Note: This is another recent addition, enacted in 2003 and revised
in 2006. There appears to be a trend of
states enacting laws to address debt management companies and including credit
services/credit repair organizations under the same regulatory structure, even
though that industry is already regulated at the federal level.
MS ST § 81-22-3
Chapter
22.
Title 81. Banks and Financial Institutions
Chapter
22.
§ 81-22-1. Short title
This
chapter may be known and cited as the "Mississippi Debt Management
Services Act."
§ 81-22-3. Definitions
As
used in this chapter, unless the context otherwise indicates, the following
terms have the following meanings:
(a)
"Commissioner" means the Commissioner of Banking and Consumer Finance
of the State of
(b)
"Debt management service" means:
(i) The receiving of money from a consumer for the purpose of
distributing one or more payments to or among one or more creditors of the
consumer in full or partial payment of the consumer's obligation;
(ii) Arranging or assisting a consumer to arrange for the
distribution of one or more payments to or among one or more creditors of the
consumer in full or partial payment of the consumer's obligation;
(iii) Exercising control, directly or indirectly, or arranging for
the exercise of control over funds of the consumer for the purpose of
distributing payments to or among one or more creditors of the consumer;
(iv) Acting or offering to act as an intermediary between a
consumer and one or more creditors of the consumer for the
purpose of adjusting, compromising, negotiating, settling, discharging or
otherwise deferring, reducing or altering the terms of payment of the
consumer's obligation; or
(v) Improving or offering to improve a consumer's credit record,
history or rating.
(c)
"Debt management service provider" means a person that provides or
offers to provide to a consumer in this state any debt management services, in
return for a fee or other consideration. "Debt management service
provider" does not include:
(i) Those situations involving debt adjusting incurred
incidentally in the lawful practice of law in this state;
(ii) Title insurers who adjust debts out of escrow funds only
incidentally in the regular course of their principal business;
(iii) Judicial officers or others acting under court orders;
(iv) Those situations involving debt adjusting incurred
incidentally in connection with the lawful practice as a certified public
accountant;
(v) Bona fide trade or mercantile associations in the course of
arranging adjustment of debts with business establishments;
(vi) Employers who adjust debts for their employees;
(vii) Any person who, at the request of a debtor, makes a loan to
the debtor, and who, at the authorization of the debtor,
acts as an adjuster of the debtor's debts solely in the disbursement of the
proceeds of the loan, without compensation for the services rendered in
adjusting the debts; or
(viii) Any institution that is regulated, supervised or licensed
by the department or any out of state institution that is insured by the
Federal Deposit Insurance Corporation or the National Credit Union
Administration.
(d)
"Department" means the Department of Banking and Consumer Finance of
the State of
(e)
"Fair share contribution" means voluntary contributions paid to the
licensee by the creditor for collecting funds from clients pursuant to debt
management services.
(f) "Licensee" means a person or entity who is required
to be licensed as a debt management service provider.
(g) "Person" means an individual or an organization.
(h) "Records" or
"documents" means any item in hard copy or produced in a format of
storage commonly described as electronic, imaged, magnetic, microphotographic
or otherwise, and any reproduction so made shall have the same force and effect
as the original thereof and be admitted in evidence equally with the original.
(i) "Third-party payment
processor" means any entity that holds, or has access to,
or can effectuate possession of, by any means, the monies of a licensee's
debtors, or distributes, or is in the chain or distribution of such monies, to
the creditors of such debtors, pursuant to an agreement or contract with the
licensee. This term shall not include entities that solely provide the
electronic routing and settlement of financial transactions and their
sponsoring banks.
§ 81-22-5. Licensure and annual
relicensure
(1) Licensure and relicensure. No person or entity may act as a debt
management service provider with respect to consumers who are residents of this
state without a license issued under this chapter. The license application must
be in a form prescribed by the commissioner. The commissioner may refuse the
application if it contains erroneous or incomplete information. A license may
not be issued unless the commissioner, upon investigation, finds that the
financial soundness and responsibility, insurance coverage, consumer education
programs and services component, character and fitness of the applicant and,
when applicable, its partners, officers or directors, warrant belief that the
business will be operated honestly and fairly within the purposes of this
chapter. Each license shall remain in full force and effect until relinquished,
suspended, revoked or expired. With each initial application for a license, the
applicant shall pay to the commissioner a license fee of Seven Hundred Fifty
Dollars ($750.00), and on or before December 31 of each year thereafter, an
annual renewal fee of Four Hundred Seventy-five Dollars ($475.00). If the
annual renewal fee remains unpaid after December 31, the license
shall expire. If any person engages in business as provided for in this chapter
without paying the license fee provided for in this subsection before beginning
business or before the expiration of the person's current license, as the case
may be, then the person shall be liable for the full amount of the license fee,
plus a penalty in an amount not to exceed Twenty-five Dollars ($25.00) for each
day that the person has engaged in such business without a license or after the
expiration of a license. All licensing fees and penalties shall be paid into
the Consumer Finance Fund of the department.
(2) Action on registration application. The commissioner shall take action
on an application within thirty (30) days after the commissioner has accepted
the application as complete. Upon written request, the applicant is entitled to
a hearing on the question of the applicant's qualifications for license if the
commissioner has notified the applicant in writing that the application has
been denied or the commissioner has not issued a license within thirty (30)
days after the application for the license was accepted as complete by the
commissioner. A request for a hearing may not be made more than sixty (60) days
after the application was accepted as complete or the commissioner has mailed a
written notice to the applicant stating that the application has been denied and stating the reasons for the denial of the
application.
§ 81-22-7. Bond required
To
be eligible for a license, an applicant shall file with the commissioner a bond
with good security in the penal sum of Fifty Thousand Dollars ($50,000.00),
payable to the State of Mississippi for the faithful performance by the
licensee of the duties and obligations pertaining to the business so licensed
and the prompt payment of any judgment that may be recovered against the
licensee on account of charges or other claims arising directly or collectively
from any violation of the provisions of this chapter. The applicant may file,
in lieu of the bond, cash, a certificate of deposit or government bonds in the
amount of Fifty Thousand Dollars ($50,000.00). Those deposits shall be filed
with the commissioner and are subject to the same terms and conditions as are provided
for in the surety bond required in this paragraph. Any interest or earnings on
those deposits are payable to the depositor.
§ 81-22-9. Handling of consumer funds
(1) Funds deposited in escrow account. The debt management service provider
shall deposit, within two (2) business days of receipt, all funds received from
or on behalf of a consumer for payment to a creditor or creditors in a
federally insured escrow account for the benefit of the consumer in a
supervised financial organization. Any escrow account established to receive
consumer funds is free from trustee process and unavailable to creditors of the
debt management service provider.
(2) Requirements for handling of funds. The debt management service provider
shall:
(a) Maintain separate records of account for each consumer receiving debt management services;
(b)
Remit funds received from or on behalf of a consumer to the consumer's creditor
or creditors within fifteen (15) business days of receipt of the funds; and
(c)
Correct or remedy any misdirected payments resulting from an error by the debt
management service provider and reimburse the consumer for any actual costs or
fees imposed by a creditor as a result of such misdirection.
(3) Commingling of funds. The debt management service provider may not
commingle escrow accounts established for the benefit of consumers with any
operating accounts of the debt management service provider.
§ 81-22-11. Requirement for written
agreement
(1) Written agreement. A debt management service provider may not perform
debt management services for a consumer unless the consumer and the debt
management service provider first have executed a written agreement with regard
to the debt management services to be provided. A copy of the completed
agreement must be given to the consumer.
(2) Required provisions. Each agreement between a consumer and a debt
management service provider must be dated and signed by the consumer and must
include the following:
(a) The name and address of the consumer and the debt management service provider;
(b) A
full description of the services to be performed for the consumer, any fees to
be charged to the consumer for those services and any contributions, fees or
charges the consumer has agreed to make or pay to the debt management service provider;
(c)
Disclosure of the existence of the surety bond on file with the commissioner
under Section 81-22-7 and a
notice that the consumer may contact the Department of Banking and Consumer
Finance at P.O. Box 23729, Jackson, MS 39225-3729 or 1-800-844-2499 with any
questions or complaints regarding the debt management service provider;
(d) The
identification of the federally insured institution where funds remitted by a
consumer for payment to one or more creditors will be held;
(e) The
right of a party to cancel the agreement by providing a written notice of
cancellation to the other party;
(f) A complete list of the consumer's obligations that are subject
to the agreement and the names and addresses of the creditors holding those
obligations;
(g) A full description and schedule of the periodic amounts to be
remitted to the debt management service provider for payment to the consumer's
creditor or creditors and the amounts to be remitted to each creditor;
(h) A notice to the consumer that by executing the agreement the
consumer authorizes the federally insured institution to disclose financial
records relating to the escrow account in which the consumer's funds are held
under Section 81-22-9 to the
commissioner during the course of any examination of the
debt management service provider by the commissioner; and
(i) The following notice:
NOTICE
TO CONSUMER: Do not sign this agreement before you read it. You must be given
a copy of this agreement.
§ 81-22-13. Fees charged to the
consumer
A
debt service management provider may only charge a consumer the following fees
for providing debt management services:
(a) A maintenance fee not to exceed Thirty Dollars ($30.00) per month after a consumer has received a free initial counseling session;
(b) A
one-time setup fee not to exceed Seventy-five Dollars ($75.00);
(c) A
fee for obtaining the consumer's credit report not to exceed Fifteen Dollars
($15.00) for an individual report or Twenty-five Dollars ($25.00) for a joint
report; and
(d) A
fee not to exceed Fifty Dollars ($50.00) for educational courses/products that
will assist the consumer in achieving financial stability. Products shall be
educational in nature and may include, but not be limited to, the following
topics: Home Buyer Education, Financial Literacy Education, and Credit Report
Review. However, the consumer must be informed that those courses and products
are not a mandatory condition to receive debt management services.
(e) A
bankruptcy consultation fee, not to exceed Fifty Dollars ($50.00) per consumer, may be charged by nonprofit credit counseling
agencies approved by the U.S. Trustees pursuant to 11 USC Section 111.
§ 81-22-15. Reports and records
(1) Written reports to consumers. A debt management service provider shall
provide to each consumer receiving debt management services periodic written
reports accounting for funds received from the consumer for payment to the
consumer's creditor or creditors whose obligations are listed in the consumer's
agreement with the debt management service provider and disbursements made to
each such creditor on the consumer's behalf since the last report. The debt
management service provider shall provide those reports to the consumer not
less than once each calendar quarter.
(2) Maintenance of records. Any person required to be licensed under this
chapter shall maintain in its offices, or such other location as the department
permits, the books, accounts and records necessary for the department to
determine whether or not the person is complying with the provisions of this
chapter and the rules and regulations adopted by the department under this
chapter. These books, accounts and records shall be maintained apart and separate from any other business in which the person is
involved. A debt management service provider shall maintain books and records
for each consumer for whom it provides debt management services for six (6)
years following the final transaction with the consumer.
(3) Verification of Payments to Creditors. Licensees that participate in
fair share contributions with creditors shall maintain records that reflect
client accounts were credited for the full amount of any payments due and not
the net amount as a result of a fair share contribution. Such records may
consist of either a copy of the client's statement from the creditor or the
licensee may send a monthly or quarterly statement to clients that reflect
payments remitted to creditors.
(4)
Within fifteen (15) days of the occurrence of any of the following events, a
licensee shall file a written report with the commissioner describing the event
and its expected impact on the activities on the licensee's business in this
state:
(a) The filing for bankruptcy or reorganization by the licensee;
(b) The institution of revocation or suspension proceedings
against the licensee by any state or governmental authority; or
(c) Any felony indictment or conviction of the licensee or any of
its directors or principal officers.
§ 81-22-17. Powers and functions of
commissioner
The
commissioner may exercise the following powers and functions:
(a) Complaint investigation. The commissioner may receive and act on complaints, take action to obtain voluntary compliance with this chapter or refer cases to the Attorney General, who shall appear for and represent the commissioner in court.
(b) Rules. The commissioner may adopt reasonable administrative regulations, not
inconsistent with law, for the enforcement of this chapter.
(c) Examination
of licensees. To assure compliance with the provisions of this chapter, the
department may examine the books and records of any licensee without notice
during normal business hours. The commissioner shall charge the licensee an
examination fee in an amount not less than Three Hundred Dollars ($300.00) nor
more than Six Hundred Dollars ($600.00) for each office or location within the
State of Mississippi, plus any actual expenses incurred while examining the
licensee's records or books that are located outside the State of Mississippi.
However, in no event shall a licensee be examined more than
once in a two-year period unless for cause shown based upon consumer complaint
and/or other exigent reasons as determined by the commissioner.
(d) Examination
of nonlicensees. The department, its designated officers and employees, or
its duly authorized representatives, for the purposes of discovering violations
of this chapter and for the purpose of determining whether any person or
individual reasonably suspected by the commissioner of conducting business that
requires a license under this chapter, may investigate those persons and
individuals and examine all relevant books, records and papers employed by
those persons or individuals in the transaction of business, and may summon
witnesses and examine them under oath concerning matters as to the business of
those persons, or other such matters as may be relevant to the discovery of
violations of this chapter, including, without limitation, the conduct of
business without a license as required under this chapter.
§ 81-22-19. Prohibited acts
A
debt management service provider may not:
(a) Purchase debt. Purchase any debt or obligation of a consumer;
(b) Lend money. Lend money or provide credit to any
consumer;
(c) Mortgage interest. Obtain a mortgage or other security
interest in property of a consumer;
(d) Debt collector. Operate as a debt collector in this
state; or
(e) Negative amortization. Structure an agreement for the
consumer that, at the conclusion of the projected term for the consumer's
participation in the debt management service agreement, would result in
negative amortization of any of the consumer's obligations to creditors.
§ 81-22-21. Advertising
(1) False advertising. A debt management service provider may not engage in
this state in false or misleading advertising concerning the terms and
conditions of any services or assistance offered.
(2) Required words. A debt management service provider may not advertise its
services in
(3) Dissemination; no liability. This section does not impose liability on
the owner or personnel of any medium in which an advertisement appears or
through which an advertisement is disseminated.
§ 81-22-23. Effects of violations on
rights of parties
(1) Violations; unfair, unconscionable or deceptive practices. A debt management
service provider that violates any provision of this chapter or any rule
adopted by the commissioner, or that through any unfair, unconscionable or
deceptive practice causes actual damage to a consumer is subject to enforcement
action under subsection (2) of this section.
(2) Enforcement actions. The following enforcement actions may be taken by
the commissioner or an aggrieved consumer against a debt management service
provider for violations of any provision of this chapter or any rule adopted
under this chapter, or for unfair, unconscionable or deceptive practices that
cause actual damage to a consumer:
(a) When the commissioner has reasonable cause to believe that a person is violating any provision of this chapter, the commissioner, in addition to and without prejudice to the authority provided elsewhere in this chapter, may enter an order requiring the person to stop or to refrain from the violation. The commissioner may sue in any chancery court of the state having jurisdiction and venue to enjoin the person from engaging in or continuing the violation or from doing any act in furtherance of the violation. In such an action, the court may enter an order or judgment awarding a preliminary or permanent injunction;
(b) The
commissioner may, after notice and hearing, impose a civil penalty against any
licensee if the licensee, individual required to be registered, or employee is
adjudged by the commissioner to be in violation of the provisions of this
chapter. The civil penalty shall not exceed Five Hundred Dollars ($500.00) per
violation and shall be deposited into the Consumer Finance Fund of the
department;
(c) The
state may enforce its rights under the surety bond as required in Section 81-22-7 as an
available remedy for the collection of any civil penalties, criminal fines or
costs of investigation and/or prosecution incurred;
(d) A
civil action by an aggrieved consumer in which that consumer has the right to
recover actual damages from the debt management service provider in an amount
determined by the court plus costs of the action together with reasonable
attorney's fees; or
(e)
Revocation, suspension or nonrenewal of the debt management service provider's
license under Section 81-22-25.
§ 81-22-25. Suspension or revocation
of registration
(1) Suspension or revocation. After notice and hearing, the commissioner may
suspend or revoke a debt management service provider's license if the
commissioner finds that one of the conditions of subsection (2) of this section
is met.
(2) Conditions for suspension or revocation. The following conditions are
grounds for suspension or revocation of a registration:
(a) A fact or condition exists that, if it had existed at the time when the licensee applied for a license, would have been grounds for denying the application;
(b) The licensee knowingly violates a material provision of this
chapter or rule or order validly adopted by the commissioner under authority of
this chapter;
(c) The licensee is insolvent;
(d) The licensee refuses to permit the commissioner to make an
examination authorized by this chapter; or
(e) The licensee fails to respond within a reasonable time and in
an appropriate manner to communications from the commissioner.
§ 81-22-27. Commissioner authorized
to hire additional full-time employees
The
commissioner may employ the necessary full-time employees above the number of
permanent full-time employees authorized for the department for the fiscal year
2003, to carry out and enforce the provisions of this chapter. The commissioner
also may expend the necessary funds and equip and provide necessary travel
expenses for those employees.
§ 81-22-28. Third party payment
processors; utilization; regulation
(1) If a licensee seeks to utilize a third-party payment
processor, to hold, have access to, effectuate possession of, by any means, or
to distribute or be in the chain of distribution of the monies of another
licensee's consumers, the licensee shall give the Department of Banking and
Consumer Finance ten (10) days' written notice.
(2) Such notice shall
contain the name and address of the third-party payment processor, a
description of the services, a copy of the agreement or contract between the
licensee and the third-party payment processor and the highest daily amount of
consumer funds to be held or transmitted. The third-party payment processor
shall submit to the department, upon request, the highest daily amount held or
transmitted during the previous month.
(3) Each third-party
payment processor shall file with the commissioner a surety
bond, issued by a bonding company or insurance company authorized to do
business in the State of Mississippi, in the principal sum of Fifty Thousand
Dollars ($50,000.00) and in an additional principal sum of Fifty Thousand
Dollars ($50,000.00) for each additional licensee it contracts with, but in no
event shall the bond be required to be in excess of One Hundred Fifty Thousand
Dollars ($150,000.00). In lieu of the surety bond, a third-party payment
processor may file other assets such as cash, a certificate of deposit or
government bonds.
(4) A licensee shall not
use a third-party payment processor until the licensee receives written notice
from the department confirming that the department has received a surety bond
or other assets from the third-party payment processor.
(5) Prior to performing
any of its services, the third-party payment processor shall provide written
authorization for the department to examine all books, records, documents and
materials, including those maintained in electronic form, as they relate to the
consumers' monies held by, or distributed by the third-party payment processor
to the creditors of the consumers and shall have received
written confirmation from the department that the written authorization is
sufficient. The cost of the examination shall be paid by the licensee.
(6) All agreements or
contracts between a licensee and a third-party payment processor shall provide
for a thirty-day written notice of termination to the party against whom
termination is being sought. A licensee shall immediately notify the department
in writing of the notice of termination.
(7) In the event a
licensee elects to maintain cash, a certificate of deposit or government bonds
on deposit, and utilizes the services of a third-party payment processor, there
is no requirement that the third-party payment processor obtain a surety bond
or maintain other assets on deposit with the department.
§ 81-22-29. Repealed by Laws 2006,
Ch. 398, § 18, eff. July 1, 2006
§ 81-22-31. Repeal of chapter
Case Law
I identified no significant cases construing this statutes.