2023 Indiana Code › Title 28. Financial Institutions › Article 1. Department of Financial Institutions › Chapter 29. Debt Management Companies › 28-1-29-9. Trust Account; Separate Account for Indiana Contract Debtors Required; Commingling With Funds of Nonresidents With Approval of Director; Requirements and Restrictions; Required Balance; Reconciliation Procedures; Embezzlement; Relocating Account; Signatories; Monthly Accountings; Completion or Termination of Contract

Sec. 9. (a) All money paid to a licensee by or on behalf of an Indiana contract debtor for distribution to creditors under a plan shall be held in trust in a separate account maintained specifically for the benefit of the licensee's Indiana contract debtors. However, as an alternative to maintaining a separate trust account specifically for the benefit of the licensee's Indiana contract debtors, a licensee may submit a request to the director for approval to maintain a trust account that holds both money paid to the licensee by or on behalf of Indiana contract debtors and money paid to the licensee by or on behalf of contract debtors who do not reside in Indiana. The request must include documentation of the licensee's account reconciliation procedures sufficient to demonstrate to the director that the licensee will be able to:
(1) comply with the reconciliation requirements set forth in subsection (e) with respect to each Indiana contract debtor whose money is held in the account; and
(2) accurately determine the appropriate surety bond level under section 6(d) of this chapter at the time of each renewal of the licensee's license under this chapter.
Upon approval by the director of a request described in this subsection, the licensee shall maintain the documentation described in subdivisions (1) and (2) for review by department examiners during the course of the department's routine examinations under this chapter. Before the close of the same banking day that funds are received from an Indiana contract debtor, the licensee shall deposit the money in the trust account required under this section.
(b) A licensee shall do the following:
(1) Maintain separate records of account for each contract debtor to whom the licensee is furnishing debt management services in Indiana.
(2) Disburse money paid by or on behalf of a contract debtor to creditors of the contract debtor as disclosed in the agreement between the licensee and the contract debtor.
(3) Make remittances not later than thirty (30) days after initial receipt of funds from a contract debtor. After the initial receipt of funds, remittances, less fees and costs, shall be made not later than thirty (30) days after receipt of funds, unless the reasonable payment of one (1) or more of the contract debtor's obligations requires that the funds be held for a longer period to accumulate a sum certain. For purposes of this section, the close-out fee set forth in section 8.3(d) of this chapter is not considered an obligation of the contract debtor.
(4) Retain for charges in the trust account required under this section an amount less than or equal to the sum of one (1) month's fees for the licensee's Indiana contract debtors whose money is held in the account, as permitted by section 8.3(c)(2) of this chapter, plus a close-out fee, as permitted by section 8.3(d) of this chapter, for each of the licensee's Indiana contract debtors whose money is held in the account, unless a greater amount is approved in writing by the department.
(5) Promptly:
(A) correct any payments on behalf of a contract debtor that are not made or that are misdirected as a result of an error by the licensee or other person in control of the trust account; and
(B) reimburse the contract debtor for any costs or fees imposed by a creditor as a result of the failure to pay or misdirection.
(c) A licensee may not commingle the licensee's own funds with money in the trust account established under this section for the benefit of the licensee's Indiana contract debtors.
(d) The trust account required under this section must at all times have a cash balance equal to at least the sum of the balances of each individual account maintained for each Indiana contract debtor whose money is held in the trust account.
(e) The licensee shall reconcile the trust account required under this section at least every thirty (30) days after receipt of the bank statement. The reconciliation must compare the cash balance in the trust account for all the licensee's Indiana contract debtors whose money is held in the account with the sum of the balances in each of those Indiana contract debtor's individual accounts. If the licensee or the licensee's designee has more than one (1) trust account under this section, each trust account must be individually reconciled. If the cash balance held in a trust account for the benefit of the licensee's Indiana contract debtors reflects a shortage when compared with the sum of the balances in each of those Indiana contract debtor's individual accounts, the licensee shall immediately provide written notice to the department of that fact and of any remedial action taken by the licensee. If the cash balance held in a trust account for the benefit of the licensee's Indiana contract debtors reflects a surplus when compared with the sum of the balances in each of those Indiana contract debtor's individual accounts, the licensee shall attempt to remedy the surplus and shall retain, for review by department examiners, documentation of the actions taken.
(f) If a licensee or a licensee's employee discovers, or has a reasonable suspicion of, embezzlement or other unlawful appropriation of money held in trust, the licensee or the licensee's employee shall immediately notify the department in writing. Unless the department by regulation, rule, policy, or guidance provides otherwise, the licensee shall give notice to the department describing the remedial action taken or to be taken not later than five (5) days after the licensee or the licensee's employee discovers, or has a reasonable suspicion of, the embezzlement or other unlawful appropriation.
(g) If a contract debtor terminates an agreement or it becomes reasonably apparent to a licensee that a plan has failed, the licensee shall, not later than fifteen (15) days after the effective date of the termination of the agreement or the date on which it becomes apparent to the licensee that the plan has failed, as applicable, refund to the contract debtor all money paid by or on behalf of the contract debtor that has not been paid to creditors less the fee that is payable to the licensee under section 8.3(d) of this chapter.
(h) Before relocating a trust account from one (1) bank to another, a licensee shall inform the department of the name, business address, and telephone number of the new bank. As soon as practicable, the licensee shall inform the department of the account number of the trust account at the new bank.
(i) Before adding or replacing any signatory on the trust account required under this section, the licensee shall:
(1) ensure that the new signatory is qualified based on a background check consistent with section 3(c) of this chapter; and
(2) maintain, for review by department examiners, documentation of the background check conducted.
(j) At least once each month while an agreement between a licensee and a contract debtor is in effect, the licensee shall render to the contract debtor an accounting statement that includes the following:
(1) The following information with respect to the month for which the accounting statement is prepared:
(A) The total amount received from the contract debtor.
(B) The total amount paid to each creditor on behalf of the contract debtor.
(C) The amount of any charges deducted by the licensee.
(D) Any amount held in reserve on behalf of the contract debtor.
(2) A statement that the contract debtor's plan is regulated by the department, along with the department's contact information, including the department's address, Internet web site address, and toll free telephone number.
A licensee shall also provide an accounting statement described in this subsection to a contract debtor not later than seven (7) days after written demand by the contract debtor for such a statement. However, the licensee is not required to provide more than three (3) such requested accountings per six (6) month period.
(k) Upon the completion or termination of a contract between a licensee and a contract debtor, the licensee shall provide to the contract debtor a statement:
(1) indicating that the licensee no longer holds funds in trust for the contract debtor; and
(2) listing the name and address of:
(A) any creditors paid in full; and
(B) any creditors remaining unpaid.
Formerly: Acts 1971, P.L.397, SEC.1; Acts 1972, P.L.10, SEC.6. As amended by P.L.196-1996, SEC.4; P.L.213-2007, SEC.49; P.L.217-2007, SEC.47; P.L.35-2010, SEC.131; P.L.89-2011, SEC.43; P.L.6-2012, SEC.195; P.L.27-2012, SEC.75; P.L.216-2013, SEC.30.