all payments 

19 and fees to be made by the consumer to the 

20 debt counseling organization, debt consolidation 

21 organization, or debt settlement organization or 

22 to any other person over the term of the con23 tract, including a maximum amount; and 

24 ‘‘(B) the amount of any monthly or other 

25 periodic payment required under the contract to 

26 any such organization or other person, the 
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1 number of such monthly or other periodic pay2 ments, and the terms applicable with respect to 

3 such payments and any late payment of, or de4 fault on, any such amount; 

5 ‘‘(2) a full and detailed description of the serv6 ices to be performed by the debt counseling organi7 zation, debt consolidation organization, or debt set8 tlement organization for the consumer, including—

9 ‘‘(A) all guarantees of performance; and 

10 ‘‘(B) an estimate of—

11 ‘‘(i) the date by which the perform12 ance of the services (to be performed by 

13 the organization or any other person) will 

14 be complete; or 

15 ‘‘(ii) the length of the period nec16 essary to perform such services; 

17 ‘‘(3) the name and principal business address of 

18 the debt counseling organization, debt consolidation 

19 organization, or debt settlement organization; 

20 ‘‘(4) a conspicuous statement in bold face type, 

21 in immediate proximity to the space reserved for the 

22 consumer’s signature on the contract, which reads as 

23 follows: ‘‘You may cancel this contract without pen24 alty or obligation at any time before midnight of the 

25 3rd business day after the date on which you signed 
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1 the contract. See the attached notice of cancellation 

2 form for an explanation of this right.’’; and 

3 ‘‘(5) no charges or fees may be imposed by the 

4 debt counseling organization, debt consolidation or5 ganization, or debt settlement organization for any 

6 activities or services undertaken on behalf of the 

7 consumer by the organization before the end of the 

8 3-business-day period beginning on the date the con9 tract is signed, if the consumer exercises the right 

10 to cancel the contract before the end of such period. 

11 ‘‘SEC. 1005. RIGHT TO CANCEL CONTRACT. 

12 ‘‘(a) IN GENERAL.—Any consumer may cancel any 

13 contract with any debt counseling organization, debt con14 solidation organization, or debt settlement organization 

15 without penalty or obligation by notifying the organization 

16 of the consumer’s intention to do so at any time before

17 midnight of the 3rd business day which begins after the 

18 date on which the contract or agreement between the con19 sumer and the organization is executed or would, but for 

20 this subsection, become enforceable against the parties. 

21 ‘‘(b) CANCELLATION FORM AND OTHER INFORMA22 TION.—Each contract shall be accompanied by a form, in 

23 duplicate, which has the heading ‘Notice of Cancellation’ 

24 and contains in bold face type the following statement:
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1 ‘You may cancel this contract, with2 out any penalty or obligation, at any time 

3 before midnight of the 3rd day which be4 gins after the date the contract is signed 

5 by you. 

6 ‘To cancel this contract, mail or de7 liver in person a signed, dated copy of 

8 this cancellation notice, or any other 

9 written notice to [ name of debt coun10 seling organization, debt consolidation 

11 organization, or debt settlement 

12 organization ] at [ address of such 

13 organization ] before midnight on 

14 [ date ] 

15 ‘I hereby cancel this transaction, 

16 [ date ] 

17 [ purchaser’s signature ].’.

18 ‘‘(c) CONSUMER COPY OF CONTRACT REQUIRED.—

19 Any consumer who enters into any contract with any debt 

20 counseling organization, debt consolidation organization, 

21 or debt settlement organization shall be given, by the orga22 nization—

23 ‘‘(1) a copy of the completed contract and the 

24 disclosure statement required under section 1004; 

25 and 
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1 ‘‘(2) a copy of any other document the organi2 zation requires the consumer to sign, 

3 at the time the contract or the other document is signed. 

4 ‘‘(d) RETENTION OF CONTRACT RECORDS.—Any 

5 debt counseling organization, debt consolidation organiza6 tion, and debt settlement organization shall maintain a 

7 copy of the contract signed by the consumer for not less 

8 than 3 years after the date the services provided under 

9 the contract have been fully performed, together with the 

10 complete name, address, and phone number of the con11 sumer at the time the contract became effective. 

12 ‘‘SEC. 1006. NONCOMPLIANCE WITH THIS TITLE. 

13 ‘‘(a) CONSUMER WAIVERS INVALID.—Any waiver by 

14 any consumer of any protection provided by or any right 

15 of the consumer under this title— 

16 ‘‘(1) shall be treated as void; and 

17 ‘‘(2) may not be enforced by any Federal or 

18 State court or any other person. 

19 ‘‘(b) ATTEMPT TO OBTAIN WAIVER.—Any attempt 

20 by any person to obtain a waiver from any consumer of 

21 any protection provided by or any right of the consumer 

22 under this title shall be treated as a violation of this title. 

23 ‘‘(c) CONTRACTS NOT IN COMPLIANCE.—Any con24 tract for services which does not comply with the applica25 ble provisions of this title—
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1 ‘‘(1) shall be treated as void; and 

2 ‘‘(2) may not be enforced by any Federal or 

3 State court or any other person. 

4 ‘‘SEC. 1007. REGISTRATION OF ORGANIZATION. 

5 ‘‘Any person who owns or controls a debt counseling 

6 organization, debt consolidation organization, or debt set7 tlement organization shall register the organization 

8 (whether or not the organization is licensed as a debt 

9 counseling organization, debt consolidation organization, 

10 or debt settlement organization in any State) with the Sec11 retary of the Treasury not later than the end of the 180-

12 day period beginning on the later of—

13 ‘‘(A) the date of enactment of the Debt 

14 Counseling, Debt Consolidation, and Debt Set15 tlement Practices Improvement Act of 2003; or 

16 ‘‘(B) the date on which the organization is 

17 established. 

18 ‘‘(2) FORM AND MANNER OF REGISTRATION.—

19 Subject to the requirements of subsection (b), the 

20 Secretary of the Treasury shall prescribe, by regula21 tion, the form and manner for registering a debt 

22 counseling organization, debt consolidation organiza23 tion, or debt settlement organization pursuant to 

24 paragraph (1) which may be consistent with the reg25 istration requirements for money transmitting busi-
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1 nesses under section 5130 of title 31, United States 

2 Code. 

3 ‘‘(3) ORGANIZATIONS REMAIN SUBJECT TO

4 STATE LAW.—This section shall not be construed as 

5 superseding any requirement of State law relating to 

6 debt counseling organizations, debt consolidation or7 ganizations, or debt settlement organizations oper8 ating in such State, except to the extent provided in 

9 section 1011. 

10 ‘‘(4) FALSE AND INCOMPLETE INFORMATION.—

11 The filing of false or materially incomplete informa12 tion in connection with the registration of a debt 

13 counseling organization, debt consolidation organiza14 tion, or debt settlement organization shall be consid15 ered as a failure to comply with the requirements of 

16 this section. 

17 ‘‘(b) CONTENTS OF REGISTRATION.—The registra18 tion of a debt counseling organization, debt consolidation 

19 organization, or debt settlement organization under sub20 section (a) shall include the following information: 

21 ‘‘(1) The name and location of the organization. 

22 ‘‘(2) The name and address of each person 

23 who—

24 ‘‘(A) owns or controls the organization; 
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1 ‘‘(B) is a director or officer of the organi2 zation; or 

3 ‘‘(C) otherwise participates in the conduct 

4 of the affairs of the organization. 

5 ‘‘(3) Such other information as the Federal 

6 Trade Commission may require. 

7 ‘‘(c) CIVIL PENALTY FOR FAILURE TO COMPLY

8 WITH REGISTRATION REQUIREMENTS.—

9 ‘‘(1) IN GENERAL.—Any person who fails to 

10 comply with any requirement of this section or any 

11 regulation prescribed under this section shall be lia12 ble to the United States for a civil penalty of $5,000 

13 for each such violation. 

14 ‘‘(2) CONTINUING VIOLATION.—Each day a vio15 lation described in paragraph (1) continues shall

16 constitute a separate violation for purposes of such 

17 paragraph. 

18 ‘‘(3) ASSESSMENTS.—Any penalty imposed 

19 under this subsection shall be assessed and collected 

20 by the Secretary of the Treasury in the manner pro21 vided in section 5321 of title 31, United States 

22 Code. 

23 ‘‘SEC. 1008. CIVIL LIABILITY. 

24 ‘‘(a) LIABILITY ESTABLISHED.—Any person who 

25 fails to comply with any provision of this title with respect 
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1 to any other person shall be liable to such person in an 

2 amount equal to the sum of the amounts determined 

3 under each of the following paragraphs: 

4 ‘‘(1) ACTUAL DAMAGES.—The greater of—

5 ‘‘(A) the amount of any actual damage 

6 sustained by such person as a result of such 

7 failure; or 

8 ‘‘(B) any amount paid by the person to the 

9 debt counseling organization, debt consolidation 

10 organization, or debt settlement organization. 

11 ‘‘(2) GENERAL DAMAGES.—

12 ‘‘(A) INDIVIDUAL ACTIONS.—In the case of 

13 any action by an individual, such additional 

14 amount as the court may allow. 

15 ‘‘(B) CLASS ACTIONS.—In the case of a 

16 class action, the sum of—

17 ‘‘(i) the aggregate of the amount 

18 which the court may allow for each named 

19 plaintiff; and 

20 ‘‘(ii) the aggregate of the amount 

21 which the court may allow for each other 

22 class member, without regard to any min23 imum individual recovery. 

24 ‘‘(3) ATTORNEYS’ FEES.—In the case of any 

25 successful action to enforce any liability under para-
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1 graph (1) or (2), the costs of the action, together 

2 with reasonable attorneys’ fees. 

3 ‘‘(b) FACTORS TO BE CONSIDERED IN AWARDING

4 GENERAL DAMAGES.—In determining the amount of any 

5 liability of any debt counseling organization, debt consoli6 dation organization, or debt settlement organization under 

7 subsection (a)(2), the court shall consider, among other 

8 relevant factors—

9 ‘‘(1) the frequency and persistence of non10 compliance by the organization; 

11 ‘‘(2) the nature of the noncompliance; 

12 ‘‘(3) the extent to which such noncompliance 

13 was intentional; and 

14 ‘‘(4) in the case of any class action, the number 

15 of consumers adversely affected. 

16 ‘‘SEC. 1009. ADMINISTRATIVE ENFORCEMENT. 

17 ‘‘(a) FEDERAL TRADE COMMISSION.—

18 ‘‘(1) IN GENERAL.—Except as provided in sub19 section (b), compliance with the requirements im20 posed under this title with respect to debt counseling 

21 organizations, debt consolidation organizations, and 

22 debt settlement organizations shall be enforced 

23 under the Federal Trade Commission Act by the 

24 Federal Trade Commission. 
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1 ‘‘(2) VIOLATIONS OF THIS TITLE TREATED AS

2 VIOLATIONS OF FEDERAL TRADE COMMISSION

3 ACT.—

4 ‘‘(A) IN GENERAL.—For the purpose of 

5 the exercise by the Federal Trade Commission 

6 of the Commission’s functions and powers 

7 under the Federal Trade Commission Act, any 

8 violation of any requirement or prohibition im9 posed under this title with respect to debt coun10 seling organizations, debt consolidation organi11 zations, and debt settlement organizations shall 

12 constitute an unfair or deceptive act or practice 

13 in commerce in violation of section 5(a) of the 

14 Federal Trade Commission Act. 

15 ‘‘(B) ENFORCEMENT AUTHORITY UNDER

16 OTHER LAW.—All functions and powers of the 

17 Federal Trade Commission under the Federal 

18 Trade Commission Act shall be available to the 

19 Commission to enforce compliance with this 

20 title by any person subject to enforcement by 

21 the Federal Trade Commission pursuant to this 

22 subsection, including the power to enforce the 

23 provisions of this title in the same manner as 

24 if the violation had been a violation of any Fed25 eral Trade Commission trade regulation rule, 
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1 without regard to whether the debt counseling 

2 organization, debt consolidation organization, or 

3 debt settlement organization—

4 ‘‘(i) is engaged in commerce; or 

5 ‘‘(ii) meets any other jurisdictional 

6 tests in the Federal Trade Commission 

7 Act. 

8 ‘‘(b) CIVIL PENALTIES.—

9 ‘‘(1) PENALTY AUTHORIZED.—The Federal 

10 Trade Commission may impose a civil penalty on 

11 any debt counseling organization, debt consolidation 

12 organization, or debt settlement organization that 

13 violates any provision of this title other than section 

14 1007. 

15 ‘‘(2) MAXIMUM AMOUNT LIMITATION.—The 

16 amount of any civil money penalty imposed under 

17 paragraph (1) shall not exceed—

18 ‘‘(A) in the case of any person who know19 ingly or recklessly violates this title, the greater 

20 of—

21 ‘‘(i) the amount (not to exceed 

22 $100,000) of the debt of the consumer 

23 that was subject to debt counseling, debt 

24 consolidation, or debt settlement; or 

25 ‘‘(ii) $25,000; and 
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1 ‘‘(B) in the case of any person who neg2 ligently violates this title, $2000. 

3 ‘‘(3) CONTINUING VIOLATIONS.—Each day a 

4 violation continues under this title shall be treated 

5 as a separate violation. 

6 ‘‘(4) TIME LIMITATIONS FOR ASSESSMENTS

7 AND COMMENCEMENT OF CIVIL ACTIONS.—

8 ‘‘(A) ASSESSMENTS.—The Federal Trade 

9 Commission may assess a civil penalty under 

10 this subsection at any time before the end of 

11 the 6-year period beginning on the date of the 

12 violation with respect to which the penalty is 

13 assessed.

14 ‘‘(B) CIVIL ACTIONS.—The Commission 

15 may commence a civil action to recover a civil 

16 penalty assessed under this subsection at any 

17 time before the end of the 2-year period begin18 ning on the date the penalty was assessed in 

19 any court with jurisdiction. 

20 ‘‘(5) CRIMINAL PENALTY NOT EXCLUSIVE OF

21 CIVIL PENALTY.—A civil money penalty may be im22 posed under this subsection with respect to any vio23 lation of this title (other than section 1007) notwith24 standing the fact that a criminal penalty is imposed 

25 with respect to the same violation. 
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1 ‘‘(6) PATTERN OF NEGLIGENT ACTIVITY.—If 

2 any debt counseling organization, debt consolidation 

3 organization, or debt settlement organization en4 gages in a pattern of negligent violations of any pro5 vision of this title (other than section 1007), or any 

6 regulation prescribed under this title, the Federal 

7 Trade Commission may, in addition to any penalty 

8 imposed under paragraph (2)(B) with respect to any 

9 such violation, impose a civil money penalty of not 

10 more than $50,000 on such organization. 

11 ‘‘(7) PROCEDURAL PROVISIONS.—

12 ‘‘(A) AUTHORITY TO MODIFY OR REMIT

13 PENALTY.—The Federal Trade Commission 

14 may compromise, modify, or remit any penalty 

15 which the Commission may assess or has al16 ready assessed under this subsection. 

17 ‘‘(B) MITIGATING FACTORS.—In deter18 mining the amount of any penalty imposed 

19 under this subsection, the Commission shall 

20 take into account the appropriateness of the 

21 penalty with respect to—

22 ‘‘(i) the size of financial resources and 

23 good faith of the organization charged; 

24 ‘‘(ii) the gravity of the violation; 
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1 ‘‘(iii) the history of previous viola2 tions; and 

3 ‘‘(iv) such other matters as justice 

4 may require. 

5 ‘‘(C) APPROPRIATENESS OF PENALTY NOT

6 REVIEWABLE.—In any civil action under para7 graph (4)(B), the validity and appropriateness 

8 of the penalty shall not be subject to review. 

9 ‘‘(D) DISBURSEMENT.—All penalties col10 lected under authority of this paragraph shall 

11 be deposited into the Treasury. 

12 ‘‘(E) REGULATIONS.—The Federal Trade 

13 Commission shall prescribe regulations, after 

14 notice and opportunity for a hearing under sec15 tion 553 of title 5, United States Code, estab16 lishing such procedures as may be necessary to 

17 carry out this subsection. 

18 ‘‘(c) STATE ACTION FOR VIOLATIONS.—

19 ‘‘(1) AUTHORITY OF STATES.—In addition to 

20 such other remedies as are provided under State 

21 law, whenever the chief law enforcement officer of a 

22 State, or an official or agency designated by a State, 

23 has reason to believe that any person has violated or 

24 is violating this title, the State—
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1 ‘‘(A) may bring an action to enjoin such 

2 violation; 

3 ‘‘(B) may bring an action on behalf of its 

4 residents to recover damages for which the per5 son is liable to such residents under section 409 

6 as a result of the violation; and 

7 ‘‘(C) in the case of any successful action 

8 under subparagraph (A) or (B), shall be award9 ed the costs of the action and reasonable attor10 ney fees as determined by the court. 

11 ‘‘(2) RIGHTS OF COMMISSION.—

12 ‘‘(A) NOTICE TO COMMISSION.—The State 

13 shall serve prior written notice of any civil ac14 tion under paragraph (1) upon the Federal 

15 Trade Commission and provide the Commission 

16 with a copy of its complaint, except in any case 

17 where such prior notice is not feasible, in which 

18 case the State shall serve such notice imme19 diately upon instituting such action. 

20 ‘‘(B) INTERVENTION.—The Commission 

21 shall have the right—

22 ‘‘(i) to intervene in any action re23 ferred to in subparagraph (A); 

24 ‘‘(ii) upon so intervening, to be heard 

25 on all matters arising in the action; and 
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1 ‘‘(iii) to file petitions for appeal. 

2 ‘‘(3) INVESTIGATORY POWERS.—For purposes 

3 of bringing any action under this subsection, nothing 

4 in this subsection shall prevent the chief law enforce5 ment officer, or an official or agency designated by 

6 a State, from exercising the powers conferred on the 

7 chief law enforcement officer or such official by the 

8 laws of such State to conduct investigations or to 

9 administer oaths or affirmations or to compel the at10 tendance of witnesses or the production of documen11 tary and other evidence. 

12 ‘‘(4) LIMITATION.—Whenever the Federal 

13 Trade Commission has instituted a civil action for 

14 violation of this title, no State may, during the pend15 ency of such action, bring an action under this sec16 tion against any defendant named in the complaint 

17 of the Commission for any violation of this title that 

18 is alleged in that complaint. 

19 ‘‘SEC. 1010. STATUTE OF LIMITATIONS. 

20 ‘‘(a) IN GENERAL.—Any action to enforce any liabil21 ity under this title may be brought before the end of the 

22 5-year period beginning on the date on which the occur23 rence of the violation is discovered or reasonably should 

24 have been discovered by the exercise of due diligence. 
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1 ‘‘(b) WILLFUL MISREPRESENTATION.—The limita2 tions period prescribed in subsection (a) shall be tolled 

3 during any period during which a defendant has materially 

4 and willfully misrepresented any information required 

5 under this title to be disclosed to an individual, and the 

6 information so misrepresented is material to the establish7 ment of the liability of the defendant to that individual 

8 under this title.’’. 

9 ‘‘SEC. 1011. RELATION TO STATE LAW. 

10 ‘‘No requirement or prohibition may be imposed 

11 under the laws of any State with respect to any subject 

12 matter regulated under this title. 

13 ‘‘SEC. 1012. EFFECTIVE DATE. 

14 ‘‘This title shall apply after the end of the 6-month 

15 period beginning on the date of the enactment of the Debt 

16 Counseling, Debt Consolidation, and Debt Settlement

17 Practices Improvement Act of 2003, except with respect 

18 to contracts entered into by a debt counseling organiza19 tion, debt consolidation organization, or debt settlement 

20 organization before the end of such period.’’. 

21 SEC. 3. STUDY OF DEBT CONSOLIDATION AND DEBT SET22 TLEMENT INDUSTRY. 

23 (a) STUDY REQUIRED.—The Federal Trade Commis24 sion and the Board of Governors of the Federal Reserve 

25 System shall jointly conduct a study of—
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1 (1) the benefits and detrimental effects of the 

2 activities of debt consolidation organizations and 

3 debt settlement organizations for consumers and 

4 creditors generally, and the economy, including the 

5 extent to which such activities have contributed to a 

6 substantial decline in the total amount of household 

7 debt and the average amount of debt per household; 

8 and 

9 (2) the extent to which such organizations are 

10 affiliates of creditors, or maintain formal or informal 

11 relationships with 1 or more creditors in providing 

12 debt consolidation or debt settlement services. 

13 (b) REPORT.—Before the end of the 1-year period be14 ginning on the date of the enactment of this Act, the Fed15 eral Trade Commission and the Board of Governors of the 

16 Federal Reserve System shall jointly submit a report to 

17 the Congress containing the findings and conclusions of 

18 the Commission and the Board pursuant to the study con19 ducted pursuant to subsection (a), together with such rec20 ommendations for legislative or administrative action as 

21 the Commission and the Board may determine to be ap22 propriate. 

23 (c) DEFINITIONS.—For purposes of this section, the 

24 terms ‘‘creditor’’, ‘‘debt consolidation organization’’, and 
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1 ‘‘debt settlement organization’’ have the same meaning as 

2 in the amendment made by section 2.

Æ