II 

111TH CONGRESS 

2D SESSION S. 3264 

To amend the Consumer Credit Protection Act to provide for regulation 

of debt settlement services, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

APRIL 27, 2010 

Mr. SCHUMER (for himself and Mrs. MCCASKILL) introduced the following 

bill; which was read twice and referred to the Committee on Banking, 

Housing, and Urban Affairs 

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 

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 antici19 pation of proffering an adjustment or settlement of 

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

21 behalf of the consumer. 

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

23 ‘debt settlement program’ means the actions and ac24 tivities undertaken by a debt settlement provider and 


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1 a consumer in connection with the provision of debt 

2 settlement service. 

3 ‘‘(6) DEBT SETTLEMENT PROVIDER.— 

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

5 subparagraph (B), the term ‘debt settlement 

6 provider’ means any person or entity engaging 

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

8 business of providing debt settlement services in 

9 exchange for a fee or compensation, or any per10 son who solicits for or acts on behalf of any 

11 person or entity engaging in, or holding itself 

12 out as engaging in, the business of providing 

13 debt settlement services in exchange for any fee 

14 or compensation. 

15 ‘‘(B) EXCEPTION.—The term ‘debt settle16 ment provider’ does not include the following: 

17 ‘‘(i) Attorneys when— 

18 ‘‘(I) acting in the ordinary prac19 tice of their professions; 

20 ‘‘(II) acting through any entity 

21 in the ordinary practice of their pro22 fession; 

23 ‘‘(III) acting in the States where 

24 they are licensed to practice their pro25 fession; and 


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1 ‘‘(IV) not holding themselves out 

2 as debt settlement providers or pro3 viding debt settlement service. 

4 ‘‘(ii) Escrow agents, accountants, 

5 broker dealers in securities, or investment 

6 advisors in securities, when acting— 

7 ‘‘(I) in the ordinary practice of 

8 their professions; and 

9 ‘‘(II) through any entity in the 

10 ordinary practice of their profession. 

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

12 trust company, savings and loan associa13 tion, savings bank, credit union, crop cred14 it association, development credit corpora15 tion, industrial development corporation, 

16 title insurance company, or insurance com17 pany operating or organized under the 

18 laws of a State or the United States. 

19 ‘‘(iv) Mortgage servicers (as such 

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

21 Estate Settlement Procedures Act of 1974 

22 (12 U.S.C. 2605(i)(2)) carrying out mort23 gage loan modifications. 

24 ‘‘(v) Any person who performs credit 

25 services for such person’s employer while 


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1 receiving a regular salary or wage when 

2 the employer is not engaged in the busi3 ness of offering or providing debt settle4 ment service. 

5 ‘‘(vi) An organization that is described 

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

7 501(q) of the Internal Revenue Code of 

8 1986 and exempt from tax under section 

9 501(a) of such Code. 

10 ‘‘(vii) Public officers while acting in 

11 their official capacities and persons acting 

12 under court order. 

13 ‘‘(viii) Any person while performing 

14 services incidental to the dissolution, wind15 ing up, or liquidating of a partnership, cor16 poration, or other business enterprise. 

17 ‘‘(7) DEBT SETTLEMENT SERVICE.— 

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

19 subparagraph (B), the term ‘debt settlement 

20 service’ means— 

21 ‘‘(i) offering to provide advice or serv22 ice, or to act or acting as an intermediary 

23 between or on behalf of a consumer and 

24 one or more of a consumer’s creditors, 

25 where the primary purpose of the advice, 


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1 service, or action is to obtain a settlement, 

2 adjustment, or satisfaction of the con3 sumer’s debt to a creditor in an amount 

4 less than the full amount of the principal 

5 amount of the debt or in an amount less 

6 than the current outstanding balance of 

7 the debt; or 

8 ‘‘(ii) offering to provide services re9 lated to or providing services advising, en10 couraging, assisting, or counseling a con11 sumer to accumulate funds for the primary 

12 purpose of proposing, obtaining, or seeking 

13 to obtain a settlement, adjustment, or sat14 isfaction of the consumer’s debt to a cred15 itor in an amount less than the full 

16 amount of the principal amount of the debt 

17 or in an amount less than the current out18 standing balance of the debt. 

19 ‘‘(B) EXCEPTION.—The term ‘debt settle20 ment service’ does not include services of an at21 torney in providing information, advice, or legal 

22 representation with respect to filing a case or 

23 proceeding under title 11, United States Code. 

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

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


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

2 provider in consideration of or in connection with es3 tablishing a contract or other agreement with a con4 sumer related to the provision of debt settlement 

5 service. 

6 ‘‘(9) MAINTENANCE FEE.—The term ‘mainte7 nance fee’ means any fee, obligation, or compensa8 tion paid or to be paid by a consumer on a periodic 

9 basis to a debt settlement provider in consideration 

10 of maintaining the relationship and services to be 

11 provided by a debt settlement provider in accordance 

12 with a contract with a consumer related to the provi13 sion of debt settlement service. 

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

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

16 amount or outstanding balance owed by a consumer 

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

18 in a contract for debt settlement service at the time 

19 when the consumer enters into a contract for debt 

20 settlement service pursuant to section 1002(a). 

21 ‘‘(11) SETTLEMENT FEE.—The term ‘settle22 ment fee’ means any fee, obligation, or compensation 

23 paid or to be paid by a consumer to a debt settle24 ment provider in consideration of or in connection 

25 with an agreement or other arrangement on the part 


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1 of a creditor to accept less than the principal 

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

3 claim against the consumer. 

4 ‘‘SEC. 1002. REQUIRED ACTS. 

5 ‘‘(a) CONTRACT REQUIRED.— 

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

7 may not provide a debt settlement service to a con8 sumer or receive any fee from a consumer for a debt 

9 settlement service without a written contract de10 scribed in paragraph (2) that is signed by the con11 sumer. 

12 ‘‘(2) CONTRACT CONTENTS.—A contract de13 scribed in this paragraph is a contract between a 

14 debt settlement provider and a consumer for debt 

15 settlement services that includes the following: 

16 ‘‘(A) The name and address of the con17 sumer. 

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

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

20 provider, including any other business names 

21 used by the debt settlement provider. 

22 ‘‘(D) The corporate address and regular 

23 business address, including a street address, of 

24 the debt settlement provider. 


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1 ‘‘(E) The license or registration number 

2 under which the debt settlement provider is li3 censed or registered if the consumer resides in 

4 a State that requires a debt settlement provider 

5 to obtain a license or registration as a condition 

6 of providing debt settlement service in that 

7 State. 

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

9 consumer may speak with a representative of 

10 the debt settlement provider during normal 

11 business hours. 

12 ‘‘(G) A complete list of the consumer’s ac13 counts, debts, and obligations covered under the 

14 debt settlement service covered by the contract, 

15 including the name of each creditor and prin16 cipal amount of each debt. 

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

18 provided by the debt settlement provider, in19 cluding the expected timeframe for settlement 

20 for each account, debt, or obligation included in 

21 subparagraph (G). 

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

23 of all fees, including any enrollment fee and set24 tlement fees to be paid by the consumer to the 

25 debt settlement provider, and the date, approxiVerDate Mar 15 2010 23:42 Apr 27, 2010 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S3264.IS S3264

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1 mate date, or circumstances under which each 

2 fee will become due. 

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

4 a good faith estimate of the total amount of all 

5 fees to be collected by the debt settlement pro6 vider from the consumer for the provision of 

7 debt settlement service under the contract. 

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

9 the proposed savings goals for the consumer, 

10 stating the amount to be saved per month or 

11 other period, the time period over which the 

12 savings goals extend, and the total amount of 

13 the savings expected to be paid by the consumer 

14 pursuant to the terms of the contract. 

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

16 the consumer is insolvent, if a creditor settles a 

17 debt for an amount less than the consumer’s 

18 current outstanding balance at the time of set19 tlement, the consumer may incur a tax liability. 

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

21 which includes a form that the consumer may 

22 use and the address to which the form may be 

23 returned to the debt settlement provider, that 

24 the consumer may cancel the contract pursuant 

25 to the provisions of section 1006. 


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1 ‘‘(N) A clear and conspicuous written no2 tice to the consumer that— 

3 ‘‘(i) the consumer may cancel the con4 tract— 

5 ‘‘(I) within 90 days of— 

6 ‘‘(aa) the execution of the 

7 contract; or 

8 ‘‘(bb) the provision of the 

9 notice of the right to cancel and 

10 cancellation form; or 

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

12 a violation of this title on the part of 

13 the debt settlement provider; and 

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

15 the contract as described in clause (i)— 

16 ‘‘(I) the consumer will be entitled 

17 to a full refund— 

18 ‘‘(aa) of all fees and com19 pensation paid by the consumer 

20 to the debt settlement provider, 

21 except any settlement fee; and 

22 ‘‘(bb) of all funds provided 

23 by the consumer to the debt set24 tlement provider for a consumer 

25 settlement account, except for 


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1 funds actually paid to a creditor 

2 on behalf of the consumer, under 

3 the terms of the contract for debt 

4 settlement service; and 

5 ‘‘(II) all powers of attorney 

6 granted to the debt settlement pro7 vider by the consumer will be revoked 

8 and voided. 

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

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

11 into a written contract with a consumer for debt settle12 ment services or rendering debt settlement services to a 

13 consumer, provide to the consumer in writing the fol14 lowing: 

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

16 consumer, including an assessment of the con17 sumer’s income, expenses, and debts. 

18 ‘‘(2) A description of the debt settlement serv19 ice being offered to the consumer by the debt settle20 ment provider, including the following: 

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

22 program being offered as part of the service. 

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

24 debts, creditors, and debt collectors that will be 

25 covered under the program. 


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

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

3 time it will take to achieve settlement of each 

4 debt covered under the program. 

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

6 settlement service provider will make a bona 

7 fide settlement offer to each creditor and debt 

8 collector covered under the program. 

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

10 consumer to each creditor covered under the 

11 program. 

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

13 monthly savings the consumer will be required 

14 to accumulate to complete the program. 

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

16 ‘‘(A) the consumer remains legally obli17 gated to make periodic or scheduled payments 

18 to creditors while participating in a debt settle19 ment program; and 

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

21 make any periodic or scheduled payments to 

22 creditors on behalf of the consumer. 

23 ‘‘(5) A clear and conspicuous notice to the con24 sumer that— 


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1 ‘‘(A) the utilization of debt settlement 

2 service may not be suitable for all consumers; 

3 ‘‘(B) the utilization of debt settlement 

4 service may adversely impact the consumer’s 

5 credit history and credit score; 

6 ‘‘(C) the consumer may inquire about 

7 other means of dealing with indebtedness, in8 cluding nonprofit credit counseling and bank9 ruptcy; 

10 ‘‘(D) the failure to make periodic or sched11 uled payments to a creditor— 

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

13 consumer’s creditworthiness; 

14 ‘‘(ii) may result in continued collection 

15 activity by creditors or debt collectors; 

16 ‘‘(iii) may result in the consumer 

17 being sued by one or more creditors or 

18 debt collectors, and in the garnishment of 

19 the consumer’s wages; and 

20 ‘‘(iv) may increase the amount of 

21 money the consumer owes to one or more 

22 creditors or debt collectors due to the im23 position by the creditor of interest charges, 

24 late fees, and other penalty fees; and 


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1 ‘‘(E) any savings the consumer realizes 

2 from use of a debt settlement service may be 

3 taxable income. 

4 ‘‘(c) DETERMINATION OF BENEFIT TO CONSUMERS

5 REQUIRED.—A debt settlement provider may not enter 

6 into a written contract with a consumer unless the debt 

7 settlement provider makes written determinations, sup8 ported by the financial analysis, that— 

9 ‘‘(1) the consumer can reasonably meet the re10 quirements of the proposed debt settlement program 

11 included in the debt settlement service offered to the 

12 consumer, including the fees and the periodic sav13 ings amounts set forth in the savings goals under 

14 the program; 

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

16 the consumer of entering into the proposed debt set17 tlement program; and 

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

19 the consumer at the time the contract is to be 

20 signed. 

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

22 provider communicates with a consumer primarily in a 

23 language other than English, the debt settlement provider 

24 shall furnish to the consumer a translation of the discloVerDate Mar 15 2010 23:42 Apr 27, 2010 Jkt 089200 PO 00000 Frm 00015 Fmt 6652 Sfmt 6201 E:\BILLS\S3264.IS S3264

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1 sures and documents required by this title in that other 

2 language. 

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

4 settlement provider shall, not less frequently than month5 ly, provide each consumer with which it has a contract 

6 for the provision of debt settlement service a statement 

7 of account balances, fees paid, settlements completed, re8 maining debts, and any other term considered appropriate 

9 by the Commission. 

10 ‘‘SEC. 1003. PROHIBITED ACTS. 

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

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

13 mortgage, or negotiable instrument other than a check 

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

15 of signature. 

16 ‘‘(b) CONFESSION OF JUDGMENT.—A debt settle17 ment provider may not take any confession of judgment 

18 or power of attorney to confess judgment against the con19 sumer or appear as the consumer or on behalf of the con20 sumer in any judicial or non-judicial proceedings. 

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

22 settlement provider may not take any release or waiver 

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

24 settlement provider or any right of the consumer. 


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

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

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

4 any person other than the consumer explicitly for the pro5 vision of debt settlement service to that consumer, without 

6 prior disclosure of such to the consumer. 

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

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

9 disclose to anyone the name or any personal information 

10 of a consumer for whom the debt settlement provider has 

11 provided or is providing debt settlement service other than 

12 to a consumer’s own creditors or the debt settlement pro13 vider’s agents, affiliates, or contractors for the purpose of 

14 providing debt or settlement service. 

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

16 PROMISES.—A debt settlement provider may not mis17 represent, directly or by implication, any material fact, 

18 make a material omission, or make a false promise di19 rected to one or more consumers in connection with the 

20 solicitation, offering, contracting or provision of debt set21 tlement service, including the following: 

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

23 the services, or the nature of the services to be pro24 vided. 


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1 ‘‘(2) Any material restriction, limitation, or con2 dition to receive the offered debt settlement service. 

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

4 efficacy, nature, or central characteristics of the of5 fered debt settlement service. 

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

7 of the seller’s cancellation policies. 

8 ‘‘(5) Any claim of affiliation with, or endorse9 ment or sponsorship by, any person or government 

10 entity. 

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

12 service, including the following: 

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

14 achieve settlement of all debt. 

15 ‘‘(B) The amount of money or the percent16 age of the debt amount that the consumer must 

17 accumulate before the provider will initiate at18 tempts with the consumer’s creditors or debt 

19 collectors to settle the debt. 

20 ‘‘(C) The effect of the service on a con21 sumer’s creditworthiness. 

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

23 or a for-profit entity. 


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

2 provider may not purchase debts or engage in the practice 

3 or business of debt collection. 

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

5 may not include in a debt settlement agreement any se6 cured debt. 

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

8 A debt settlement provider may not employ any unfair, 

9 unconscionable, or deceptive act or practice, including the 

10 knowing omission of any material information. 

11 ‘‘(j) LIMITATION ON COMMUNICATION.—A debt set12 tlement provider may not— 

13 ‘‘(1) obtain a power of attorney or other au14 thorization from a consumer that prohibits or limits 

15 the consumer or any creditor from communication 

16 directly with one another; or 

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

18 a consumer cannot or should not contact or commu19 nicate with any creditor. 

20 ‘‘SEC. 1004. FEES. 

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

22 that a debt settlement provider may charge a consumer 

23 are the following: 

24 ‘‘(1) Enrollment fees. 

25 ‘‘(2) Settlement fees. 


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

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

3 maintenance fees. 

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

5 an enrollment fee charged by a debt settlement provider 

6 shall not exceed the lesser of— 

7 ‘‘(1) the amount that is reasonable and com8 mensurate to the debt settlement service provided to 

9 a consumer; and 

10 ‘‘(2) $50. 

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

12 amount of a settlement fee charged by a debt settlement 

13 provider shall not exceed the lesser of— 

14 ‘‘(1) the amount that is reasonable and com15 mensurate to the debt settlement service provided to 

16 a consumer; and 

17 ‘‘(2) the amount that is 5 percent of the dif18 ference between— 

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

20 and 

21 ‘‘(B) the amount— 

22 ‘‘(i) paid by the debt settlement pro23 vider to the creditor pursuant to a settle24 ment negotiated by the debt settlement 

25 provider on behalf of the consumer as full 


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1 and complete satisfaction of the creditor’s 

2 claim with regard to that debt; or 

3 ‘‘(ii) negotiated by the debt settlement 

4 provider and paid by the consumer to the 

5 creditor pursuant to a settlement nego6 tiated by the debt settlement provider on 

7 behalf of the consumer as full and com8 plete satisfaction of the creditor’s claim 

9 with regard to that debt. 

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

11 settlement provider shall not collect any debt settlement 

12 fee from a consumer until— 

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

14 agreement with the consumer to accept funds in a 

15 specific dollar amount as full and complete satisfac16 tion of the creditor’s claim with regard to that debt; 

17 and 

18 ‘‘(2) those funds are provided— 

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

20 behalf of the consumer; or 

21 ‘‘(B) directly by the consumer to the cred22 itor pursuant to a settlement negotiated by the 

23 debt settlement provider. 


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1 ‘‘SEC. 1005. CONSUMER SETTLEMENT ACCOUNTS. 

2 ‘‘(a) TRUST ACCOUNT REQUIRED.—A debt settle3 ment provider who receives funds from a consumer shall 

4 hold all funds received for a consumer settlement account 

5 in a properly designated trust account in a federally in6 sured depository institution. Such funds shall remain the 

7 property of the consumer until the debt settlement pro8 vider disburses the funds to a creditor on behalf of the 

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

10 debt to the creditor or the creditor’s claim against the con11 sumer. 

12 ‘‘(b) INDEPENDENT ADMINISTRATION OF AC13 COUNT.—A debt settlement provider may not hold funds 

14 received for a consumer settlement account under sub15 section (a) in an account administered by an entity that— 

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

17 affiliated with the debt settlement service provider; 

18 or 

19 ‘‘(2) gives or accepts any money or other com20 pensation in exchange for referrals of business in21 volving the debt settlement service provider. 

22 ‘‘(c) LIMITATIONS.—A debt settlement service pro23 vider shall not— 

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

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

26 bank account; 


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

2 bank account; 

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

4 held by or on behalf of the consumer; or 

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

6 bank account from any person other than the con7 sumer. 

8 ‘‘SEC. 1006. CANCELLATION OF CONTRACT. 

9 ‘‘(a) IN GENERAL.—A consumer may cancel a con10 tract with a debt settlement provider at any time. 

11 ‘‘(b) REFUNDS.— 

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

13 VIOLATION OF THIS TITLE.—If a consumer cancels 

14 a contract with a debt settlement provider not later 

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

16 contract or at any time upon a violation of a provi17 sion of this title by the debt settlement provider, the 

18 debt settlement provider shall refund to the con19 sumer all— 

20 ‘‘(A) fees paid to the debt settlement pro21 vider by the consumer, with the exception of 

22 any earned settlement fee; and 

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

24 debt settlement provider that— 


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1 ‘‘(i) have accumulated in a consumer 

2 settlement account; and 

3 ‘‘(ii) the debt settlement provider has 

4 not disbursed to creditors. 

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

6 consumer cancels a contract with a debt settlement 

7 provider later than 90 days after the date of the exe8 cution of the contract and for any reason other than 

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

10 settlement provider, the debt settlement provider 

11 shall refund to the consumer— 

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

13 the consumer, with the exception of any earned 

14 settlement fees; and 

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

16 debt settlement provider that have accumulated 

17 in a consumer settlement account and which the 

18 debt service provider has not disbursed to credi19 tors. 

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

21 provider shall make any refund required under this 

22 subsection not later than 5 business days after a no23 tice of cancellation is made on behalf of the con24 sumer under subsection (d). 


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1 ‘‘(4) STATEMENT OF ACCOUNT.—A debt settle2 ment provider making a refund to a consumer under 

3 this subsection shall include with such refund a full 

4 statement of account showing the following: 

5 ‘‘(A) The fees received by the debt settle6 ment provider from the consumer. 

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

8 the debt settlement provider. 

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

10 the debt settlement provider. 

11 ‘‘(D) The payments made by the debt set12 tlement provider to creditors on behalf of the 

13 consumer. 

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

15 the debt settlement provider by settling debt on 

16 behalf of the consumer. 

17 ‘‘(F) The savings of the consumer re18 funded to the consumer by the debt settlement 

19 provider. 

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

21 DIRECT DEBIT AUTHORIZATIONS.—Upon cancellation of 

22 a contract by a consumer— 

23 ‘‘(1) all powers of attorney and direct debit au24 thorizations granted to the debt settlement provider 

25 by the consumer are revoked and voided; and 


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1 ‘‘(2) the debt settlement provider shall imme2 diately take any action necessary to reflect cancella3 tion of the contract, including notifying the recipient 

4 of any direct debit authorization. 

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

6 Upon the cancellation of a contract under this section of 

7 the Act, the debt settlement provider shall provide timely 

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

9 creditors with whom the debt settlement provider has had 

10 any prior communication on behalf of the consumer in 

11 connection with the provision of any debt settlement serv12 ice. 

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

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

15 in all matters under this title. 

16 ‘‘SEC. 1008. INVALIDATION OF CONTRACTS. 

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

18 consumer of any protection provided or any right of the 

19 consumer under this title— 

20 ‘‘(1) is void; and 

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

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

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

24 any protection provided by or any right or protection of 

25 the consumer or any obligation or requirement of the debt 


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1 settlement provider under this title shall be considered a 

2 violation of a provision of this title. 

3 ‘‘(c) CONTRACTS NOT IN COMPLIANCE.—Any con4 tract for a debt settlement service that does not comply 

5 with the provisions of this title— 

6 ‘‘(1) shall be treated as void; 

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

8 and 

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

10 the debt settlement provider to the consumer shall 

11 be made as if the contract had been cancelled as 

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

13 ‘‘SEC. 1009. ADVERTISING, MARKETING, AND COMMUNICA14 TION PRACTICES. 

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

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

17 or other communication with consumers that represent or 

18 reflect results or outcomes, including about the percentage 

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

20 amount a consumer may save or the historical experience 

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

22 ‘‘(1) are materially different from the actual av23 erage result or outcome achieved by that debt settle24 ment provider on all of the debt of consumers who 

25 enter the program; or 


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

2 that documents that the described result or outcome 

3 was achieved for all debt enrolled in the program by 

4 at least 80 percent of the customers who began the 

5 service in the most recent 2 calendar year period. 

6 ‘‘SEC. 1010. RULEMAKING BY FEDERAL TRADE COMMIS7 SION. 

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

9 rules with respect to advertising and marketing practices, 

10 record retention, provision of accountings to consumers, 

11 and such other matters as the Commission considers nec12 essary to improve the consumer experience with debt set13 tlement providers. 

14 ‘‘(b) DEBT RELIEF SERVICE RULES.— 

15 ‘‘(1) IN GENERAL.—Except as provided in para16 graph (2), the Commission may prescribe rules with 

17 respect to the providers of debt relief service not 

18 otherwise covered by this title. 

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

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

21 include services provided by those persons or entities 

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

23 1001(7)(B). 

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

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


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1 service represented, directly or by implication, to re2 negotiate, or in any way alter the terms of payment 

3 or other terms of the debt between a consumer and 

4 one or more unsecured creditors or debt collectors, 

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

6 fees owed by a consumer to an unsecured creditor or 

7 debt collector. 

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

9 shall be conducted in accordance with section 553 of title 

10 5, United States Code, and shall not be subject to other 

11 procedures set forth in section 18 of the Federal Trade 

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

13 ‘‘SEC. 1011. CIVIL LIABILITY. 

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

15 provider who fails to comply with any provision of this 

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

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

18 determined under each of the following: 

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

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

21 sustained by such consumer as a result of such 

22 failure; or 

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

24 the debt settlement provider. 


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1 ‘‘(2) STATUTORY DAMAGES.—An amount deter2 mined by the court of not less than $1,000 nor more 

3 than $5,000 per violation. 

4 ‘‘(3) PUNITIVE DAMAGES.— 

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

6 any action by an individual, such additional 

7 amount as the court may allow. 

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

9 class action, the sum of— 

10 ‘‘(i) the aggregate of the amount 

11 which the court may allow for each named 

12 plaintiff; and 

13 ‘‘(ii) the aggregate of the amount 

14 which the court may allow for each other 

15 class member, without regard to any min16 imum individual recovery. 

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

18 successful action to enforce any liability under para19 graph (1), (2), or (3), the costs of the action, to20 gether with reasonable attorneys’ fees. 

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

22 PUNITIVE DAMAGES.—In determining the amount of any 

23 liability of any debt settlement provider under subsection 

24 (a)(2), the court shall consider, among other relevant fac25 tors— 


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1 ‘‘(1) the frequency and persistence of non2 compliance by the debt settlement provider; 

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

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

5 was intentional; and 

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

7 of consumers adversely affected. 

8 ‘‘SEC. 1012. ENFORCEMENT BY FEDERAL TRADE COMMIS9 SION. 

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

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

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

13 duties as though all applicable terms and provisions of the 

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

15 were incorporated into and made part of this title. 

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

17 A failure to comply with a provision of this title or a viola18 tion of a rule prescribed under section 1010 shall be treat19 ed as a violation of a rule defining an unfair or deceptive 

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

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

22 ‘‘SEC. 1013. ACTION BY STATES. 

23 ‘‘(a) IN GENERAL.—In any case in which the attor24 ney general of a State has reason to believe that an inter25 est of the residents of the State has been or is threatened 


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1 or adversely affected by the engagement of any person 

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

3 under section 1010 in a practice that violates such provi4 sion or rule, the State may, as parens patriae, bring a 

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

6 appropriate district court of the United States or other 

7 court of competent jurisdiction— 

8 ‘‘(1) to enjoin that practice; 

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

10 rule; or 

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

12 behalf of residents of the State. 

13 ‘‘(b) ATTORNEYS’ FEES.—In the case of any success14 ful action under paragraph (1), (2), or (3) of subsection 

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

16 shall be awarded the costs of the action and reasonable 

17 attorneys’ fees as determined by the court. 

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

19 ‘‘(1) NOTICE TO FEDERAL TRADE COMMIS20 SION.— 

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

22 subparagraph (C), the attorney general of a 

23 State shall notify the Federal Trade Commis24 sion in writing of any civil action under sub25 section (a), prior to initiating such civil action. 


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

2 subparagraph (A) shall include a copy of the 

3 complaint to be filed to initiate such civil ac4 tion. 

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

6 the attorney general of a State to provide the 

7 notice required by subparagraph (A), the State 

8 shall provide notice immediately upon insti9 tuting a civil action under subsection (a). 

10 ‘‘(2) INTERVENTION BY FEDERAL TRADE COM11 MISSION.—Upon receiving notice required by para12 graph (1) with respect to a civil action, the Commis13 sion may— 

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

15 ‘‘(B) upon intervening— 

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

17 such civil action; 

18 ‘‘(ii) remove the action to the appro19 priate district court of the United States; 

20 and 

21 ‘‘(iii) file petitions for appeal of a de22 cision in such action. 

23 ‘‘(d) INVESTIGATORY POWERS.—Nothing in this sec24 tion may be construed to prevent the attorney general of 

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1 torney general by the laws of such State to conduct inves2 tigations or to administer oaths or affirmations or to com3 pel the attendance of witnesses or the production of docu4 mentary and other evidence. 

5 ‘‘(e) EFFECT OF ACTION BY FEDERAL TRADE COM6 MISSION.—If the Federal Trade Commission institutes a 

7 civil action or an administrative action to enforce a viola8 tion of a provision of this title or a rule prescribed under 

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

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

11 any defendant named in the complaint of the Commission 

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

13 under section 1010 that is alleged in such complaint. 

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

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

16 brought by an attorney general of a State under 

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

18 in a State who are so authorized. 

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

20 in this section may be construed to prohibit an au21 thorized official of a State from proceeding in a 

22 court of such State on the basis of an alleged viola23 tion of any civil or criminal statute of such State. 


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1 ‘‘SEC. 1014. STATUTE OF LIMITATIONS. 

2 ‘‘Any action to enforce any liability under section 

3 1011 may be brought before the later of— 

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

5 the date of the occurrence of the violation involved; 

6 or 

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

8 provider has materially and willfully misrepresented 

9 any information that the debt settlement provider is 

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

11 any consumer and that is material to the establish12 ment of the debt settlement provider’s liability to the 

13 consumer under this title, the end of the 5-year pe14 riod beginning on the date of the discovery by the 

15 consumer of the violation. 

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

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

18 any person subject to the provisions of this title from com19 plying with the law of any State except to the extent that 

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

21 and then only to the extent of the inconsistency. For pur22 poses of this section, a State statute, regulation, order, 

23 or interpretation is not inconsistent with the provisions of 

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

25 or interpretation affords any person is greater than the 

26 protection provided under this title and any subsequent 


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1 amendments. Nothing in this title shall limit or prohibit 

2 a State from prohibiting or otherwise restricting the provi3 sion of debt settlement services, or imposing and admin4 istering a system of additional requirements, prohibitions, 

5 registration, or licensure.’’. 

6 (b) INITIAL REGULATIONS.— 

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

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

9 Trade Commission shall commence a rulemaking to 

10 prescribe the following: 

11 (A) The form of the written notices re12 quired under subparagraphs (M) and (N) of 

13 subsection (a)(2) and subsection (b)(5) of sec14 tion 1002 of the Consumer Credit Protection 

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

16 (B) The form of the statement required 

17 under subsection (e) of such section 1002. 

18 (2) DEADLINE.—The Federal Trade Commis19 sion shall complete the rulemaking required by para20 graph (1) not later than 1 year after the date of the 

21 enactment of this Act. 

22 (3) PROCEDURE.—All rulemaking under para23 graph (1) shall be conducted in accordance with sec24 tion 553 of title 5, United States Code, and shall 

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1 tion 18 of the Federal Trade Commission Act (15 

2 U.S.C. 57a). 

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

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

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

6 the date of the enactment of this Act. 

Æ 


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