I 

111TH CONGRESS 

2D SESSION H. R. 5387 

To amend the Consumer Credit Protection Act to provide for regulation 

of debt settlement services, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 25, 2010 

Mr. GUTIERREZ (for himself, Ms. MOORE of Wisconsin, and Mr. ELLISON) introduced the following bill; which was referred to the Committee on Financial Services 

A BILL 

To amend the Consumer Credit Protection Act to provide 

for regulation of 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 Settlement Con5 sumer Protection Act of 2010’’. 

6 SEC. 2. REGULATION OF DEBT SETTLEMENT SERVICES. 

7 (a) IN GENERAL.—The Consumer Credit Protection 

8 Act (15 U.S.C. 1601 et seq.) is amended by adding at 

9 the end the following: 


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1 ‘‘TITLE X—DEBT SETTLEMENT 

2 SERVICES 

‘‘Sec. 1001. Definitions. 

‘‘Sec. 1002. Required acts. 

‘‘Sec. 1003. Prohibited acts. 

‘‘Sec. 1004. Fees. 

‘‘Sec. 1005. Consumer settlement accounts. 

‘‘Sec. 1006. Cancellation of contract. 

‘‘Sec. 1007. Obligation of good faith. 

‘‘Sec. 1008. Invalidation of contracts. 

‘‘Sec. 1009. Advertising, marketing, and communication practices. 

‘‘Sec. 1010. Rulemaking by Federal Trade Commission. 

‘‘Sec. 1011. Civil liability. 

‘‘Sec. 1012. Enforcement by Federal Trade Commission. 

‘‘Sec. 1013. Action by States. 

‘‘Sec. 1014. Statute of limitations. 

‘‘Sec. 1015. Relation to State law. 

3 ‘‘SEC. 1001. DEFINITIONS. 

4 ‘‘In this title: 

5 ‘‘(1) ATTORNEY GENERAL OF A STATE.—The 

6 term ‘attorney general of a State’ means the attor7 ney general or other chief law enforcement officer of 

8 a State. 

9 ‘‘(2) COMMISSION.—The term ‘Commission’ 

10 means the Federal Trade Commission. 

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

12 any person. 

13 ‘‘(4) CONSUMER SETTLEMENT ACCOUNT.—The 

14 term ‘consumer settlement account’ means any ac15 count or other means or device in which payments, 

16 deposits, or other transfers from a consumer are 

17 held or transferred to a debt settlement provider for 

18 the accumulation of the consumer’s funds in anticiVerDate Mar 15 2010 06:53 May 26, 2010 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H5387.IH H5387

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1 pation of proffering an adjustment or settlement of 

2 a debt or obligation of the consumer to a creditor on 

3 behalf of the consumer. 

4 ‘‘(5) DEBT SETTLEMENT PROGRAM.—The term 

5 ‘debt settlement program’ means the actions and ac6 tivities undertaken by a debt settlement provider and 

7 a consumer in connection with the provision of debt 

8 settlement service. 

9 ‘‘(6) DEBT SETTLEMENT PROVIDER.— 

10 ‘‘(A) IN GENERAL.—Except as provided in 

11 subparagraph (B), the term ‘debt settlement 

12 provider’ means any person or entity engaging 

13 in, or holding itself out as engaging in, the 

14 business of providing debt settlement services in 

15 exchange for a fee or compensation, or any per16 son who solicits for or acts on behalf of any 

17 person or entity engaging in, or holding itself 

18 out as engaging in, the business of providing 

19 debt settlement services in exchange for any fee 

20 or compensation. 

21 ‘‘(B) EXCEPTION.—The term ‘debt settle22 ment provider’ does not include the following: 

23 ‘‘(i) Attorneys when— 

24 ‘‘(I) acting in the ordinary prac25 tice of their professions; 


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1 ‘‘(II) acting through any entity 

2 in the ordinary practice of their pro3 fession; 

4 ‘‘(III) acting in the States where 

5 they are licensed to practice their pro6 fession; and 

7 ‘‘(IV) not holding themselves out 

8 as debt settlement providers or pro9 viding debt settlement service. 

10 ‘‘(ii) Escrow agents, accountants, 

11 broker dealers in securities, or investment 

12 advisors in securities, when acting— 

13 ‘‘(I) in the ordinary practice of 

14 their professions; and 

15 ‘‘(II) through any entity in the 

16 ordinary practice of their profession. 

17 ‘‘(iii) Any bank, agent of a bank, 

18 trust company, savings and loan associa19 tion, savings bank, credit union, crop cred20 it association, development credit corpora21 tion, industrial development corporation, 

22 title insurance company, or insurance com23 pany operating or organized under the 

24 laws of a State or the United States. 


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1 ‘‘(iv) Mortgage servicers (as such 

2 term is defined in section 6(i) of the Real 

3 Estate Settlement Procedures Act of 1974 

4 (12 U.S.C. 2605(i)(2)) carrying out mort5 gage loan modifications. 

6 ‘‘(v) Any person who performs credit 

7 services for such person’s employer while 

8 receiving a regular salary or wage when 

9 the employer is not engaged in the busi10 ness of offering or providing debt settle11 ment service. 

12 ‘‘(vi) An organization that is described 

13 in section 501(c)(3) and subject to section 

14 501(q) of the Internal Revenue Code of 

15 1986 and exempt from tax under section 

16 501(a) of such Code. 

17 ‘‘(vii) Public officers while acting in 

18 their official capacities and persons acting 

19 under court order. 

20 ‘‘(viii) Any person while performing 

21 services incidental to the dissolution, wind22 ing up, or liquidating of a partnership, cor23 poration, or other business enterprise. 

24 ‘‘(7) DEBT SETTLEMENT SERVICE.— 


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1 ‘‘(A) IN GENERAL.—Except as provided in 

2 subparagraph (B), the term ‘debt settlement 

3 service’ means— 

4 ‘‘(i) offering to provide advice or serv5 ice, or to act or acting as an intermediary 

6 between or on behalf of a consumer and 

7 one or more of a consumer’s creditors, 

8 where the primary purpose of the advice, 

9 service, or action is to obtain a settlement, 

10 adjustment, or satisfaction of the con11 sumer’s debt to a creditor in an amount 

12 less than the full amount of the principal 

13 amount of the debt or in an amount less 

14 than the current outstanding balance of 

15 the debt; or 

16 ‘‘(ii) offering to provide services re17 lated to or providing services advising, en18 couraging, assisting, or counseling a con19 sumer to accumulate funds for the primary 

20 purpose of proposing, obtaining, or seeking 

21 to obtain a settlement, adjustment, or sat22 isfaction of the consumer’s debt to a cred23 itor in an amount less than the full 

24 amount of the principal amount of the debt 


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1 or in an amount less than the current out2 standing balance of the debt. 

3 ‘‘(B) EXCEPTION.—The term ‘debt settle4 ment service’ does not include services of an at5 torney in providing information, advice, or legal 

6 representation with respect to filing a case or 

7 proceeding under title 11, United States Code. 

8 ‘‘(8) ENROLLMENT FEE.—The term ‘enrollment 

9 fee’ means any fee, obligation, or compensation paid 

10 or to be paid by the consumer to a debt settlement 

11 provider in consideration of or in connection with es12 tablishing a contract or other agreement with a con13 sumer related to the provision of debt settlement 

14 service. 

15 ‘‘(9) MAINTENANCE FEE.—The term ‘mainte16 nance fee’ means any fee, obligation, or compensa17 tion paid or to be paid by a consumer on a periodic 

18 basis to a debt settlement provider in consideration 

19 of maintaining the relationship and services to be 

20 provided by a debt settlement provider in accordance 

21 with a contract with a consumer related to the provi22 sion of debt settlement service. 

23 ‘‘(10) PRINCIPAL AMOUNT OF THE DEBT.—The 

24 term ‘principal amount of the debt’ means the total 

25 amount or outstanding balance owed by a consumer 


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1 to one or more creditors for a debt that is included 

2 in a contract for debt settlement service at the time 

3 when the consumer enters into a contract for debt 

4 settlement service pursuant to section 1002(a). 

5 ‘‘(11) SETTLEMENT FEE.—The term ‘settle6 ment fee’ means any fee, obligation, or compensation 

7 paid or to be paid by a consumer to a debt settle8 ment provider in consideration of or in connection 

9 with an agreement or other arrangement on the part 

10 of a creditor to accept less than the principal 

11 amount of the debt as satisfaction of the creditor’s 

12 claim against the consumer. 

13 ‘‘SEC. 1002. REQUIRED ACTS. 

14 ‘‘(a) CONTRACT REQUIRED.— 

15 ‘‘(1) IN GENERAL.—A debt settlement provider 

16 may not provide a debt settlement service to a con17 sumer or receive any fee from a consumer for a debt 

18 settlement service without a written contract de19 scribed in paragraph (2) that is signed by the con20 sumer. 

21 ‘‘(2) CONTRACT CONTENTS.—A contract de22 scribed in this paragraph is a contract between a 

23 debt settlement provider and a consumer for debt 

24 settlement services that includes the following: 


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1 ‘‘(A) The name and address of the con2 sumer. 

3 ‘‘(B) The date of execution of the contract. 

4 ‘‘(C) The legal name of the debt settlement 

5 provider, including any other business names 

6 used by the debt settlement provider. 

7 ‘‘(D) The corporate address and regular 

8 business address, including a street address, of 

9 the debt settlement provider. 

10 ‘‘(E) The license or registration number 

11 under which the debt settlement provider is li12 censed or registered if the consumer resides in 

13 a State that requires a debt settlement provider 

14 to obtain a license or registration as a condition 

15 of providing debt settlement service in that 

16 State. 

17 ‘‘(F) The telephone number at which the 

18 consumer may speak with a representative of 

19 the debt settlement provider during normal 

20 business hours. 

21 ‘‘(G) A complete list of the consumer’s ac22 counts, debts, and obligations covered under the 

23 debt settlement service covered by the contract, 

24 including the name of each creditor and prin25 cipal amount of each debt. 


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1 ‘‘(H) A description of the services to be 

2 provided by the debt settlement provider, in3 cluding the expected timeframe for settlement 

4 for each account, debt, or obligation included in 

5 subparagraph (G). 

6 ‘‘(I) A clear and conspicuous itemized list 

7 of all fees, including any enrollment fee and set8 tlement fees to be paid by the consumer to the 

9 debt settlement provider, and the date, approxi10 mate date, or circumstances under which each 

11 fee will become due. 

12 ‘‘(J) A clear and conspicuous statement of 

13 a good faith estimate of the total amount of all 

14 fees to be collected by the debt settlement pro15 vider from the consumer for the provision of 

16 debt settlement service under the contract. 

17 ‘‘(K) A clear and conspicuous statement of 

18 the proposed savings goals for the consumer, 

19 stating the amount to be saved per month or 

20 other period, the time period over which the 

21 savings goals extend, and the total amount of 

22 the savings expected to be paid by the consumer 

23 pursuant to the terms of the contract. 

24 ‘‘(L) A notice to the consumer that unless 

25 the consumer is insolvent, if a creditor settles a 


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1 debt for an amount less than the consumer’s 

2 current outstanding balance at the time of set3 tlement, the consumer may incur a tax liability. 

4 ‘‘(M) A written notice to the consumer, 

5 which includes a form that the consumer may 

6 use and the address to which the form may be 

7 returned to the debt settlement provider, that 

8 the consumer may cancel the contract pursuant 

9 to the provisions of section 1006. 

10 ‘‘(N) A clear and conspicuous written no11 tice to the consumer that— 

12 ‘‘(i) the consumer may cancel the con13 tract— 

14 ‘‘(I) within 90 days of— 

15 ‘‘(aa) the execution of the 

16 contract; or 

17 ‘‘(bb) the provision of the 

18 notice of the right to cancel and 

19 cancellation form; or 

20 ‘‘(II) at any time in the event of 

21 a violation of this title on the part of 

22 the debt settlement provider; and 

23 ‘‘(ii) in the case the consumer cancels 

24 the contract as described in clause (i)— 


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1 ‘‘(I) the consumer will be entitled 

2 to a full refund— 

3 ‘‘(aa) of all fees and com4 pensation paid by the consumer 

5 to the debt settlement provider, 

6 except any settlement fee; and 

7 ‘‘(bb) of all funds provided 

8 by the consumer to the debt set9 tlement provider for a consumer 

10 settlement account, except for 

11 funds actually paid to a creditor 

12 on behalf of the consumer, under 

13 the terms of the contract for debt 

14 settlement service; and 

15 ‘‘(II) all powers of attorney 

16 granted to the debt settlement pro17 vider by the consumer will be revoked 

18 and voided. 

19 ‘‘(b) NOTIFICATION REQUIRED.—A debt settlement 

20 provider shall, before the earlier of the date of entering 

21 into a written contract with a consumer for debt settle22 ment services or rendering debt settlement services to a 

23 consumer, provide to the consumer in writing the fol24 lowing: 


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1 ‘‘(1) An individualized financial analysis of the 

2 consumer, including an assessment of the con3 sumer’s income, expenses, and debts. 

4 ‘‘(2) A description of the debt settlement serv5 ice being offered to the consumer by the debt settle6 ment provider, including the following: 

7 ‘‘(A) A description of the debt settlement 

8 program being offered as part of the service. 

9 ‘‘(B) A list of each of the consumer’s 

10 debts, creditors, and debt collectors that will be 

11 covered under the program. 

12 ‘‘(3) A statement containing the following: 

13 ‘‘(A) A good-faith estimate of the length of 

14 time it will take to achieve settlement of each 

15 debt covered under the program. 

16 ‘‘(B) The specific time by which the debt 

17 settlement service provider will make a bona 

18 fide settlement offer to each creditor and debt 

19 collector covered under the program. 

20 ‘‘(C) The total amount of debt owed by the 

21 consumer to each creditor covered under the 

22 program. 

23 ‘‘(D) An estimate of the total and the 

24 monthly savings the consumer will be required 

25 to accumulate to complete the program. 


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1 ‘‘(4) A clear and conspicuous statement that— 

2 ‘‘(A) the consumer remains legally obli3 gated to make periodic or scheduled payments 

4 to creditors while participating in a debt settle5 ment program; and 

6 ‘‘(B) the debt settlement provider will not 

7 make any periodic or scheduled payments to 

8 creditors on behalf of the consumer. 

9 ‘‘(5) A clear and conspicuous notice to the con10 sumer that— 

11 ‘‘(A) the utilization of debt settlement 

12 service may not be suitable for all consumers; 

13 ‘‘(B) the utilization of debt settlement 

14 service may adversely impact the consumer’s 

15 credit history and credit score; 

16 ‘‘(C) the consumer may inquire about 

17 other means of dealing with indebtedness, in18 cluding nonprofit credit counseling and bank19 ruptcy; 

20 ‘‘(D) the failure to make periodic or sched21 uled payments to a creditor— 

22 ‘‘(i) is likely to affect adversely the 

23 consumer’s creditworthiness; 

24 ‘‘(ii) may result in continued collection 

25 activity by creditors or debt collectors; 


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1 ‘‘(iii) may result in the consumer 

2 being sued by one or more creditors or 

3 debt collectors, and in the garnishment of 

4 the consumer’s wages; and 

5 ‘‘(iv) may increase the amount of 

6 money the consumer owes to one or more 

7 creditors or debt collectors due to the im8 position by the creditor of interest charges, 

9 late fees, and other penalty fees; and 

10 ‘‘(E) any savings the consumer realizes 

11 from use of a debt settlement service may be 

12 taxable income. 

13 ‘‘(c) DETERMINATION OF BENEFIT TO CONSUMERS

14 REQUIRED.—A debt settlement provider may not enter 

15 into a written contract with a consumer unless the debt 

16 settlement provider makes written determinations, sup17 ported by the financial analysis, that— 

18 ‘‘(1) the consumer can reasonably meet the re19 quirements of the proposed debt settlement program 

20 included in the debt settlement service offered to the 

21 consumer, including the fees and the periodic sav22 ings amounts set forth in the savings goals under 

23 the program; 


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1 ‘‘(2) there is a net tangible financial benefit to 

2 the consumer of entering into the proposed debt set3 tlement program; and 

4 ‘‘(3) the debt settlement program is suitable for 

5 the consumer at the time the contract is to be 

6 signed. 

7 ‘‘(d) CHOICE OF LANGUAGE.—If a debt settlement 

8 provider communicates with a consumer primarily in a 

9 language other than English, the debt settlement provider 

10 shall furnish to the consumer a translation of the disclo11 sures and documents required by this title in that other 

12 language. 

13 ‘‘(e) MONTHLY STATEMENTS REQUIRED.—A debt 

14 settlement provider shall, not less frequently than month15 ly, provide each consumer with which it has a contract 

16 for the provision of debt settlement service a statement 

17 of account balances, fees paid, settlements completed, re18 maining debts, and any other term considered appropriate 

19 by the Commission. 

20 ‘‘SEC. 1003. PROHIBITED ACTS. 

21 ‘‘(a) LOANS.—A debt settlement provider may not 

22 make loans or offer credit or solicit or accept any note, 

23 mortgage, or negotiable instrument other than a check 

24 signed by the consumer and dated no later than the date 

25 of signature. 


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1 ‘‘(b) CONFESSION OF JUDGMENT.—A debt settle2 ment provider may not take any confession of judgment 

3 or power of attorney to confess judgment against the con4 sumer or appear as the consumer or on behalf of the con5 sumer in any judicial or non-judicial proceedings. 

6 ‘‘(c) RELEASE OR WAIVER OF OBLIGATION.—A debt 

7 settlement provider may not take any release or waiver 

8 of any obligation to be performed on the part of the debt 

9 settlement provider or any right of the consumer. 

10 ‘‘(d) RECEIPT OF THIRD-PARTY COMPENSATION.— 

11 A debt settlement provider may not receive any cash, fee, 

12 gift, bonus, premium, reward, or other compensation from 

13 any person other than the consumer explicitly for the pro14 vision of debt settlement service to that consumer, without 

15 prior disclosure of such to the consumer. 

16 ‘‘(e) CONFIDENTIALITY.—A debt settlement provider 

17 may not (without prior written consent of the consumer) 

18 disclose to anyone the name or any personal information 

19 of a consumer for whom the debt settlement provider has 

20 provided or is providing debt settlement service other than 

21 to a consumer’s own creditors or the debt settlement pro22 vider’s agents, affiliates, or contractors for the purpose of 

23 providing debt or settlement service. 

24 ‘‘(f) MISREPRESENTATION, OMISSION, AND FALSE

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1 represent, directly or by implication, any material fact, 

2 make a material omission, or make a false promise di3 rected to one or more consumers in connection with the 

4 solicitation, offering, contracting or provision of debt set5 tlement service, including the following: 

6 ‘‘(1) The total costs to purchase, receive, or use 

7 the services, or the nature of the services to be pro8 vided. 

9 ‘‘(2) Any material restriction, limitation, or con10 dition to receive the offered debt settlement service. 

11 ‘‘(3) Any material aspect of the performance, 

12 efficacy, nature, or central characteristics of the of13 fered debt settlement service. 

14 ‘‘(4) Any material aspect of the nature of terms 

15 of the seller’s cancellation policies. 

16 ‘‘(5) Any claim of affiliation with, or endorse17 ment or sponsorship by, any person or government 

18 entity. 

19 ‘‘(6) Any material aspect of any debt settlement 

20 service, including the following: 

21 ‘‘(A) The amount of time necessary to 

22 achieve settlement of all debt. 

23 ‘‘(B) The amount of money or the percent24 age of the debt amount that the consumer must 

25 accumulate before the provider will initiate atVerDate Mar 15 2010 06:53 May 26, 2010 Jkt 089200 PO 00000 Frm 00018 Fmt 6652 Sfmt 6201 E:\BILLS\H5387.IH H5387

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1 tempts with the consumer’s creditors or debt 

2 collectors to settle the debt. 

3 ‘‘(C) The effect of the service on a con4 sumer’s creditworthiness. 

5 ‘‘(D) Whether the provider is a nonprofit 

6 or a for-profit entity. 

7 ‘‘(g) PURCHASING OF DEBTS.—A debt settlement 

8 provider may not purchase debts or engage in the practice 

9 or business of debt collection. 

10 ‘‘(h) SECURED DEBT.—A debt settlement provider 

11 may not include in a debt settlement agreement any se12 cured debt. 

13 ‘‘(i) UNFAIR OR DECEPTIVE ACTS OR PRACTICES.— 

14 A debt settlement provider may not employ any unfair, 

15 unconscionable, or deceptive act or practice, including the 

16 knowing omission of any material information. 

17 ‘‘(j) LIMITATION ON COMMUNICATION.—A debt set18 tlement provider may not— 

19 ‘‘(1) obtain a power of attorney or other au20 thorization from a consumer that prohibits or limits 

21 the consumer or any creditor from communication 

22 directly with one another; or 

23 ‘‘(2) represent, expressly or by implication, that 

24 a consumer cannot or should not contact or commu25 nicate with any creditor. 


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1 ‘‘SEC. 1004. FEES. 

2 ‘‘(a) TYPES OF FEES PERMITTED.—The types of fees 

3 that a debt settlement provider may charge a consumer 

4 are the following: 

5 ‘‘(1) Enrollment fees. 

6 ‘‘(2) Settlement fees. 

7 ‘‘(b) TYPES OF FEES PROHIBITED.—All fee types 

8 not included under subsection (a) are prohibited, including 

9 maintenance fees. 

10 ‘‘(c) ENROLLMENT FEE AMOUNTS.—The amount of 

11 an enrollment fee charged by a debt settlement provider 

12 shall not exceed the lesser of— 

13 ‘‘(1) the amount that is reasonable and com14 mensurate to the debt settlement service provided to 

15 a consumer; and 

16 ‘‘(2) $50. 

17 ‘‘(d) DEBT SETTLEMENT FEE AMOUNTS.—The 

18 amount of a settlement fee charged by a debt settlement 

19 provider shall not exceed the lesser of— 

20 ‘‘(1) the amount that is reasonable and com21 mensurate to the debt settlement service provided to 

22 a consumer; and 

23 ‘‘(2) the amount that is 5 percent of the dif24 ference between— 

25 ‘‘(A) the principal amount of that debt; 

26 and 


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1 ‘‘(B) the amount— 

2 ‘‘(i) paid by the debt settlement pro3 vider to the creditor pursuant to a settle4 ment negotiated by the debt settlement 

5 provider on behalf of the consumer as full 

6 and complete satisfaction of the creditor’s 

7 claim with regard to that debt; or 

8 ‘‘(ii) negotiated by the debt settlement 

9 provider and paid by the consumer to the 

10 creditor pursuant to a settlement nego11 tiated by the debt settlement provider on 

12 behalf of the consumer as full and com13 plete satisfaction of the creditor’s claim 

14 with regard to that debt. 

15 ‘‘(e) TIMING OF DEBT SETTLEMENT FEES.—A debt 

16 settlement provider shall not collect any debt settlement 

17 fee from a consumer until— 

18 ‘‘(1) a creditor enters into a legally enforceable 

19 agreement with the consumer to accept funds in a 

20 specific dollar amount as full and complete satisfac21 tion of the creditor’s claim with regard to that debt; 

22 and 

23 ‘‘(2) those funds are provided— 

24 ‘‘(A) by the debt settlement provider on 

25 behalf of the consumer; or 


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1 ‘‘(B) directly by the consumer to the cred2 itor pursuant to a settlement negotiated by the 

3 debt settlement provider. 

4 ‘‘SEC. 1005. CONSUMER SETTLEMENT ACCOUNTS. 

5 ‘‘(a) TRUST ACCOUNT REQUIRED.—A debt settle6 ment provider who receives funds from a consumer shall 

7 hold all funds received for a consumer settlement account 

8 in a properly designated trust account in a federally in9 sured depository institution. Such funds shall remain the 

10 property of the consumer until the debt settlement pro11 vider disburses the funds to a creditor on behalf of the 

12 consumer as full or partial satisfaction of the consumer’s 

13 debt to the creditor or the creditor’s claim against the con14 sumer. 

15 ‘‘(b) INDEPENDENT ADMINISTRATION OF AC16 COUNT.—A debt settlement provider may not hold funds 

17 received for a consumer settlement account under sub18 section (a) in an account administered by an entity that— 

19 ‘‘(1) is owned by, controlled by, or in any way 

20 affiliated with the debt settlement service provider; 

21 or 

22 ‘‘(2) gives or accepts any money or other com23 pensation in exchange for referrals of business in24 volving the debt settlement service provider. 


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1 ‘‘(c) LIMITATIONS.—A debt settlement service pro2 vider shall not— 

3 ‘‘(1) be named on a consumer’s bank account; 

4 ‘‘(2) take a power of attorney in a consumer’s 

5 bank account; 

6 ‘‘(3) create a demand draft on a consumer’s 

7 bank account; 

8 ‘‘(4) exercise any control over any bank account 

9 held by or on behalf of the consumer; or 

10 ‘‘(5) obtain any information about a consumer’s 

11 bank account from any person other than the con12 sumer. 

13 ‘‘SEC. 1006. CANCELLATION OF CONTRACT. 

14 ‘‘(a) IN GENERAL.—A consumer may cancel a con15 tract with a debt settlement provider at any time. 

16 ‘‘(b) REFUNDS.— 

17 ‘‘(1) CANCELLATION WITHIN 90 DAYS OR UPON

18 VIOLATION OF THIS TITLE.—If a consumer cancels 

19 a contract with a debt settlement provider not later 

20 than 90 days after the date of the execution of the 

21 contract or at any time upon a violation of a provi22 sion of this title by the debt settlement provider, the 

23 debt settlement provider shall refund to the con24 sumer all— 


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1 ‘‘(A) fees paid to the debt settlement pro2 vider by the consumer, with the exception of 

3 any earned settlement fee; and 

4 ‘‘(B) funds paid by the consumer to the 

5 debt settlement provider that— 

6 ‘‘(i) have accumulated in a consumer 

7 settlement account; and 

8 ‘‘(ii) the debt settlement provider has 

9 not disbursed to creditors. 

10 ‘‘(2) CANCELLATIONS AFTER 90 DAYS.—If a 

11 consumer cancels a contract with a debt settlement 

12 provider later than 90 days after the date of the exe13 cution of the contract and for any reason other than 

14 for a violation of a provision of this title by the debt 

15 settlement provider, the debt settlement provider 

16 shall refund to the consumer— 

17 ‘‘(A) half of all of the fees collected from 

18 the consumer, with the exception of any earned 

19 settlement fees; and 

20 ‘‘(B) all funds paid by the consumer to the 

21 debt settlement provider that have accumulated 

22 in a consumer settlement account and which the 

23 debt service provider has not disbursed to credi24 tors. 


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1 ‘‘(3) TIMING OF REFUNDS.—A debt settlement 

2 provider shall make any refund required under this 

3 subsection not later than 5 business days after a no4 tice of cancellation is made on behalf of the con5 sumer under subsection (d). 

6 ‘‘(4) STATEMENT OF ACCOUNT.—A debt settle7 ment provider making a refund to a consumer under 

8 this subsection shall include with such refund a full 

9 statement of account showing the following: 

10 ‘‘(A) The fees received by the debt settle11 ment provider from the consumer. 

12 ‘‘(B) The fees refunded to the consumer by 

13 the debt settlement provider. 

14 ‘‘(C) The savings of the consumer held by 

15 the debt settlement provider. 

16 ‘‘(D) The payments made by the debt set17 tlement provider to creditors on behalf of the 

18 consumer. 

19 ‘‘(E) The settlement fees earned, if any, by 

20 the debt settlement provider by settling debt on 

21 behalf of the consumer. 

22 ‘‘(F) The savings of the consumer re23 funded to the consumer by the debt settlement 

24 provider. 


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1 ‘‘(c) REVOCATION OF POWERS OF ATTORNEY AND

2 DIRECT DEBIT AUTHORIZATIONS.—Upon cancellation of 

3 a contract by a consumer— 

4 ‘‘(1) all powers of attorney and direct debit au5 thorizations granted to the debt settlement provider 

6 by the consumer are revoked and voided; and 

7 ‘‘(2) the debt settlement provider shall imme8 diately take any action necessary to reflect cancella9 tion of the contract, including notifying the recipient 

10 of any direct debit authorization. 

11 ‘‘(d) NOTICE OF CANCELLATION TO CREDITORS.— 

12 Upon the cancellation of a contract under this section of 

13 the Act, the debt settlement provider shall provide timely 

14 notice of the cancellation of such contract to each of the 

15 creditors with whom the debt settlement provider has had 

16 any prior communication on behalf of the consumer in 

17 connection with the provision of any debt settlement serv18 ice. 

19 ‘‘SEC. 1007. OBLIGATION OF GOOD FAITH. 

20 ‘‘A debt settlement provider shall act in good faith 

21 in all matters under this title. 

22 ‘‘SEC. 1008. INVALIDATION OF CONTRACTS. 

23 ‘‘(a) CONSUMER WAIVERS INVALID.—A waiver by a 

24 consumer of any protection provided or any right of the 

25 consumer under this title— 


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1 ‘‘(1) is void; and 

2 ‘‘(2) may not be enforced by any other person. 

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

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

5 any protection provided by or any right or protection of 

6 the consumer or any obligation or requirement of the debt 

7 settlement provider under this title shall be considered a 

8 violation of a provision of this title. 

9 ‘‘(c) CONTRACTS NOT IN COMPLIANCE.—Any con10 tract for a debt settlement service that does not comply 

11 with the provisions of this title— 

12 ‘‘(1) shall be treated as void; 

13 ‘‘(2) may not be enforced by any other person; 

14 and 

15 ‘‘(3) upon notice of a void contract, a refund by 

16 the debt settlement provider to the consumer shall 

17 be made as if the contract had been cancelled as 

18 provided in section 1006(b)(1) of this title. 

19 ‘‘SEC. 1009. ADVERTISING, MARKETING, AND COMMUNICA20 TION PRACTICES. 

21 ‘‘A debt settlement provider shall not state or imply 

22 claims, results, or outcomes in any advertising, marketing, 

23 or other communication with consumers that represent or 

24 reflect results or outcomes, including about the percentage 

25 or dollar amount by which debt may be reduced or the 


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1 amount a consumer may save or the historical experience 

2 of its customers with respect to debt reduction, that— 

3 ‘‘(1) are materially different from the actual av4 erage result or outcome achieved by that debt settle5 ment provider on all of the debt of consumers who 

6 enter the program; or 

7 ‘‘(2) are not verified by an independent audit 

8 that documents that the described result or outcome 

9 was achieved for all debt enrolled in the program by 

10 at least 80 percent of the customers who began the 

11 service in the most recent 2 calendar year period. 

12 ‘‘SEC. 1010. RULEMAKING BY FEDERAL TRADE COMMIS13 SION. 

14 ‘‘(a) IN GENERAL.—The Commission may prescribe 

15 rules with respect to advertising and marketing practices, 

16 record retention, provision of accountings to consumers, 

17 and such other matters as the Commission considers nec18 essary to improve the consumer experience with debt set19 tlement providers. 

20 ‘‘(b) DEBT RELIEF SERVICE RULES.— 

21 ‘‘(1) IN GENERAL.—Except as provided in para22 graph (2), the Commission may prescribe rules with 

23 respect to the providers of debt relief service not 

24 otherwise covered by this title. 


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1 ‘‘(2) EXCEPTION.—Any rule prescribed under 

2 paragraph (1) shall not be applicable to or otherwise 

3 include services provided by those persons or entities 

4 identified in section 1001(6)(B) or section 

5 1001(7)(B). 

6 ‘‘(3) DEBT RELIEF SERVICE DEFINED.—In this 

7 subsection, the term ‘debt relief service’ means any 

8 service represented, directly or by implication, to re9 negotiate, or in any way alter the terms of payment 

10 or other terms of the debt between a consumer and 

11 one or more unsecured creditors or debt collectors, 

12 including a reduction in the balance, interest rate, or 

13 fees owed by a consumer to an unsecured creditor or 

14 debt collector. 

15 ‘‘(c) PROCEDURE.—All rulemaking under this title 

16 shall be conducted in accordance with section 553 of title 

17 5, United States Code, and shall not be subject to other 

18 procedures set forth in section 18 of the Federal Trade 

19 Commission Act (15 U.S.C. 57a). 

20 ‘‘SEC. 1011. CIVIL LIABILITY. 

21 ‘‘(a) LIABILITY ESTABLISHED.—Any debt settlement 

22 provider who fails to comply with any provision of this 

23 title with respect to any consumer shall be liable to such 

24 consumer in an amount equal to the sum of the amounts 

25 determined under each of the following: 


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

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

3 sustained by such consumer as a result of such 

4 failure; or 

5 ‘‘(B) any amount paid by the consumer to 

6 the debt settlement provider. 

7 ‘‘(2) STATUTORY DAMAGES.—An amount deter8 mined by the court of not less than $1,000 nor more 

9 than $5,000 per violation. 

10 ‘‘(3) PUNITIVE DAMAGES.— 

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

12 any action by an individual, such additional 

13 amount as the court may allow. 

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

15 class action, the sum of— 

16 ‘‘(i) the aggregate of the amount 

17 which the court may allow for each named 

18 plaintiff; and 

19 ‘‘(ii) the aggregate of the amount 

20 which the court may allow for each other 

21 class member, without regard to any min22 imum individual recovery. 

23 ‘‘(4) ATTORNEYS’ FEES.—In the case of any 

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1 graph (1), (2), or (3), the costs of the action, to2 gether with reasonable attorneys’ fees. 

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

4 PUNITIVE DAMAGES.—In determining the amount of any 

5 liability of any debt settlement provider under subsection 

6 (a)(2), the court shall consider, among other relevant fac7 tors— 

8 ‘‘(1) the frequency and persistence of non9 compliance by the debt settlement provider; 

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

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

12 was intentional; and 

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

14 of consumers adversely affected. 

15 ‘‘SEC. 1012. ENFORCEMENT BY FEDERAL TRADE COMMIS16 SION. 

17 ‘‘(a) IN GENERAL.—The Commission shall enforce 

18 the provisions of this title in the same manner, by the 

19 same means, and with the same jurisdiction, powers, and 

20 duties as though all applicable terms and provisions of the 

21 Federal Trade Commission Act (15 U.S.C. 41 et seq.) 

22 were incorporated into and made part of this title. 

23 ‘‘(b) UNFAIR OR DECEPTIVE ACTS OR PRACTICES.— 

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1 ed as a violation of a rule defining an unfair or deceptive 

2 act or practice prescribed under section 18(a)(1)(B) of the 

3 Federal Trade Commission Act (15 U.S.C. 57a(a)(1)(B)). 

4 ‘‘SEC. 1013. ACTION BY STATES. 

5 ‘‘(a) IN GENERAL.—In any case in which the attor6 ney general of a State has reason to believe that an inter7 est of the residents of the State has been or is threatened 

8 or adversely affected by the engagement of any person 

9 subject to a provision of this title or a rule prescribed 

10 under section 1010 in a practice that violates such provi11 sion or rule, the State may, as parens patriae, bring a 

12 civil action on behalf of the residents of the State in an 

13 appropriate district court of the United States or other 

14 court of competent jurisdiction— 

15 ‘‘(1) to enjoin that practice; 

16 ‘‘(2) to enforce compliance with the provision or 

17 rule; or 

18 ‘‘(3) to obtain damages under section 1011 on 

19 behalf of residents of the State. 

20 ‘‘(b) ATTORNEYS’ FEES.—In the case of any success21 ful action under paragraph (1), (2), or (3) of subsection 

22 (a), the attorney general of the State bringing the action 

23 shall be awarded the costs of the action and reasonable 

24 attorneys’ fees as determined by the court. 

25 ‘‘(c) RIGHTS OF FEDERAL TRADE COMMISSION.— 


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1 ‘‘(1) NOTICE TO FEDERAL TRADE COMMIS2 SION.— 

3 ‘‘(A) IN GENERAL.—Except as provided in 

4 subparagraph (C), the attorney general of a 

5 State shall notify the Federal Trade Commis6 sion in writing of any civil action under sub7 section (a), prior to initiating such civil action. 

8 ‘‘(B) CONTENTS.—The notice required by 

9 subparagraph (A) shall include a copy of the 

10 complaint to be filed to initiate such civil ac11 tion. 

12 ‘‘(C) EXCEPTION.—If it is not feasible for 

13 the attorney general of a State to provide the 

14 notice required by subparagraph (A), the State 

15 shall provide notice immediately upon insti16 tuting a civil action under subsection (a). 

17 ‘‘(2) INTERVENTION BY FEDERAL TRADE COM18 MISSION.—Upon receiving notice required by para19 graph (1) with respect to a civil action, the Commis20 sion may— 

21 ‘‘(A) intervene in such action; and 

22 ‘‘(B) upon intervening— 

23 ‘‘(i) be heard on all matters arising in 

24 such civil action; 


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1 ‘‘(ii) remove the action to the appro2 priate district court of the United States; 

3 and 

4 ‘‘(iii) file petitions for appeal of a de5 cision in such action. 

6 ‘‘(d) INVESTIGATORY POWERS.—Nothing in this sec7 tion may be construed to prevent the attorney general of 

8 a State from exercising the powers conferred on such at9 torney general by the laws of such State to conduct inves10 tigations or to administer oaths or affirmations or to com11 pel the attendance of witnesses or the production of docu12 mentary and other evidence. 

13 ‘‘(e) EFFECT OF ACTION BY FEDERAL TRADE COM14 MISSION.—If the Federal Trade Commission institutes a 

15 civil action or an administrative action to enforce a viola16 tion of a provision of this title or a rule prescribed under 

17 section 1010, no State may, during the pendency of such 

18 action, bring a civil action under subsection (a) against 

19 any defendant named in the complaint of the Commission 

20 for violation of a provision of this title or rule prescribed 

21 under section 1010 that is alleged in such complaint. 

22 ‘‘(f) ACTIONS BY OTHER STATE OFFICIALS.— 

23 ‘‘(1) IN GENERAL.—In addition to actions 

24 brought by an attorney general of a State under 


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1 subsection (a), an action may be brought by officials 

2 in a State who are so authorized. 

3 ‘‘(2) SAVINGS PROVISION.—Nothing contained 

4 in this section may be construed to prohibit an au5 thorized official of a State from proceeding in a 

6 court of such State on the basis of an alleged viola7 tion of any civil or criminal statute of such State. 

8 ‘‘SEC. 1014. STATUTE OF LIMITATIONS. 

9 ‘‘Any action to enforce any liability under section 

10 1011 may be brought before the later of— 

11 ‘‘(1) the end of the 5-year period beginning on 

12 the date of the occurrence of the violation involved; 

13 or 

14 ‘‘(2) in any case in which any debt settlement 

15 provider has materially and willfully misrepresented 

16 any information that the debt settlement provider is 

17 required, by any provision of this title, to disclose to 

18 any consumer and that is material to the establish19 ment of the debt settlement provider’s liability to the 

20 consumer under this title, the end of the 5-year pe21 riod beginning on the date of the discovery by the 

22 consumer of the violation. 

23 ‘‘SEC. 1015. RELATION TO STATE LAW. 

24 ‘‘This title shall not annul, alter, affect, or exempt 

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1 plying with the law of any State except to the extent that 

2 such law is inconsistent with any provision of this title, 

3 and then only to the extent of the inconsistency. For pur4 poses of this section, a State statute, regulation, order, 

5 or interpretation is not inconsistent with the provisions of 

6 this title if the protection such statute, regulation, order, 

7 or interpretation affords any person is greater than the 

8 protection provided under this title and any subsequent 

9 amendments. Nothing in this title shall limit or prohibit 

10 a State from prohibiting or otherwise restricting the provi11 sion of debt settlement services, or imposing and admin12 istering a system of additional requirements, prohibitions, 

13 registration, or licensure.’’. 

14 (b) INITIAL REGULATIONS.— 

15 (1) IN GENERAL.—Not later than 60 days after 

16 the date of the enactment of this Act, the Federal 

17 Trade Commission shall commence a rulemaking to 

18 prescribe the following: 

19 (A) The form of the written notices re20 quired under subparagraphs (M) and (N) of 

21 subsection (a)(2) and subsection (b)(5) of sec22 tion 1002 of the Consumer Credit Protection 

23 Act, as added by subsection (a) of this section. 

24 (B) The form of the statement required 

25 under subsection (e) of such section 1002. 


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1 (2) DEADLINE.—The Federal Trade Commis2 sion shall complete the rulemaking required by para3 graph (1) not later than 1 year after the date of the 

4 enactment of this Act. 

5 (3) PROCEDURE.—All rulemaking under para6 graph (1) shall be conducted in accordance with sec7 tion 553 of title 5, United States Code, and shall 

8 not be subject to other procedures set forth in sec9 tion 18 of the Federal Trade Commission Act (15 

10 U.S.C. 57a). 

11 (c) EFFECTIVE DATE.—Title X of the Consumer 

12 Credit Protection Act, as added by subsection (a) of this 

13 section, shall take effect on the date that is 60 days after 

14 the date of the enactment of this Act. 

Æ 


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