Honorable SamKelley Opinion No. &766

Consumer Credit Commissioner 1011 San Jacinto Re: Whether a certainplan of P. 0. **BOX** 2107 Austin, Texas 78767 payment to dischargeprior debts of a client by intercession of a certain credit counseling servicebetween the client and his debtors and creditors is in violation of Dear Mr. Kelley: Article 5069-9.02, V.C.S.

In your recent letter you request this office to render an opinion on whether the contract of Credit Counseling of Houston, Texas, violatesArticle 5069-9.02, Vernon's civil Statutes.
Article 5069-9.02 prohibits debt pooling contracts and provides that such contracts shallbe void and of no effect. A debtpooling contract is defined in the followingmanner in Article 5069-9.02:

"(1) Except as provided in Article 9.03 nothing herein shall be construed to permit any debt pooling contractswherein a contract is entered into by any person with a debtor by the terms of which contract the debtor agrees to deposit periodicallyor otherwise with suchperson a specified sum of money and saidperson agrees to distribute said sums of money among creditors of the debtor, for which service the debtor agrees to pay a valuable consideration.
"(2) Any such contract as describedherein shallbe void and of no effect." (Emphasisadded).
Article 5069-9.03 furtherprovides as follows:

"The provisions of Article 9.02 shallnot apply to: (a) Any bank, savings and loan association, trust company or credit union doing businessunder the

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laws of this State or of the United States; b [I Any attorney at law;

**C** Any judicialofficer or other person acting under the orders of a court of this State or of theUnited States; (d) Any agency, instrumentalityor subdivision of this State or of the United States; (e) Any retailmerchants association or nonprofit trade association formed for the purpose of collectingaccounts and exchanging credit information;and (f) Any non-profit organizationproviding debtcounseling services to citizens of this State."
Article 5069-9.04 furtherprovides as follows:
"Any person violatingArticle 9.02 shall be guilty of a misdemeanor, and upon conviction shall be finednot less than One Hundred Dollars
nor more thanFive Hundred Dollars for each conviction. Each act of debt pooling as defined in Article 9.02 shall constitutea separate offense."

The rules of constructionap8licable toArticle 5069-9.01, et seq, are set out by Article 50 q-50.01. Therein it is provided, in part, that:

"Unless specificallyaltered by this Act or unless the context requires otherwise, the provisions of Article 10, 11, 12, 14, 22, and 23, Revised Civil Statutes of Texas, 1925,.

. . apply to thisAct."
Article 10 contains the general rule of construction of laws. Sections 6 and 8 thereof are particularly relevant here and it is our opinion thatwe must construeArticle 5069-9.01, et seq, more liberally thanwould ordinarily be the case where misdemeanor penalties are provided.
With theseprinciples in mind it is clear from a reading of the statute that the Legislature intended to prohibit debt pooling contractswherein a debtor,by contract, becomes obligated to depositwith a person, periodically or otherwise, specified sums

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of money, and thatperson agrees to distri,bute said sums of money among the creditors of the debtor, and the debtor further agrees to pay valuable considerationfor the service, except where this service is provided by one of thepersons expressly enumerated in Section 9.03. In otherwords, thosepersons enumerated in Section 9.03may, by contract,do thatwhich is otherwiseprohibited by Section 9.02. Credit Counseling of Houston, Texas, does not fallwithin one of the exemptions containedwithin Section 9.03.
Credit Counseling of Houston, Texas, operatesunder the terms of the contractyou have submittedwith your opinion request. Construction of that contract, in light of the facts submitted.in your letter,presents a close question for our determination. We are, however, constrained to hold that the tenor and purpose of the contract,while ambiguous in some respects, does evidence an obligation on the part of.Credit Counselingof Houston, Texas, to effecta distribution of money to the list of creditors submitted to it by the debtor. This is part of thatwhich is prohibited by contract under Section 9.02.
Neither the contractnor the facts submitteddemonstrate that the debtor Is required to depositmonies directlywith Credit.Counseling. On the contrary, the contractrequires the debtor to set up a bank account to which money is directed and fromwhich, presumably, only the debtor can.withdraw funds. However,we are further constrained to hold that the mere artifice of requiring,by contract, a debtor to depositmonies to one of the persons ordinarily exempt under Section 9.03 (abank, in this instance)does not suffice to remove them contract of Credit Counseling from that expressprohibition of Section 9.02. It is the control over the debtor by persons other than those enumerated in Section 9.03 which we hold, under the contract and facts submitted, the Legislature intended to prohibit. The;contract,viewed inlight of the,facts submitted in your letter, illustrates that Credit Counseling,as .apracticalmatter, effectively controls the income of the debtor tothe same extend as where the debtor depositsmoney directlywith and to the account of Credit Caunseling.

The furtherprohibited requirement that the debtor pay valuable consideration for servicesrendered Is contained in the contract and completelybrings the contract of Credit Counseling

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within the proscription of Section 9.02.

The scope of this ooinion is limited to an analvsis of the written contract and-the facts submitted in your-letter.

A contract enumeratedSUMMARY

------- between a debtor and a person not In Article 5069-9.03,wherein the person by said contract requires the debtor to set up a bank account fromwhich disbursements to a list of creditors submitted to such person are made, and such person is, under the terms of that contract, obligated towork out
a plan of disbursements to creditors,and the person redeives valuable consideration for the arrangement of the plan of payment to the creditors of the debtor, is a debtpooling contractwithin the terms of Article 5069-9.02, V.C.S., and expresslyprohibifi thereby.



# Yc@ 6 very truly,

* 

# z%i?A.& .

. MARTIN eneral of Texas
Prepared by Rex H. White, Jr. AssistantAttorney General

APPROVED: OPINION COMMITTEE

Kerns Taylor, Chairman Bill Allen, Co-Chairman John H. Banks Roger Tyler Jim Swearingen Jay Floyd Ralph Rash

MEADE F. GRIFFIN Staff Legal As~sistant NOLR WHITE FirstAssistant ALFREDWALKER Executive Assistant

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