Honorable SamKelley Opinion No. &766 

Consumer Credit Commissioner 

1011 San Jacinto Re: Whether a certain plan of 

P. 0. BOX 2107 

Austin, Texas 78767 

payment to discharge prior 

debts of a client by intercession of a certain credit 

counseling service between 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, violates Article 5069-9.02, Vernon's civil Statutes. 

Article 5069-9.02 prohibits debt pooling contracts and 

provides that such contracts shall be void and of no effect. A 

debt pooling contract is defined in the following manner in 

Article 5069-9.02: 

"(1) Except as provided in Article 9.03 nothing 

herein shall be construed to permit any debt pooling 

contracts wherein a contract is entered into by any 

person with a debtor by the terms of which contract 

the debtor agrees to deposit periodically or otherwise with such person a specified sum of money and 

said person 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 described herein shall be 

void and of no effect." (Emphasis added). 

Article 5069-9.03 further provides as follows: 

"The provisions of Article 9.02 shall not apply 

to: 

(a) Any bank, savings and loan association, trust 

company or credit union doing business under the 

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.Hon. Sam Kelley, page 2 (M-766) 

laws of this State or of the United States; 

b 

[I 

Any attorney at law; 

C Any judicial officer or other person 

acting under the orders of a court of this 

State or of the United States; 

(d) Any agency, instrumentality or subdivision of this State or of the United States; 

(e) Any retail merchants association or nonprofit trade association formed for the purpose 

of collecting accounts and exchanging credit 

information; and 

(f) Any non-profit organization providing debtcounseling services to citizens of this State." 

Article 5069-9.04 further provides as follows: 

"Any person violating Article 9.02 shall be 

guilty of a misdemeanor, and upon conviction 

shall be fined not less than One Hundred Dollars 

nor more than Five Hundred Dollars for each conviction. Each act of debt pooling as defined in 

Article 9.02 shall constitute a separate offense." 

The rules of construction ap 

8 

licable to Article 5069-9.01, 

et seq, are set out by Article 50 q-50.01. Therein it is provided, in part, that: 

"Unless specifically altered 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 this Act." 

Article 10 contains the general rule of construction of laws. 

Sections 6 and 8 thereof are particularly relevant here and it 

is our opinion that we must construe Article 5069-9.01, et seq, 

more liberally than would ordinarily be the case where misdemeanor 

penalties are provided. 

With these principles in mind it is clear from a reading of 

the statute that the Legislature intended to prohibit debt pooling 

contracts wherein a debtor, by contract, becomes obligated to 

deposit with a person, periodically or otherwise, specified sums 

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Hon. Sam Kelley, page 3 (M- 766) 

of money, and that person agrees to distri,bute said sums of 

money among the creditors of the debtor, and the debtor further 

agrees to pay valuable consideration for the service, except 

where this service is provided by one of the persons expressly 

enumerated in Section 9.03. In other words, those persons enumerated in Section 9.03 may, by contract, do that which is 

otherwise prohibited by Section 9.02. Credit Counseling of 

Houston, Texas, does not fall within one of the exemptions contained within Section 9.03. 

Credit Counseling of Houston, Texas, operates under the 

terms of the contract you have submitted with 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 Counseling of Houston, Texas, 

to effecta distribution of money to the list of creditors submitted to it by the debtor. This is part of that which is prohibited by contract under Section 9.02. 

Neither the contract nor the facts submitted demonstrate 

that the debtor Is required to deposit monies directly with 

Credit.Counseling. On the contrary, the contract requires the 

debtor to set up a bank account to which money is directed and 

from which, 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 deposit monies to one of the 

persons ordinarily exempt under Section 9.03 (a bank, in this 

instance) does not suffice to remove them contract of Credit 

Counseling from that express prohibition 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 .a practical matter, effectively controls the income of the debtor to the same extend as 

where the debtor deposits money directly with and to the account 

of Credit Caunseling. 

The further prohibited requirement that the debtor pay 

valuable consideration for services rendered Is contained in the 

contract and completely brings the contract of Credit Counseling 

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Hon. Sam Kelley, page 4 (M- 766) 

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 

enumerated 

------- SUMMARY 

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 from which disbursements to a list of creditors submitted to such 

person are made, and such person is, under the 

terms of that contract, obligated to work 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 debt pooling 

contract within the terms of Article 5069-9.02, 

V.C.S., and expressly prohibifi thereby. 

Yc@ 6 very truly, * 

z%i?A.& . 

. MARTIN 

eneral of Texas 

Prepared by Rex H. White, Jr. 

Assistant Attorney 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 

First Assistant 

ALFREDWALKER 

Executive Assistant 

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