I 
108TH CONGRESS 
1ST SESSION H. R. 3331
To amend the Consumer Credit Protection Act to protect consumers from 
unfair and deceptive practices by organizations providing debt counseling, 
debt consolidation, or debt settlement services, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
OCTOBER 17, 2003
Ms. CARSON of Indiana (for herself, Mr. OWENS, Mr. LIPINSKI, Mrs. 
NAPOLITANO, Mrs. JONES of Ohio, Mr. RYAN of Ohio, Mr. DAVIS of Illi-
nois, Mr. HINCHEY, Mr. THOMPSON of Mississippi, Ms. LEE, and Mr. 
SANDERS) introduced the following bill; which was referred to the Com-
mittee on Financial Services 
A BILL 
To amend the Consumer Credit Protection Act to protect 
consumers from unfair and deceptive practices by organi-
zations providing debt counseling, debt consolidation, or 
debt settlement services, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Debt Counseling, Debt 
Consolidation, and Debt Settlement Practices Improve-
ment Act of 2003’’.
SEC. 2. DEBT COUNSELING, DEBT CONSOLIDATION, AND 
DEBT SETTLEMENT PRACTICES. 
The Consumer Credit Protection Act (15 U.S.C. 
1601 et seq.) is amended by adding at the end the fol-
lowing new title: 
‘‘TITLE 
X—DEBT 
COUNSELING, 
DEBT CONSOLIDATION, AND 
DEBT 
SETTLEMENT 
PRAC-
TICES 
‘‘SEC. 1001. SHORT TITLE; TABLE OF CONTENTS. 
‘‘(a) SHORT TITLE.—This title may be cited as the 
‘‘Debt Counseling, Debt Consolidation, and Debt Settle-
ment Practices Act’’. 
‘‘(b) TABLE OF CONTENTS.—The table of contents 
for this title is as follows:
‘‘TITLE X—DEBT COUNSELING, DEBT CONSOLIDATION, AND 
DEBT SETTLEMENT PRACTICES 
‘‘Sec. 1001. Short title; table of contents. 
‘‘Sec. 1002. Definitions. 
‘‘Sec. 1003. Prohibited practices. 
‘‘Sec. 1004. Debt counseling, debt consolidation, or debt settlement organi-
zation contracts. 
‘‘Sec. 1005. Right to cancel contract. 
‘‘Sec. 1006. Noncompliance with this title. 
‘‘Sec. 1007. Registration of organization. 
‘‘Sec. 1008. Civil liability. 
‘‘Sec. 1009. Administrative enforcement. 
‘‘Sec. 1010. Statute of limitations. 
‘‘Sec. 1011. Relation to State law. 
‘‘Sec. 1012. Effective date.
‘‘SEC. 1002. DEFINITIONS. 
‘‘For purposes of this title, the following definitions 
shall apply:
‘‘(1) COMMISSION.—The term ‘Commission’ 
means the Federal Trade Commission. 
‘‘(2) CONSUMER.—The term ‘consumer’ means 
an individual. 
‘‘(3) CREDITOR.—The term ‘creditor’ has the 
same meaning as in section 103. 
‘‘(4) DEBT CONSOLIDATION.—The term ‘debt 
consolidation’ means a transaction involving a loan 
or other extension of credit to a consumer for a pur-
pose that at least includes the repayment in full of 
2 or more existing loans or extensions of credit to 
the consumer, without regard to whether any of such 
existing loans or extensions of credit is in troubled 
condition. 
‘‘(5) DEBT CONSOLIDATION ORGANIZATION.—
The term ‘debt consolidation organization’—
‘‘(A) means any person who uses any in-
strumentality of interstate commerce or the 
mails to sell, provide, or perform (or represent 
that such person can or will sell, provide, or 
perform) any service, in return for the payment 
of money or other valuable consideration, for 
the express or implied purpose of—
‘‘(i) engaging in a debt consolidation 
transaction with a consumer; or
‘‘(ii) providing any advice or assist-
ance to any consumer with regard to any 
activity or service which results in or may 
result in a debt consolidation transaction; 
‘‘(B) includes any nonprofit organization 
which is exempt from taxation under section 
501(c)(3) of the Internal Revenue Code of 1986 
other than an organization described in sub-
paragraph (C); and 
‘‘(C) does not include—
‘‘(i) any creditor, with respect to any 
consumer, to the extent the creditor is as-
sisting the consumer to restructure any 
debt owed by the consumer to the creditor; 
‘‘(ii) any depository institution (as 
that term is defined in section 3 of the 
Federal Deposit Insurance Act) or any 
Federal or State credit union (as those 
terms are defined in section 101 of the 
Federal Credit Union Act), or any affiliate 
or subsidiary of such a depository institu-
tion or credit union; 
‘‘(iii) any government-sponsored en-
terprise (as defined in section 1404(e)(1)
of the Financial Institutions Reform, Re-
covery, and Enforcement Act of 1989); 
‘‘(iv) any attorney at law, if providing 
debt counseling, debt consolidation, or debt 
settlement services are incidental to, and 
not the principal business of, the practice 
of such attorney; 
‘‘(v) any certified public accountant, if 
providing debt counseling, debt consolida-
tion, or debt settlement services are inci-
dental to, and not the principal business 
of, the accounting practice of such ac-
countant; 
‘‘(vi) any title insurer or abstract 
company, while doing escrow business; or 
‘‘(vii) a judicial officer or person act-
ing under court order. 
‘‘(6) DEBT COUNSELING ORGANIZATION.—The 
term ‘debt counseling organization’ means any per-
son who—
‘‘(A) uses any instrumentality of interstate 
commerce or the mails to provide education, 
counseling to individuals or groups, or debt 
management services to help consumers manage 
money and credit; and
‘‘(B) is not a debt consolidation organiza-
tion or a debt settlement organization. 
‘‘(7) DEBT SETTLEMENT.—The term ‘debt set-
tlement’ means any action or negotiation initiated or 
taken by or on behalf of any consumer with any 
creditor of the consumer for the purpose of obtain-
ing debt forgiveness of a portion of the credit ex-
tended by the creditor to the consumer, or troubled 
debt restructuring on terms that are more favorable 
to the consumer. 
‘‘(8) DEBT SETTLEMENT ORGANIZATION.—The 
term ‘debt settlement organization’—
‘‘(A) means any person who uses any in-
strumentality of interstate commerce or the 
mails to sell, provide, or perform (or represent 
that such person can or will sell, provide, or 
perform) any service, in return for the payment 
of money or other valuable consideration, for 
the express or implied purpose of—
‘‘(i) providing any debt settlement 
service to, for, or on behalf of a consumer; 
or 
‘‘(ii) providing any advice or assist-
ance to any consumer with regard to any 
activity or service described in clause (i);
‘‘(B) includes any nonprofit organization 
which is exempt from taxation under section 
501(c)(3) of the Internal Revenue Code of 1986 
other than an organization described in sub-
paragraph (C); and 
‘‘(C) does not include—
‘‘(ii) any creditor, with respect to any 
consumer, to the extent the creditor is as-
sisting the consumer to restructure any 
debt owed by the consumer to the creditor; 
‘‘(iii) any depository institution (as 
that term is defined in section 3 of the 
Federal Deposit Insurance Act) or any 
Federal or State credit union (as those 
terms are defined in section 101 of the 
Federal Credit Union Act), or any affiliate 
or subsidiary of such a depository institu-
tion or credit union; 
‘‘(iv) any attorney at law, if providing 
debt counseling, debt consolidation, or debt 
settlement services are incidental to, and 
not the principal business of, the practice 
of such attorney; 
‘‘(v) any certified public accountant, if 
providing debt counseling, debt consolida-
tion, or debt settlement services are inci-
dental to, and not the principal business 
of, the accounting practice of such ac-
countant; 
‘‘(vi) any title insurer or abstract 
company, while doing escrow business; or 
‘‘(vii) a judicial officer or person act-
ing under court order. 
‘‘SEC. 1003. PROHIBITED PRACTICES.
‘‘(a) IN GENERAL.—A debt counseling organization, 
a debt consolidation organization and a debt settlement 
organization may not—
‘‘(1) unreasonably disclose information to third 
parties regarding amounts owed by any consumer; 
‘‘(2) make any fraudulent, deceptive, or mis-
leading representation to obtain information about 
any consumer, to solicit business with any consumer, 
or in connection with providing services for or on be-
half of any consumer; 
‘‘(3) use any unconscionable means to obtain a 
contract with any consumer collect or attempt to col-
lect a debt owed to the seller; 
‘‘(4) advertise, announce, solicit, or otherwise 
represent as free or available without charge (includ-
ing by use of other words of similar meaning) any
tionship or reciprocal referral agreement to the con-
sumer; 
‘‘(2) fully discloses, orally and in writing, the 
detail of the financial relationship between the debt 
counseling organization and the debt consolidation 
or debt settlement organization, including the extent 
to which the debt counseling organization benefits fi-
nancially from any services or advice provided by the 
counseling organization to the consumer that results 
in any debt consolidation or debt settlement con-
tract, agreement, or transaction between the con-
sumer and the debt consolidation or debt settlement 
organization; and 
‘‘(3) such other information as the Commission 
may require in regulations. 
‘‘(c) DIVERSION
OF PERIODIC PAYMENTS FROM 
CREDITOR TO DEBT SETTLEMENT ORGANIZATION.—
‘‘(1) OFFER
OR
ADVICE
TO
CONSUMER.—No 
debt counseling organization, debt consolidation or-
ganization, or debt settlement organization may sug-
gest or advise any consumer to stop making any 
payment or any portion of any payment, whether 
periodic or otherwise, due from the consumer to any 
creditor under the terms of a loan or extension of 
credit from the creditor to the consumer for the pur-
pose of facilitating debt settlement negotiations with 
such creditor by or on behalf of the consumer, unless 
the organization provides full written disclosure to 
the consumer, and obtains a signed statement from 
the consumer that the consumer has read and un-
derstood the disclosure, that—
‘‘(A) such action is or may be a violation 
of the terms of the agreement between the con-
sumer and the creditor if the creditor has not 
agreed in writing to a new payment arrange-
ment; 
‘‘(B) the failure to make timely payments 
on any loan or extension of credit in accordance 
with the terms of the contract—
‘‘(i) will be, or is likely to be, reported 
as a late payment or a nonpayment to a 
consumer reporting agency; 
‘‘(ii) will, or is likely to have, an ad-
verse effect on the creditworthiness of the 
consumer such that the consumer may 
have difficulty obtaining credit; and 
‘‘(C) if the consumer has not missed or 
failed to make payments to the creditor, such 
action may not be necessary in order for the
consumer to obtain debt settlement from the 
creditor. 
‘‘(2) ACCEPTANCE
OF
PAYMENTS
DIVERTED 
FROM A CREDITOR.—No debt settlement organiza-
tion may accept or hold any payments from a con-
sumer intended for a creditor after a settlement has 
been reached between the creditor and the debt set-
tlement organization beyond a reasonable amount of 
time necessary solely for payment-processing pur-
poses. 
‘‘(d) PAYMENT IN ADVANCE.—
‘‘(1) IN GENERAL.—No debt counseling organi-
zation, debt consolidation organization, or debt set-
tlement organization may collect any payment from 
a consumer prior to the payment being earned as 
specifically defined in the contract between the par-
ties. 
‘‘(2) FULL
OR
FINAL
PAYMENT.—No debt 
counseling organization, debt consolidation organiza-
tion, or debt settlement organization may charge or 
receive full or final payment for the performance of 
any service which such organization has agreed to 
perform for any consumer before such service is fully 
performed by both parties in accordance with the 
contract between the parties.
‘‘SEC. 1004. DEBT COUNSELING, DEBT CONSOLIDATION, OR 
DEBT 
SETTLEMENT 
ORGANIZATION 
CON-
TRACTS. 
‘‘(a) WRITTEN CONTRACTS REQUIRED.—No services 
that require any payment, voluntary donation, fee, or 
other consideration may be provided by any debt coun-
seling organization, debt consolidation organization, or 
debt settlement organization for any consumer unless a 
written and dated contract (for the purchase of such serv-
ices) which meets the requirements of subsection (b) has 
been signed by the consumer. 
‘‘(b) TERMS AND CONDITIONS OF CONTRACT.—No 
contract referred to in subsection (a) meets the require-
ments of this subsection unless such contract includes (in 
writing)—
‘‘(1) the terms and conditions of payment, in-
cluding—
‘‘(A) a reasonable estimate of all payments 
and fees to be made by the consumer to the 
debt counseling organization, debt consolidation 
organization, or debt settlement organization or 
to any other person over the term of the con-
tract, including a maximum amount; and 
‘‘(B) the amount of any monthly or other 
periodic payment required under the contract to 
any such organization or other person, the
number of such monthly or other periodic pay-
ments, and the terms applicable with respect to 
such payments and any late payment of, or de-
fault on, any such amount; 
‘‘(2) a full and detailed description of the serv-
ices to be performed by the debt counseling organi-
zation, debt consolidation organization, or debt set-
tlement organization for the consumer, including—
‘‘(A) all guarantees of performance; and 
‘‘(B) an estimate of—
‘‘(i) the date by which the perform-
ance of the services (to be performed by 
the organization or any other person) will 
be complete; or 
‘‘(ii) the length of the period nec-
essary to perform such services; 
‘‘(3) the name and principal business address of 
the debt counseling organization, debt consolidation 
organization, or debt settlement organization; 
‘‘(4) a conspicuous statement in bold face type, 
in immediate proximity to the space reserved for the 
consumer’s signature on the contract, which reads as 
follows: ‘‘You may cancel this contract without pen-
alty or obligation at any time before midnight of the 
3rd business day after the date on which you signed
the contract. See the attached notice of cancellation 
form for an explanation of this right.’’; and 
‘‘(5) no charges or fees may be imposed by the 
debt counseling organization, debt consolidation or-
ganization, or debt settlement organization for any 
activities or services undertaken on behalf of the 
consumer by the organization before the end of the 
3-business-day period beginning on the date the con-
tract is signed, if the consumer exercises the right 
to cancel the contract before the end of such period. 
‘‘SEC. 1005. RIGHT TO CANCEL CONTRACT. 
‘‘(a) IN GENERAL.—Any consumer may cancel any 
contract with any debt counseling organization, debt con-
solidation organization, or debt settlement organization 
without penalty or obligation by notifying the organization 
of the consumer’s intention to do so at any time before
midnight of the 3rd business day which begins after the 
date on which the contract or agreement between the con-
sumer and the organization is executed or would, but for 
this subsection, become enforceable against the parties. 
‘‘(b) CANCELLATION FORM AND OTHER INFORMA-
TION.—Each contract shall be accompanied by a form, in 
duplicate, which has the heading ‘Notice of Cancellation’ 
and contains in bold face type the following statement:
‘You may cancel this contract, with-
out any penalty or obligation, at any time 
before midnight of the 3rd day which be-
gins after the date the contract is signed 
by you. 
‘To cancel this contract, mail or de-
liver in person a signed, dated copy of 
this cancellation notice, or any other 
written notice to [ name of debt coun-
seling organization, debt consolidation 
organization, 
or 
debt 
settlement 
organization ] 
at 
[ address 
of 
such 
organization ] 
before 
midnight 
on 
[ date ] 
‘I hereby cancel this transaction, 
[ date ] 
[ purchaser’s signature ].’.
‘‘(c) CONSUMER COPY OF CONTRACT REQUIRED.—
Any consumer who enters into any contract with any debt 
counseling organization, debt consolidation organization, 
or debt settlement organization shall be given, by the orga-
nization—
‘‘(1) a copy of the completed contract and the 
disclosure statement required under section 1004; 
and
‘‘(2) a copy of any other document the organi-
zation requires the consumer to sign, 
at the time the contract or the other document is signed. 
‘‘(d) RETENTION
OF CONTRACT RECORDS.—Any 
debt counseling organization, debt consolidation organiza-
tion, and debt settlement organization shall maintain a 
copy of the contract signed by the consumer for not less 
than 3 years after the date the services provided under 
the contract have been fully performed, together with the 
complete name, address, and phone number of the con-
sumer at the time the contract became effective. 
‘‘SEC. 1006. NONCOMPLIANCE WITH THIS TITLE. 
‘‘(a) CONSUMER WAIVERS INVALID.—Any waiver by 
any consumer of any protection provided by or any right 
of the consumer under this title— 
‘‘(1) shall be treated as void; and 
‘‘(2) may not be enforced by any Federal or 
State court or any other person. 
‘‘(b) ATTEMPT TO OBTAIN WAIVER.—Any attempt 
by any person to obtain a waiver from any consumer of 
any protection provided by or any right of the consumer 
under this title shall be treated as a violation of this title. 
‘‘(c) CONTRACTS NOT IN COMPLIANCE.—Any con-
tract for services which does not comply with the applica-
ble provisions of this title—
‘‘(1) shall be treated as void; and 
‘‘(2) may not be enforced by any Federal or 
State court or any other person. 
‘‘SEC. 1007. REGISTRATION OF ORGANIZATION. 
‘‘Any person who owns or controls a debt counseling 
organization, debt consolidation organization, or debt set-
tlement organization shall register the organization 
(whether or not the organization is licensed as a debt 
counseling organization, debt consolidation organization, 
or debt settlement organization in any State) with the Sec-
retary of the Treasury not later than the end of the 180-
day period beginning on the later of—
‘‘(A) the date of enactment of the Debt 
Counseling, Debt Consolidation, and Debt Set-
tlement Practices Improvement Act of 2003; or 
‘‘(B) the date on which the organization is 
established. 
‘‘(2) FORM AND MANNER OF REGISTRATION.—
Subject to the requirements of subsection (b), the 
Secretary of the Treasury shall prescribe, by regula-
tion, the form and manner for registering a debt 
counseling organization, debt consolidation organiza-
tion, or debt settlement organization pursuant to 
paragraph (1) which may be consistent with the reg-
istration requirements for money transmitting busi-
nesses under section 5130 of title 31, United States 
Code. 
‘‘(3) ORGANIZATIONS
REMAIN
SUBJECT
TO 
STATE LAW.—This section shall not be construed as 
superseding any requirement of State law relating to 
debt counseling organizations, debt consolidation or-
ganizations, or debt settlement organizations oper-
ating in such State, except to the extent provided in 
section 1011. 
‘‘(4) FALSE AND INCOMPLETE INFORMATION.—
The filing of false or materially incomplete informa-
tion in connection with the registration of a debt 
counseling organization, debt consolidation organiza-
tion, or debt settlement organization shall be consid-
ered as a failure to comply with the requirements of 
this section. 
‘‘(b) CONTENTS OF REGISTRATION.—The registra-
tion of a debt counseling organization, debt consolidation 
organization, or debt settlement organization under sub-
section (a) shall include the following information: 
‘‘(1) The name and location of the organization. 
‘‘(2) The name and address of each person 
who—
‘‘(A) owns or controls the organization;
‘‘(B) is a director or officer of the organi-
zation; or 
‘‘(C) otherwise participates in the conduct 
of the affairs of the organization. 
‘‘(3) Such other information as the Federal 
Trade Commission may require. 
‘‘(c) CIVIL PENALTY
FOR FAILURE TO COMPLY 
WITH REGISTRATION REQUIREMENTS.—
‘‘(1) IN GENERAL.—Any person who fails to 
comply with any requirement of this section or any 
regulation prescribed under this section shall be lia-
ble to the United States for a civil penalty of $5,000 
for each such violation. 
‘‘(2) CONTINUING VIOLATION.—Each day a vio-
lation described in paragraph (1) continues shall
constitute a separate violation for purposes of such 
paragraph. 
‘‘(3) ASSESSMENTS.—Any penalty imposed 
under this subsection shall be assessed and collected 
by the Secretary of the Treasury in the manner pro-
vided in section 5321 of title 31, United States 
Code. 
‘‘SEC. 1008. CIVIL LIABILITY. 
‘‘(a) LIABILITY ESTABLISHED.—Any person who 
fails to comply with any provision of this title with respect
to any other person shall be liable to such person in an 
amount equal to the sum of the amounts determined 
under each of the following paragraphs: 
‘‘(1) ACTUAL DAMAGES.—The greater of—
‘‘(A) the amount of any actual damage 
sustained by such person as a result of such 
failure; or 
‘‘(B) any amount paid by the person to the 
debt counseling organization, debt consolidation 
organization, or debt settlement organization. 
‘‘(2) GENERAL DAMAGES.—
‘‘(A) INDIVIDUAL ACTIONS.—In the case of 
any action by an individual, such additional 
amount as the court may allow. 
‘‘(B) CLASS ACTIONS.—In the case of a 
class action, the sum of—
‘‘(i) the aggregate of the amount 
which the court may allow for each named 
plaintiff; and 
‘‘(ii) the aggregate of the amount 
which the court may allow for each other 
class member, without regard to any min-
imum individual recovery. 
‘‘(3) ATTORNEYS’ FEES.—In the case of any 
successful action to enforce any liability under para-
graph (1) or (2), the costs of the action, together 
with reasonable attorneys’ fees. 
‘‘(b) FACTORS TO BE CONSIDERED IN AWARDING 
GENERAL DAMAGES.—In determining the amount of any 
liability of any debt counseling organization, debt consoli-
dation organization, or debt settlement organization under 
subsection (a)(2), the court shall consider, among other 
relevant factors—
‘‘(1) the frequency and persistence of non-
compliance by the organization; 
‘‘(2) the nature of the noncompliance; 
‘‘(3) the extent to which such noncompliance 
was intentional; and 
‘‘(4) in the case of any class action, the number 
of consumers adversely affected. 
‘‘SEC. 1009. ADMINISTRATIVE ENFORCEMENT. 
‘‘(a) FEDERAL TRADE COMMISSION.—
‘‘(1) IN GENERAL.—Except as provided in sub-
section (b), compliance with the requirements im-
posed under this title with respect to debt counseling 
organizations, debt consolidation organizations, and 
debt settlement organizations shall be enforced 
under the Federal Trade Commission Act by the 
Federal Trade Commission.
‘‘(2) VIOLATIONS OF THIS TITLE TREATED AS 
VIOLATIONS
OF
FEDERAL
TRADE
COMMISSION 
ACT.—
‘‘(A) IN
GENERAL.—For the purpose of 
the exercise by the Federal Trade Commission 
of the Commission’s functions and powers 
under the Federal Trade Commission Act, any 
violation of any requirement or prohibition im-
posed under this title with respect to debt coun-
seling organizations, debt consolidation organi-
zations, and debt settlement organizations shall 
constitute an unfair or deceptive act or practice 
in commerce in violation of section 5(a) of the 
Federal Trade Commission Act. 
‘‘(B) ENFORCEMENT
AUTHORITY
UNDER 
OTHER LAW.—All functions and powers of the 
Federal Trade Commission under the Federal 
Trade Commission Act shall be available to the 
Commission to enforce compliance with this 
title by any person subject to enforcement by 
the Federal Trade Commission pursuant to this 
subsection, including the power to enforce the 
provisions of this title in the same manner as 
if the violation had been a violation of any Fed-
eral Trade Commission trade regulation rule,
without regard to whether the debt counseling 
organization, debt consolidation organization, or 
debt settlement organization—
‘‘(i) is engaged in commerce; or 
‘‘(ii) meets any other jurisdictional 
tests in the Federal Trade Commission 
Act. 
‘‘(b) CIVIL PENALTIES.—
‘‘(1) PENALTY
AUTHORIZED.—The Federal 
Trade Commission may impose a civil penalty on 
any debt counseling organization, debt consolidation 
organization, or debt settlement organization that 
violates any provision of this title other than section 
1007. 
‘‘(2) MAXIMUM
AMOUNT
LIMITATION.—The 
amount of any civil money penalty imposed under 
paragraph (1) shall not exceed—
‘‘(A) in the case of any person who know-
ingly or recklessly violates this title, the greater 
of—
‘‘(i) the amount (not to exceed 
$100,000) of the debt of the consumer 
that was subject to debt counseling, debt 
consolidation, or debt settlement; or 
‘‘(ii) $25,000; and
‘‘(B) in the case of any person who neg-
ligently violates this title, $2000. 
‘‘(3) CONTINUING
VIOLATIONS.—Each day a 
violation continues under this title shall be treated 
as a separate violation. 
‘‘(4) TIME
LIMITATIONS
FOR
ASSESSMENTS 
AND COMMENCEMENT OF CIVIL ACTIONS.—
‘‘(A) ASSESSMENTS.—The Federal Trade 
Commission may assess a civil penalty under 
this subsection at any time before the end of 
the 6-year period beginning on the date of the 
violation with respect to which the penalty is 
assessed.
‘‘(B) CIVIL
ACTIONS.—The Commission 
may commence a civil action to recover a civil 
penalty assessed under this subsection at any 
time before the end of the 2-year period begin-
ning on the date the penalty was assessed in 
any court with jurisdiction. 
‘‘(5) CRIMINAL PENALTY NOT EXCLUSIVE OF 
CIVIL PENALTY.—A civil money penalty may be im-
posed under this subsection with respect to any vio-
lation of this title (other than section 1007) notwith-
standing the fact that a criminal penalty is imposed 
with respect to the same violation.
‘‘(6) PATTERN
OF
NEGLIGENT
ACTIVITY.—If 
any debt counseling organization, debt consolidation 
organization, or debt settlement organization en-
gages in a pattern of negligent violations of any pro-
vision of this title (other than section 1007), or any 
regulation prescribed under this title, the Federal 
Trade Commission may, in addition to any penalty 
imposed under paragraph (2)(B) with respect to any 
such violation, impose a civil money penalty of not 
more than $50,000 on such organization. 
‘‘(7) PROCEDURAL PROVISIONS.—
‘‘(A) AUTHORITY
TO
MODIFY
OR
REMIT 
PENALTY.—The Federal Trade Commission 
may compromise, modify, or remit any penalty 
which the Commission may assess or has al-
ready assessed under this subsection. 
‘‘(B) MITIGATING
FACTORS.—In deter-
mining the amount of any penalty imposed 
under this subsection, the Commission shall 
take into account the appropriateness of the 
penalty with respect to—
‘‘(i) the size of financial resources and 
good faith of the organization charged; 
‘‘(ii) the gravity of the violation;
‘‘(iii) the history of previous viola-
tions; and 
‘‘(iv) such other matters as justice 
may require. 
‘‘(C) APPROPRIATENESS OF PENALTY NOT 
REVIEWABLE.—In any civil action under para-
graph (4)(B), the validity and appropriateness 
of the penalty shall not be subject to review. 
‘‘(D) DISBURSEMENT.—All penalties col-
lected under authority of this paragraph shall 
be deposited into the Treasury. 
‘‘(E) REGULATIONS.—The Federal Trade 
Commission shall prescribe regulations, after 
notice and opportunity for a hearing under sec-
tion 553 of title 5, United States Code, estab-
lishing such procedures as may be necessary to 
carry out this subsection. 
‘‘(c) STATE ACTION FOR VIOLATIONS.—
‘‘(1) AUTHORITY OF STATES.—In addition to 
such other remedies as are provided under State 
law, whenever the chief law enforcement officer of a 
State, or an official or agency designated by a State, 
has reason to believe that any person has violated or 
is violating this title, the State—
‘‘(A) may bring an action to enjoin such 
violation; 
‘‘(B) may bring an action on behalf of its 
residents to recover damages for which the per-
son is liable to such residents under section 409 
as a result of the violation; and 
‘‘(C) in the case of any successful action 
under subparagraph (A) or (B), shall be award-
ed the costs of the action and reasonable attor-
ney fees as determined by the court. 
‘‘(2) RIGHTS OF COMMISSION.—
‘‘(A) NOTICE TO COMMISSION.—The State 
shall serve prior written notice of any civil ac-
tion under paragraph (1) upon the Federal 
Trade Commission and provide the Commission 
with a copy of its complaint, except in any case 
where such prior notice is not feasible, in which 
case the State shall serve such notice imme-
diately upon instituting such action. 
‘‘(B) INTERVENTION.—The Commission 
shall have the right—
‘‘(i) to intervene in any action re-
ferred to in subparagraph (A); 
‘‘(ii) upon so intervening, to be heard 
on all matters arising in the action; and
‘‘(iii) to file petitions for appeal. 
‘‘(3) INVESTIGATORY
POWERS.—For purposes 
of bringing any action under this subsection, nothing 
in this subsection shall prevent the chief law enforce-
ment officer, or an official or agency designated by 
a State, from exercising the powers conferred on the 
chief law enforcement officer or such official by the 
laws of such State to conduct investigations or to 
administer oaths or affirmations or to compel the at-
tendance of witnesses or the production of documen-
tary and other evidence. 
‘‘(4) 
LIMITATION.—Whenever 
the 
Federal 
Trade Commission has instituted a civil action for 
violation of this title, no State may, during the pend-
ency of such action, bring an action under this sec-
tion against any defendant named in the complaint 
of the Commission for any violation of this title that 
is alleged in that complaint. 
‘‘SEC. 1010. STATUTE OF LIMITATIONS. 
‘‘(a) IN GENERAL.—Any action to enforce any liabil-
ity under this title may be brought before the end of the 
5-year period beginning on the date on which the occur-
rence of the violation is discovered or reasonably should 
have been discovered by the exercise of due diligence.
‘‘(b) WILLFUL MISREPRESENTATION.—The limita-
tions period prescribed in subsection (a) shall be tolled 
during any period during which a defendant has materially 
and willfully misrepresented any information required 
under this title to be disclosed to an individual, and the 
information so misrepresented is material to the establish-
ment of the liability of the defendant to that individual 
under this title.’’. 
‘‘SEC. 1011. RELATION TO STATE LAW. 
‘‘No requirement or prohibition may be imposed 
under the laws of any State with respect to any subject 
matter regulated under this title. 
‘‘SEC. 1012. EFFECTIVE DATE. 
‘‘This title shall apply after the end of the 6-month 
period beginning on the date of the enactment of the Debt 
Counseling, Debt Consolidation, and Debt Settlement
Practices Improvement Act of 2003, except with respect 
to contracts entered into by a debt counseling organiza-
tion, debt consolidation organization, or debt settlement 
organization before the end of such period.’’. 
SEC. 3. STUDY OF DEBT CONSOLIDATION AND DEBT SET-
TLEMENT INDUSTRY. 
(a) STUDY REQUIRED.—The Federal Trade Commis-
sion and the Board of Governors of the Federal Reserve 
System shall jointly conduct a study of—
(1) the benefits and detrimental effects of the 
activities of debt consolidation organizations and 
debt settlement organizations for consumers and 
creditors generally, and the economy, including the 
extent to which such activities have contributed to a 
substantial decline in the total amount of household 
debt and the average amount of debt per household; 
and 
(2) the extent to which such organizations are 
affiliates of creditors, or maintain formal or informal 
relationships with 1 or more creditors in providing 
debt consolidation or debt settlement services. 
(b) REPORT.—Before the end of the 1-year period be-
ginning on the date of the enactment of this Act, the Fed-
eral Trade Commission and the Board of Governors of the 
Federal Reserve System shall jointly submit a report to 
the Congress containing the findings and conclusions of 
the Commission and the Board pursuant to the study con-
ducted pursuant to subsection (a), together with such rec-
ommendations for legislative or administrative action as 
the Commission and the Board may determine to be ap-
propriate. 
(c) DEFINITIONS.—For purposes of this section, the 
terms ‘‘creditor’’, ‘‘debt consolidation organization’’, and
‘‘debt settlement organization’’ have the same meaning as 
in the amendment made by section 2.
Æ