Citation: MN Stat § 332A.02 et seq. (2022)
332A.02 DEFINITIONS.
https://www.revisor.mn.gov/statutes/cite/332A.02
Subdivision 1.Scope. Unless a different meaning is clearly indicated by the context, for the purposes of this chapter the terms defined in this section have the meanings given them.
Subd. 2.Accreditation. “Accreditation” means certification as an accredited credit counseling provider by the Council on Accreditation, the Bureau Veritas Certification North America, Inc., or BSI Management Systems America, Inc.
Subd. 2a.Advertise. “Advertise” means to solicit business through any means or medium.
Subd. 3.Attorney general. “Attorney general” means the attorney general of the state of Minnesota.
Subd. 4.Commissioner. “Commissioner” means commissioner of commerce.
Subd. 5.Controlling or affiliated party. “Controlling or affiliated party” means any person or entity that controls or is controlled, directly or indirectly, or is under common control with another person. Controlling or affiliated party includes, but is not limited to, employees, officers, independent contractors, corporations, partnerships, and limited liability corporations.
Subd. 5a.Creditor. “Creditor” means any party:
(1) named by the debtor as a creditor in the debt management services plan or debt management services agreement;
(2) that acquires or holds the debt; or
(3) to whom interactions with the debt management services is assigned in relation to the debt listed in the debt management services plan or debt management services agreement.
Subd. 6.Debt management services agreement. “Debt management services agreement” means the written contract between the debt management services provider and the debtor.
Subd. 7.Debt management services plan. “Debt management services plan” means the debtor’s individualized package of debt management services set forth in the debt management services agreement.
Subd. 8.Debt management services provider. “Debt management services provider” means any person offering or providing debt management services to a debtor domiciled in this state, regardless of whether or not a fee is charged for the services and regardless of whether the person maintains a physical presence in the state. This term includes any person to whom debt management services are delegated, and does not include services performed by the following when engaged in the regular course of their respective businesses and professions:
(1) exempt attorneys at law, escrow agents, and broker-dealers in securities;
(2) certified public accountants and CPA firms licensed under chapter 326A;
(3) state or national banks, credit unions, trust companies, savings associations, title insurers, insurance companies, and all other lending institutions duly authorized to transact business in Minnesota;
(4) persons who, as employees on a regular salary or wage of an employer not engaged in the business of debt management, perform credit services for their employer;
(5) public officers acting in their official capacities and persons acting as a debt management services provider pursuant to court order;
(6) any person while performing services incidental to the dissolution, winding up, or liquidation of a partnership, corporation, or other business enterprise;
(7) the federal government, the state, their political subdivisions, public agencies, and employees;
(8) collection agencies, provided that the services are provided to a creditor;
(9) “qualified organizations” designated as representative payees for purposes of the Social Security and Supplemental Security Income Representative Payee System and the federal Omnibus Budget Reconciliation Act of 1990, Public Law 101-508;
(10) accelerated mortgage payment providers. “Accelerated mortgage payment providers” are persons who, after satisfying the requirements of sections 332.30 to 332.303, receive funds to make mortgage payments to a lender or lenders, on behalf of mortgagors, in order to exceed regularly scheduled minimum payment obligations under the terms of the indebtedness. The term does not include: (i) persons or entities described in clauses (1) to (9); (ii) mortgage lenders or servicers, industrial loan and thrift companies, or regulated lenders under chapter 56; or (iii) persons authorized to make loans under section 47.20, subdivision 1. For purposes of this clause and sections 332.30 to 332.303, “lender” means the original lender or that lender’s assignee, whichever is the current mortgage holder;
(11) trustees, guardians, and conservators;
(12) an enrolled agent or enrolled agent firm; and
(13) debt settlement services providers.
Subd. 9.Debt management services. “Debt management services” means the provision of any services whereby a debt management services provider assists in managing the financial affairs of a debtor by distributing periodic payments to the debtor’s creditors from funds that the debt management services provider receives from the debtor and where the primary purpose of the services is to effect full repayment of debt incurred primarily for personal, family, or household services.
Any person so engaged or holding out as so engaged is deemed to be engaged in the provision of debt management services regardless of whether or not a fee is charged for such services.
Subd. 10.Debtor. “Debtor” means the person for whom the debt management services are performed.
Subd. 10a.Exempt attorney at law. “Exempt attorney at law” means an attorney licensed or otherwise authorized to practice law in this state:
(1) whose exclusive or principal practice does not involve the provision of debt management services; and
(2) who does not have a business relationship with a debt management services provider that involves the provision of debt management services.
Subd. 10b.Enrolled agent. “Enrolled agent” means a person defined under Code of Federal Regulations, title 26, section 601.502, and who is authorized to practice before the Internal Revenue Service pursuant to Code of Federal Regulations, title 31, section 10.3.
Subd. 10c.Enrolled agent firm. “Enrolled agent firm” means an association, corporation, partnership, or sole proprietorship:
(1) that is owned by or employs enrolled agents;
(2) whose practice, in whole or in part, involves, for a fee, assisting debtors to delay payment of delinquent taxes owed, establish a payment plan for delinquent taxes owed, or obtain a settlement for less than the full amount of delinquent taxes owed; and
(3) where:
(i) all contracts with debtors are reviewed and signed by an enrolled agent employed by the firm;
(ii) an enrolled agent is responsible for all work performed under the contract and the responsible agent obtains a power of attorney or a disclosure authorization from the debtor; and
(iii) an enrolled agent files the power of attorney or disclosure authorization according to all procedural requirements under the Internal Revenue Code.
Subd. 11.Person. “Person” means any individual, firm, partnership, association, or corporation.
Subd. 12.Registrant. “Registrant” means any person registered by the commissioner pursuant to this chapter and, where used in conjunction with an act or omission required or prohibited by this chapter, shall mean any person performing debt management services.
Subd. 13.Debt settlement services provider. “Debt settlement services provider” has the meaning given in section 332B.02, subdivision 13.
332A.03 REQUIREMENT OF REGISTRATION.
https://www.revisor.mn.gov/statutes/cite/332A.03
(a) On or after August 1, 2007, it is unlawful for any person, whether or not located in this state, to operate as a debt management services provider or provide debt management services, including but not limited to offering, advertising, or executing or causing to be executed any debt management services or debt management services agreement, except as authorized by law without first becoming registered as provided in this chapter. A person who possesses a valid license as a debt prorater that was issued by the commissioner before August 1, 2007, is deemed to be registered as a debt management services provider until the date the debt prorater license expires, at which time the licensee must obtain a renewal as a debt management services provider in compliance with this chapter. Debt proraters who were not required to be licensed as debt proraters before August 1, 2007, may continue to provide debt management services without complying with this chapter to those debtors who entered into a contract to participate in a debt management plan before August 1, 2007, except that the debt prorater must comply with section 332A.13, subdivision 2.
(b) Section 58A.04, subdivisions 2 and 3, apply to this section.
332A.04 REGISTRATION.
https://www.revisor.mn.gov/statutes/cite/332A.04
Subdivision 1.Form. Application for registration to operate as a debt management services provider in this state must be made in writing to the commissioner, under oath, in the form prescribed by the commissioner, and must contain:
(1) the full name of each principal of the entity applying;
(2) the address, which must not be a post office box, and the telephone number and, if applicable, email address, of the applicant;
(3) identification of the trust account required under section 332A.13;
(4) consent to the jurisdiction of the courts of this state;
(5) the name and address of the registered agent authorized to accept service of process on behalf of the applicant or appointment of the commissioner as the applicant’s agent for purposes of accepting service of process;
(6) disclosure of:
(i) whether any controlling or affiliated party has ever been convicted of a crime or found civilly liable for an offense involving moral turpitude, including forgery, embezzlement, obtaining money under false pretenses, larceny, extortion, conspiracy to defraud, or any other similar offense or violation, or any violation of a federal or state law or regulation in connection with activities relating to the rendition of debt management services or involving any consumer fraud, false advertising, deceptive trade practices, or similar consumer protection law;
(ii) any judgments, private or public litigation, tax liens, written complaints, administrative actions, or investigations by any government agency against the applicant or any officer, director, manager, or shareholder owning more than five percent interest in the applicant, unresolved or otherwise, filed or otherwise commenced within the preceding ten years;
(iii) whether the applicant or any person employed by the applicant has had a record of having defaulted in the payment of money collected for others, including the discharge of debts through bankruptcy proceedings; and
(iv) whether the applicant’s license or registration to provide debt management services in any other state has ever been revoked or suspended;
(7) a copy of the applicant’s standard debt management services agreement that the applicant intends to execute with debtors;
(8) proof of accreditation, unless the applicant was licensed in Minnesota as a debt prorater immediately before August 1, 2007; and
(9) any other information and material as the commissioner may require.
The commissioner may, for good cause shown, temporarily waive any requirement of this subdivision.
Subd. 2.Term and scope of registration. A registration is effective until 11:59 p.m. on December 31 of the year for which the application for registration is filed or until it is surrendered by the registrant or revoked or suspended by the commissioner. The registration is limited solely to the business of providing debt management services.
Subd. 3.Fees. The registration application must be accompanied by payment of $1,000 as a registration fee.
Subd. 4.Bond. The registration application must be accompanied by a surety bond in which the applicant shall be the obligor, in a sum to be determined by the commissioner but not less than $5,000, and in which an insurance company, which is duly authorized by the state of Minnesota to transact the business of fidelity and surety insurance, shall be a surety. However, the commissioner may accept a deposit in cash, or securities that may legally be purchased by savings banks or for trust funds of an aggregate market value equal to the bond requirement, in lieu of the surety bond. The cash or securities must be deposited with the commissioner of management and budget. The commissioner may also require a fidelity bond in an appropriate amount covering employees of any applicant. Each branch office or additional place of business in this state of an applicant must be bonded as provided in this subdivision. In determining the bond amount necessary for the maintenance of any office, whether it is a surety bond, fidelity bond, or both, the commissioner shall consider the financial responsibility, experience, character, and general fitness of the debt management services provider and its operators and owners; the volume of business handled or proposed to be handled; the location of the office and the geographical area served or proposed to be served; and other information the commissioner may deem pertinent based upon past performance, previous examinations, annual reports, and manner of business conducted in other states.
Subd. 5.Condition of bond. The bond must run to the state of Minnesota for the use of the state and of any person or persons who may have a cause of action against the obligor arising out of the obligor’s activities as a debt management services provider to a debtor domiciled in this state. The bond must be conditioned that the obligor will not commit any fraudulent act and will faithfully conform to and abide by the provisions of this chapter and of all rules lawfully made by the commissioner under this chapter and pay to the state and to any such person or persons any and all money that may become due or owing to the state or to such person or persons from the obligor under and by virtue of this chapter.
Subd. 6.Right of action on bond. If the registrant has failed to account to a debtor or distribute to the debtor’s creditors the amounts required by this chapter, or has failed to perform any of the services promised in the debt management services agreement, the registrant is in default. The debtor or the debtor’s legal representative or receiver, the commissioner, or the attorney general, shall have, in addition to all other legal remedies, a right of action in the name of the debtor on the bond or the security given under this section, for loss suffered by the debtor, not exceeding the face amount of the bond or security, and without the necessity of joining the registrant in the suit or action based on the default.
Subd. 7.Registrant list. The commissioner must maintain a list of registered debt management services providers. The list must be made available to the public in written form upon request and on the Department of Commerce website.
332A.05 NONASSIGNMENT OF REGISTRATION.
https://www.revisor.mn.gov/statutes/cite/332A.05
A registration must not be transferred or assigned without the consent of the commissioner.
332A.06 RENEWAL OF REGISTRATION.
https://www.revisor.mn.gov/statutes/cite/332A.06
Each year, each registrant under the provisions of this chapter must, not more than 60 nor less than 30 days before its registration is to expire, apply to the commissioner for renewal of its registration on a form prescribed by the commissioner. The application must be signed by the registrant under penalty of perjury, contain current information on all matters required in the original application, and be accompanied by a payment of $250. The registrant must maintain a continuous surety bond that satisfies the requirements of section 332A.04, subdivision 4, provided that the commissioner may require a different amount that is at least equal to the largest amount that has accrued in the registrant’s trust account during the previous year. The renewal is effective for one year. The commissioner may, for good cause shown, temporarily waive any requirement of this section.
332A.07 OTHER DUTIES OF REGISTRANT.
https://www.revisor.mn.gov/statutes/cite/332A.07
Subdivision 1.Requirement to update information. A registrant must update any information required by this chapter provided in its original or renewal application not later than ten days after the date the events precipitating the update occurred.
Subd. 2.Inspection of debtor of registration. Each registrant must maintain a copy of its registration in its files. The registrant must allow a debtor, upon request, to inspect the registration.
332A.08 DENIAL OF REGISTRATION.
https://www.revisor.mn.gov/statutes/cite/332A.08
The commissioner, with notice to the applicant by certified mail sent to the address listed on the application, may deny an application for a registration upon finding that the applicant:
(1) has submitted an application required under section 332A.04 that contains incorrect, misleading, incomplete, or materially untrue information. An application is incomplete if it does not include all the information required in section 332A.04;
(2) has failed to pay any fee or pay or maintain any bond required by this chapter, or failed to comply with any order, decision, or finding of the commissioner made under and within the authority of this chapter;
(3) has violated any provision of this chapter or any rule or direction lawfully made by the commissioner under and within the authority of this chapter;
(4) or any controlling or affiliated party has ever been convicted of a crime or found civilly liable for an offense involving moral turpitude, including forgery, embezzlement, obtaining money under false pretenses, larceny, extortion, conspiracy to defraud, or any other similar offense or violation, or any violation of a federal or state law or regulation in connection with activities relating to the rendition of debt management services or any consumer fraud, false advertising, deceptive trade practices, or similar consumer protection law;
(5) has had a registration or license previously revoked or suspended in this state or any other state or the applicant or licensee has been permanently or temporarily enjoined by any court of competent jurisdiction from engaging in or continuing any conduct or practice involving any aspect of the debt management services provider business; or any controlling or affiliated party has been an officer, director, manager, or shareholder owning more than a ten percent interest in a debt management services provider whose registration has previously been revoked or suspended in this state or any other state, or who has been permanently or temporarily enjoined by any court of competent jurisdiction from engaging in or continuing any conduct or practice involving any aspect of the debt management services provider business;
(6) has made any false statement or representation to the commissioner;
(7) is insolvent;
(8) refuses to fully comply with an investigation or examination of the debt management services provider by the commissioner;
(9) has improperly withheld, misappropriated, or converted any money or properties received in the course of doing business;
(10) has failed to have a trust account with an actual cash balance equal to or greater than the sum of the escrow balances of each debtor’s account;
(11) has defaulted in making payments to creditors on behalf of debtors as required by agreements between the provider and debtor;
(12) has used fraudulent, coercive, or dishonest practices, or demonstrated incompetence, untrustworthiness, or financial irresponsibility in this state or elsewhere; or
(13) has been shown to have engaged in a pattern of failing to perform the services promised.
332A.09 SUSPENDING, REVOKING, OR REFUSING TO RENEW REGISTRATION.
https://www.revisor.mn.gov/statutes/cite/332A.09
Subdivision 1.Procedure. The commissioner may revoke, suspend, or refuse to renew any registration issued under this chapter, or may levy a civil penalty under section 45.027, or any combination of actions, if the debt management services provider or any controlling or affiliated person has committed any act or omission for which the commissioner could have refused to issue an initial registration or renew an existing registration. Revocation of or refusal to renew a registration must be upon notice and hearing as prescribed in the Administrative Procedure Act, sections 14.57 to 14.69. The notice must set a time for hearing before the commissioner not less than 20 nor more than 30 days after service of the notice, provided the registrant may waive the 20-day minimum. The commissioner may, in the notice, suspend the registration for a period not to exceed 60 days. Unless the notice states that the registration is suspended, pending the determination of the main issue, the registrant may continue to transact business until the final decision of the commissioner. If the registration is suspended, the commissioner shall hold a hearing and render a final determination within ten days of a request by the registrant. If the commissioner fails to do so, the suspension shall terminate and be of no force or effect.
Subd. 2.Notification of interested persons. After the notice and hearing required in subdivision 1, upon issuing an order suspending or revoking a registration or refusing to renew a registration, the commissioner may notify all individuals who have contracts with the affected registrant and all creditors who have agreed to a debt management services plan that the registration has been revoked and that the order is subject to appeal.
Subd. 3.Receiver for funds of sanctioned registrant. When an order is issued revoking or refusing to renew a registration, the commissioner may apply for, and the district court must appoint, a receiver to temporarily or permanently receive the assets of the registrant pending a final determination of the validity of the order.
332A.10 WRITTEN DEBT MANAGEMENT SERVICES AGREEMENT.
https://www.revisor.mn.gov/statutes/cite/332A.10
Subdivision 1.Written agreement required. (a) A debt management services provider may not perform any debt management services or receive any money related to a debt management services plan until the provider has obtained a debt management services agreement that contains all terms of the agreement between the debt management services provider and the debtor.
(b) A debt management services agreement must:
(1) be in writing, dated, and signed by the debt management services provider and the debtor;
(2) conspicuously indicate whether or not the debt management services provider is registered with the Minnesota Department of Commerce and include any registration number; and
(3) be written in the debtor’s primary language if the debt management services provider advertised in that language.
(c) The registrant must furnish the debtor with a copy of the signed contract upon execution.
Subd. 2.Actions prior to written agreement. No person may provide debt management services for a debtor or execute a debt management services agreement unless the person first has:
(1) provided the debtor individualized counseling and educational information that, at a minimum, addresses managing household finances, managing credit and debt, budgeting, and personal savings strategies;
(2) prepared in writing and provided to the debtor, in a form that the debtor may keep, an individualized financial analysis and a proposed debt management services plan listing the debtor’s known debts with specific recommendations regarding actions the debtor should take to reduce or eliminate the amount of the debts, including written disclosure that debt management services are not suitable for all debtors and that there are other ways, including bankruptcy, to deal with indebtedness;
(3) made a determination supported by an individualized financial analysis that the debtor can reasonably meet the requirements of the proposed debt management services plan and that there is a net tangible benefit to the debtor of entering into the proposed debt management services plan;
(4) prepared, in a form the debtor may keep, a written list identifying all known creditors of the debtor that the provider reasonably expects to participate in the plan and the creditors, including secured creditors, that the provider reasonably expects not to participate; and
(5) disclosed, in addition to the written disclosure on the agreement required under subdivision 1, whether or not the debt management services provider is registered with the Minnesota Department of Commerce and any registration number.
Subd. 3.Required terms. (a) Each debt management services agreement must contain the following terms, which must be disclosed prominently and clearly in bold print on the front page of the agreement, segregated by bold lines from all other information on the page:
(1) the origination fee amount to be paid by the debtor and whether all or a portion of the origination fee is refundable or nonrefundable;
(2) the monthly fee amount or percentage to be paid by the debtor; and
(3) the total amount of fees reasonably anticipated to be paid by the debtor over the term of the agreement.
(b) Each debt management services agreement must also contain the following:
(1) a disclosure that if the amount of debt owed is increased by interest, late fees, over the limit fees, and other amounts imposed by the creditors, the length of the debt management services agreement will be extended and remain in force and that the total dollar charges agreed upon may increase at the rate agreed upon in the original contract agreement;
(2) a prominent statement describing the terms upon which the debtor may cancel the contract as set forth in section 332A.11;
(3) a detailed description of all services to be performed by the debt management services provider for the debtor;
(4) the debt management services provider’s refund policy; and
(5) the debt management services provider’s principal business address and the name and address of its agent in this state authorized to receive service of process.
Subd. 4.Prohibited terms. The following terms shall not be included in the debt management services agreement:
(1) a hold harmless clause;
(2) a confession of judgment, or a power of attorney to confess judgment against the debtor or appear as the debtor in any judicial proceeding;
(3) a waiver of the right to a jury trial, if applicable, in any action brought by or against a debtor;
(4) an assignment of or an order for payment of wages or other compensation for services;
(5) a provision in which the debtor agrees not to assert any claim or defense arising out of the debt management services agreement;
(6) a waiver of any provision of this chapter or a release of any obligation required to be performed on the part of the debt management services provider;
(7) a mandatory arbitration clause; or
(8) a clause selecting a law other than the laws of Minnesota or a venue other than the state of Minnesota under which the debt management services agreement or any other dispute involving the provision of debt management services is governed or enforced.
Subd. 5.New debt management services agreements; modification of existing agreements.
(a) Separate and additional debt management services agreements that comply with this chapter may be entered into by the debt management services provider and the debtor provided that no additional origination fee may be charged by the debt management services provider.
(b) Any modification of an existing debt management services agreement, including any increase in the number or amount of debts included in the debt management services agreement, must be in writing and signed by both parties, except that the signature of the debtor is not required if:
(1) a creditor is added to or deleted from a debt management services agreement at the request of the debtor or a debtor voluntarily increases the amount of a payment, provided the debt management services provider must provide an updated payment schedule to the debtor within seven days; or
(2) the payment amount to a creditor in the agreement increases by $10 or less and the total payment amount to all creditors increases a total of $20 or less as a result of incorrect or incomplete information provided by the debtor regarding the amount of debt owed a creditor, provided the debt management services provider must notify the debtor of the increase within seven days.
No fees, charges, or other consideration may be demanded from the debtor for the modification, other than an increase in the amount of the monthly maintenance fee established in the original debt management services agreement.
332A.11 RIGHT TO CANCEL.
https://www.revisor.mn.gov/statutes/cite/332A.11
Subdivision 1.Debtor’s right to cancel. A debtor has the right to cancel the debt management services agreement without cause at any time upon ten days’ written notice to the debt management services provider. In the event of cancellation, the debt management services provider must, within ten days of the cancellation, notify the debtor’s creditors of the cancellation and provide a refund of all unexpended funds paid by or for the debtor to the debt management services provider.
Subd. 2.Notice of debtor’s right to cancel. A debt management services agreement must contain, on its face, in an easily readable type immediately adjacent to the space for signature by the debtor, the following notice: “Right To Cancel: You have the right to cancel this contract at any time on ten days’ written notice.”
Subd. 3.Automatic termination. Upon the payment of all listed debts and fees, the debt management services agreement must automatically terminate, and all unexpended funds paid by or for the debtor to the debt management services provider must be immediately returned to the debtor.
Subd. 4.Debt management services provider’s right to cancel. A debt management services provider may cancel a debt management services agreement with good cause upon 30 days’ written notice to the debtor. Within ten days after the cancellation, the debt management services provider must: (1) notify the debtor’s creditors of the cancellation; and (2) return to the debtor all unexpended funds paid by or for the debtor.
332A.12 BOOKS, RECORDS, AND INFORMATION.
https://www.revisor.mn.gov/statutes/cite/332A.12
Subdivision 1.Records retention. Every registrant must keep, and use in the registrant’s business, such books, accounts, and records, including electronic records, as will enable the commissioner to determine whether the registrant is complying with this chapter and of the rules, orders, and directives adopted by the commissioner under this chapter. Every registrant must preserve such books, accounts, and records for at least six years after making the final entry on any transaction recorded therein. Examinations of the books, records, and method of operations conducted under the supervision of the commissioner shall be done at the cost of the registrant. The cost must be assessed as determined under section 46.131.
Subd. 1a.Annual report. On or before March 15 of each calendar year, each registrant must file a report with the commissioner containing such information as the commissioner may require about the preceding calendar year. The report must be in a form the commissioner prescribes.
Subd. 2.Statements to debtors. Each registrant must maintain and must make available records and accounts that will enable each debtor to ascertain the amounts paid to the creditors of the debtor. A statement showing amounts received from the debtor, disbursements to each creditor, amounts which any creditor has agreed to accept as payment in full for any debt owed the creditor by the debtor, charges deducted by the registrant, and such other information as the commissioner may prescribe, must be furnished by the registrant to the debtor at least monthly and, in addition, upon any cancellation or termination of the contract. In addition to the statements required by this subdivision, each debtor must have reasonable access, without cost, by electronic or other means, to information in the registrant’s files applicable to the debtor. These statements, records, and accounts must otherwise remain confidential except for duly authorized state and government officials, the commissioner, the attorney general, the debtor, and the debtor’s representative and designees. Each registrant must prepare and retain in the file of each debtor a written analysis of the debtor’s income and expenses to substantiate that the plan of payment is feasible and practicable.
332A.13 FEES, PAYMENTS, AND CONSENT OF CREDITORS.
https://www.revisor.mn.gov/statutes/cite/332A.13
Subdivision 1.Origination fee. The registrant may charge a nonrefundable origination fee of not more than $50, which may be retained by the registrant from the initial amount paid by the debtor to the registrant.
Subd. 2.Monthly maintenance fee. The registrant may charge a periodic fee for account maintenance or other purposes, but only if the fee is reasonable for the services provided and does not exceed the lesser of 15 percent of the monthly payment amount or $75.
Subd. 3.Additional fees unauthorized. A registrant may not impose any fee or other charge or receive any funds or other payment other than the initial fee or monthly maintenance fee authorized by this section.
Subd. 4.Amount of periodic payments retained. The registrant may retain as payment for the fees authorized by this section no more than 15 percent of any periodic payment made to the registrant by the debtor. The remaining 85 percent must be disbursed to listed creditors under and in accordance with the debt management services agreement. No fees or charges may be received or retained by the registrant for any handling of recurring payments. Recurring payments include current rent, mortgage, utility, telephone, maintenance as defined in section 518.27, child support, insurance premiums, and such other payments as the commissioner may by rule prescribe.
Subd. 5.Advance payments. No fees or charges may be received or retained for any payments by the debtor made more than the following number of days in advance of the date specified in the debt management services agreement on which they are due: (1) 42 days in the case of contracts requiring monthly payments; (2) 15 days in the case of agreements requiring biweekly payments; or (3) seven days in the case of agreements requiring weekly payments. For those agreements which do not require payments in specified amounts, a payment is deemed an advance payment to the extent it exceeds twice the average regular payment previously made by the debtor under that contract. This subdivision does not apply when the debtor intends to use the advance payments to satisfy future payment of obligations due within 30 days under the contract. This subdivision supersedes any inconsistent provision of this chapter.
Subd. 6.Consent of creditors. A registrant must actively seek to obtain the consent of all creditors to the debt management services plan set forth in the debt management services agreement. Consent by a creditor may be express and in writing, or may be evidenced by acceptance of a payment made under the debt management services plan set forth in the contract. The registrant must notify the debtor within ten days after any failure to obtain the required consent and of the debtor’s right to cancel without penalty. The notice must be in a form as the commissioner shall prescribe. Nothing contained in this section is deemed to require the return of any origination fee and any fees earned by the registrant prior to cancellation or default.
Subd. 7.Withdrawal of creditor. Whenever a creditor withdraws from a debt management services plan, or refuses to participate in a debt management services plan, the registrant must promptly notify the debtor of the withdrawal or refusal. In no case may this notice be provided more than 15 days after the debt management services provider learns of the creditor’s decision to withdraw from or refuse to participate in a plan. This notice must include the identity of the creditor withdrawing from the plan, the amount of the monthly payment to that creditor, and the right of the debtor to cancel the agreement under section 332A.11.
Subd. 8.Payments held in trust. The registrant must maintain a separate trust account and deposit in the account all payments received from the moment that the funds are available, except that the registrant may commingle the payment with the registrant’s own property or funds, but only to the extent necessary to ensure the maintenance of a minimum balance if the financial institution at which the trust account is held requires a minimum balance to avoid the assessment of fees or penalties for failure to maintain a minimum balance. All disbursements, whether to the debtor or to the creditors of the debtor, or to the registrant, must be made from such account, except that disbursements may be made from a trust account to an account established solely for the purpose of making disbursements to debtors and creditors.
Subd. 9.Timely payment of creditors. The registrant must disburse any funds paid by or on behalf of a debtor to creditors of the consumer within 42 days after receipt of the funds, or earlier if necessary to comply with the due date in the agreement between the debtor and the creditor, unless the reasonable payment of one or more of the debtor’s obligations requires that the funds be held for a longer period so as to accumulate a sum certain, or where the debtor’s payment is returned for insufficient funds or other reason that makes the withholding of such payments in the net interest of the debtor.
332A.14 PROHIBITIONS.
https://www.revisor.mn.gov/statutes/cite/332A.14
No debt management services provider shall:
(1) purchase from a creditor any obligation of a debtor;
(2) use, threaten to use, seek to have used, or seek to have threatened the use of any legal process, including but not limited to garnishment and repossession of personal property, against any debtor while the debt management services agreement between the registrant and the debtor remains executory;
(3) advise, counsel, or encourage a debtor to stop paying a creditor, or imply, infer, encourage, or in any other way indicate, that it is advisable to stop paying a creditor;
(4) sanction or condone the act by a debtor of ceasing payments to a creditor or imply, infer, or in any manner indicate that the act of ceasing payments to a creditor is advisable or beneficial to the debtor;
(5) require as a condition of performing debt management services the purchase of any services, stock, insurance, commodity, or other property or any interest therein either by the debtor or the registrant;
(6) compromise any debts unless the prior written or contractual approval of the debtor has been obtained to such compromise and unless such compromise inures solely to the benefit of the debtor;
(7) receive from any debtor as security or in payment of any fee a promissory note or other promise to pay or any mortgage or other security, whether as to real or personal property;
(8) lend money or provide credit to any debtor if any interest or fee is charged, or directly or indirectly collect any fee for referring, advising, procuring, arranging, or assisting a consumer in obtaining any extension of credit or other debtor service from a lender or debt management services provider;
(9) structure a debt management services agreement that would result in negative amortization of any debt in the plan;
(10) engage in any unfair, deceptive, or unconscionable act or practice in connection with any service provided to any debtor;
(11) offer, pay, or give any material cash fee, gift, bonus, premium, reward, or other compensation to any person for referring any prospective customer to the registrant or for enrolling a debtor in a debt management services plan, or provide any other incentives for employees or agents of the debt management services provider to induce debtors to enter into a debt management services plan;
(12) receive any cash, fee, gift, bonus, premium, reward, or other compensation from any person other than the debtor or a person on the debtor’s behalf in connection with activities as a registrant, provided that this paragraph does not apply to a registrant which is a bona fide nonprofit corporation duly organized under chapter 317A or under the similar laws of another state;
(13) enter into a contract with a debtor unless a thorough written budget analysis indicates that the debtor can reasonably meet the requirements of the financial adjustment plan and will be benefited by the plan;
(14) in any way charge or purport to charge or provide any debtor credit insurance in conjunction with any contract or agreement involved in the debt management services plan;
(15) operate or employ a person who is an employee or owner of a collection agency or process-serving business; or
(16) solicit, demand, collect, require, or attempt to require payment of a sum that the registrant states, discloses, or advertises to be a voluntary contribution to a debt management services provider or designee from the debtor.
332A.16 ADVERTISEMENT OF DEBT MANAGEMENT SERVICES.
https://www.revisor.mn.gov/statutes/cite/332A.16
No debt management services provider may make false, deceptive, or misleading statements or omissions about the rates, terms, or conditions of an actual or proposed debt management services plan or its debt management services, or create the likelihood of consumer confusion or misunderstanding regarding its services, including but not limited to the following:
(1) represent that the debt management services provider is a nonprofit, not-for-profit, or has similar status or characteristics if some or all of the debt management services will be provided by a for-profit company that is a controlling or affiliated party to the debt management services provider; or
(2) make any communication that gives the impression that the debt management services provider is acting on behalf of a government agency.
332A.17 DEBT MANAGEMENT SERVICES AGREEMENT RESCISSION.
https://www.revisor.mn.gov/statutes/cite/332A.17
Any debtor has the right to rescind any debt management services agreement with a debt management services provider that commits a material violation of this chapter. On rescission, all fees paid to the debt management services provider or any other person other than creditors of the debtor must be returned to the debtor entering into the debt management services agreement within ten days of rescission of the debt management services agreement.
332A.18 ENFORCEMENT; REMEDIES.
https://www.revisor.mn.gov/statutes/cite/332A.18
Subdivision 1.Violation a deceptive practice. A violation of any of the provisions of this chapter is considered an unfair or deceptive trade practice under section 8.31, subdivision 1. A private right of action under section 8.31 by an aggrieved debtor is in the public interest.
Subd. 2.Private right of action. (a) A debt management services provider who fails to comply with any of the provisions of this chapter is liable under this section in an individual action for the sum of (i) actual, incidental, and consequential damages sustained by the debtor as a result of the failure; and (ii) statutory damages of up to $1,000.
(b) A debt management services provider who fails to comply with any of the provisions of this chapter is liable to the named plaintiffs under this section in a class action for the amount that each named plaintiff could recover under paragraph (a), clause (i), and to the other class members for such amount as the court may allow.
(c) In determining the amount of statutory damages, the court shall consider, among other relevant factors:
(1) the frequency, nature, and persistence of noncompliance;
(2) the extent to which the noncompliance was intentional; and
(3) in the case of a class action, the number of debtors adversely affected.
(d) A plaintiff or class successful in a legal or equitable action under this section is entitled to the costs of the action, plus reasonable attorney fees.
Subd. 3.Injunctive relief. A debtor may sue a debt management services provider for temporary or permanent injunctive or other appropriate equitable relief to prevent violations of any provision of this chapter. A court must grant injunctive relief on a showing that the debt management services provider has violated any provision of this chapter, or in the case of a temporary injunction, on a showing that the debtor is likely to prevail on allegations that the debt management services provider violated any provision of this chapter.
Subd. 4.Remedies cumulative. The remedies provided in this section are cumulative and do not restrict any remedy that is otherwise available. The provisions of this chapter are not exclusive and are in addition to any other requirements, rights, remedies, and penalties provided by law.
Subd. 5.Public enforcement. The attorney general shall enforce this chapter under section 8.31.
332A.19 INVESTIGATION.
https://www.revisor.mn.gov/statutes/cite/332A.19
At any reasonable time, the commissioner may examine the books and records of every registrant and of any person engaged in the business of providing debt management services as defined in section 332A.02. The commissioner once during any calendar year may require the submission of an audit prepared by a certified public accountant of the books and records of each registrant. If the registrant has, within one year previous to the commissioner’s demand, had an audit prepared for some other purpose, this audit may be submitted to satisfy the requirement of this section. The commissioner may investigate any complaint concerning violations of this chapter and may require the attendance and sworn testimony of witnesses and the production of documents.
M.S.A. § 332B.02 et seq.
332B.02. Definitions
Subdivision 1. Scope. Unless a different meaning is clearly indicated by the context, for the purposes of this chapter, the terms defined in this section have the meanings given them.
Subd. 2. Accreditation. “Accreditation” means certification as an accredited credit counseling provider by the Council on Accreditation, the Bureau Veritas Certification North America, Inc., or BSI Management Systems America, Inc.
Subd. 3. Advertise. “Advertise” means to solicit business through any means or medium.
Subd. 4. Aggregate debt. “Aggregate debt” means the total of principal and interest that is owed by the debtor to the creditors at the time of execution of the debt settlement agreement.
Subd. 5. Attorney general. “Attorney general” means the attorney general of the state of Minnesota.
Subd. 6. Commissioner. “Commissioner” means the commissioner of commerce.
Subd. 7. Controlling or affiliated party. “Controlling or affiliated party” means any person or entity that controls or is controlled, directly or indirectly, or is under common control with another person. Controlling or affiliated party includes, but is not limited to, employees, officers, independent contractors, corporations, partnerships, and limited liability corporations.
Subd. 8. Credit counseling. “Credit counseling” means the provision of counseling and advice on managing household finances, including but not limited to managing credit and debt, budgeting, and personal savings.
Subd. 9. Creditor. “Creditor” means:
(1) a party named by the debtor as a creditor in the debt settlement services plan or debt settlement services agreement;
(2) a party that acquires or holds the debt;
(3) a party to whom interactions with the debt settlement services is assigned in relation to the debt listed in the debt settlement services plan or debt settlement services agreement; or
(4) the federal government, state government, or their political subdivisions, to which delinquent taxes are owed.
Subd. 10. Debt settlement services. “Debt settlement services” means any one or more of the following activities:
(1) offering to provide advice, or offering to act or acting as an intermediary between a debtor and one or more of the debtor’s creditors, where the primary purpose of the advice or action is to obtain a settlement for less than the full amount of debt, whether in principal, interest, fees, or other charges, incurred primarily for personal, family, or household purposes including, but not limited to, offering debt negotiation, debt reduction, or debt relief services;
(2) advising, encouraging, assisting, or counseling a debtor to accumulate funds in an account for future payment of a reduced amount of debt to one or more of the debtor’s creditors; or
(3) offering to provide advice, or offering to act or acting as an intermediary between a debtor and the federal government, state government, or their political subdivisions to delay payment of delinquent taxes owed, establish a payment plan for delinquent taxes owed, or obtain a settlement for less than the full amount of delinquent taxes owed.
Any person so engaged or holding out as so engaged is deemed to be engaged in the provision of debt settlement services, regardless of whether or not a fee is charged for such services.
Subd. 11. Debt settlement services agreement. “Debt settlement services agreement” means the written contract between the debt settlement services provider and the debtor.
Subd. 12. Debt settlement services plan. “Debt settlement services plan” means the debtor’s individualized package of debt settlement services set forth in the debt settlement services agreement.
Subd. 13. Debt settlement services provider. “Debt settlement services provider” means any person offering or providing debt settlement services to a debtor domiciled in this state, regardless of whether or not a fee is charged for the services and regardless of whether the person maintains a physical presence in the state. The term includes any person to whom debt settlement services are delegated. The term shall not include an exempt attorney at law and persons listed in section 332A.02, subdivision 8, clauses (2) to (12), or a debt management services provider.
Subd. 13a. Exempt attorney at law. “Exempt attorney at law” means an attorney licensed or otherwise authorized to practice law in this state:
(1) whose exclusive or principal practice does not involve the provision of debt settlement services; and
(2) who does not have a business relationship with a debt settlement services provider that involves the provision of debt settlement services.
Subd. 14. Lead generator. “Lead generator” means a person that, without providing debt settlement services: (1) solicits debtors to engage in debt settlement through mail, in person, or electronic website-based solicitation or any other means, (2) acts as an intermediary or referral agent between a debtor and an entity actually providing debt settlement services, or (3) obtains a debtor’s personally identifiable information and transmits that information to a debt settlement services provider.
Subd. 15. Person. “Person” means an individual, firm, partnership, association, or corporation.
Subd. 16. Registrant. “Registrant” means any person registered by the commissioner pursuant to this chapter and, where used in conjunction with an act or omission required or prohibited by this chapter, shall mean any person performing debt settlement services.
332B.03. Requirement of registration
On or after August 1, 2009, it is unlawful for any person, whether or not located in this state, to operate as a debt settlement services provider or provide debt settlement services including, but not limited to, offering, advertising, or executing or causing to be executed any debt settlement services or debt settlement services agreement, except as authorized by law, without first becoming registered as provided in this chapter. Debt settlement services providers may continue to provide debt settlement services without complying with this chapter to those debtors who entered into a contract to participate in a debt settlement services plan prior to August 1, 2009, but may not enter into a debt settlement services agreement with a debtor on or after August 1, 2009, without complying with this chapter.
332B.04. Registration
Subdivision 1. Form. Application for registration to operate as a debt settlement services provider in this state must be made in writing to the commissioner, under oath, in the form prescribed by the commissioner, and must contain:
(1) the full name of each principal of the entity applying;
(2) the address, which must not be a post office box, and the telephone number and, if applicable, email address of the applicant;
(3) consent to the jurisdiction of the courts of this state;
(4) the name and address of the registered agent authorized to accept service of process on behalf of the applicant or appointment of the commissioner as the applicant’s agent for purposes of accepting service of process;
(5) disclosure of:
(i) whether any controlling or affiliated party has ever been convicted of a crime or found civilly liable for an offense involving moral turpitude, including forgery, embezzlement, obtaining money under false pretenses, larceny, extortion, conspiracy to defraud, or any other similar offense or violation, or any violation of a federal or state law or regulation in connection with activities relating to the rendition of debt settlement services or involving any consumer fraud, false advertising, deceptive trade practices, or similar consumer protection law;
(ii) any judgments, private or public litigation, tax liens, written complaints, administrative actions, or investigations by any government agency against the applicant or any officer, director, manager, or shareholder owning more than five percent interest in the applicant, unresolved or otherwise, filed or otherwise commenced within the preceding ten years;
(iii) whether the applicant or any person employed by the applicant has had a record of having defaulted in the payment of money collected for others, including the discharge of debts through bankruptcy proceedings; and
(iv) whether the applicant’s license or registration to provide debt settlement services in any other state has ever been revoked or suspended;
(6) a copy of the applicant’s standard debt settlement services agreement that the applicant intends to execute with debtors;
(7) proof of accreditation, unless the applicant submits an affidavit attesting that the applicant does not provide credit counseling services; and
(8) any other information and material as the commissioner may require.
The commissioner may, for good cause shown, temporarily waive any requirement of this subdivision.
Subd. 2. Term and scope of registration. A registration is effective until 11:59 p.m. on December 31 of the year for which the application for registration is filed or until it is surrendered by the registrant or revoked or suspended by the commissioner. The registration is limited solely to the business of providing debt settlement services.
Subd. 3. Fees; bond. An applicant for registration as a debt settlement services provider must comply with the requirements of section 332A.04, subdivisions 3, 4, and 5.
Subd. 4. Right of action on bond. If the registrant has failed to account to a debtor, or has failed to perform any of the services promised, the registrant is in default. The debtor or the debtor’s legal representative or receiver, the commissioner, or the attorney general shall have, in addition to all other legal remedies, a right of action in the name of the debtor on the bond or the security given under this section, for loss suffered by the debtor, not exceeding the face amount of the bond or security, and without the necessity of joining the registrant in the suit or action based on the default.
Subd. 5. Registrant list. The commissioner must maintain a list of registered debt settlement services providers. The list must be made available to the public in written form upon request and on the Department of Commerce website.
Subd. 6. Renewal of registration. Each year, each registrant under the provisions of this chapter must, not more than 60 nor less than 30 days before its registration is to expire, apply to the commissioner for renewal of its registration on a form prescribed by the commissioner. The application must be signed by the registrant under penalty of perjury, contain current information on all matters required in the original application, and be accompanied by a payment of $250. The registrant must maintain a continuous surety bond that satisfies the requirements of section 332A.04, subdivision 4. The renewal is effective for one year. The commissioner may, for good cause shown, temporarily waive any requirement of this section.
Subd. 7. Information updates required. A registrant must update any information required by this chapter the registrant provided in the original or renewal application not later than ten days after the date the events precipitating the update occurred.
Subd. 8. Records and fees; maintenance and processing. Section 58A.04, subdivisions 2 and 3, apply to this section.
332B.05. Denial, suspension, revocation, or nonrenewal of registration
Subdivision 1. Denial. The commissioner, with notice to the applicant by certified mail sent to the address listed on the application, may deny an application for a registration for any of the reasons specified under section 332A.08.
Subd. 2. Suspension, revocation, or nonrenewal. The commissioner may suspend, revoke, or refuse to renew any registration issued under this chapter, or may levy a civil penalty under section 45.027, or any combination of actions, if the debt settlement services provider or any controlling or affiliated person has committed any act or omission for which the commissioner could have refused to issue an initial registration.
Subd. 3. Procedure. Suspension, revocation, or nonrenewal must be upon notice and under the conditions prescribed in section 332A.09, subdivision 1. Upon issuance of an order suspending, revoking, or refusing to renew a registration, the commissioner:
(1) shall follow the procedure established in section 332A.09, subdivision 2; and
(2) may follow the procedure specified in section 332A.09, subdivision 3, concerning the appointment of a receiver for funds of sanctioned registrants.
332B.06. Written debt settlement services agreement; disclosures; trust account
Subdivision 1. Written agreement required. (a) A debt settlement services provider may not perform, or impose any charges or receive any payment for, any debt settlement services until the provider and the debtor have executed a debt settlement services agreement that contains all terms of the agreement between the debt settlement services provider and the debtor, and the provider complies with all the applicable requirements of this chapter.
(b) A debt settlement services agreement must:
(1) be in writing, dated, and signed by the debt settlement services provider and the debtor;
(2) conspicuously indicate whether or not the debt settlement services provider is registered with the Minnesota Department of Commerce and include any registration number; and
(3) be written in the debtor’s primary language if the debt settlement services provider advertises in that language, or in the language in which the agreement was negotiated, regardless of whether the debt settlement services provider advertises in that language.
(c) The registrant must furnish the debtor with a copy of the signed contract upon execution.
Subd. 2. Actions prior to executing a written agreement. No person may provide debt settlement services for a debtor or execute a debt settlement services agreement unless the person first has:
(1) informed the debtor, in writing, that debt settlement is not appropriate for all debtors and that there are other ways to deal with debt, including using credit counseling or debt management services, or filing bankruptcy;
(2) prepared in writing and provided to the debtor, in a form the debtor may keep, an individualized financial analysis of the debtor’s financial circumstances, including income and liabilities, and made a determination supported by the individualized financial analysis that:
(i) the debt settlement plan proposed for addressing the debt is suitable for the individual debtor;
(ii) the debtor can reasonably meet the requirements of the proposed debt settlement services plan; and
(iii) based on the totality of the circumstances, there is a net tangible benefit to the debtor of entering into the proposed debt settlement services plan; and
(3) provided, on a document separate from any other document, the total amount and an itemization of fees, including any origination fees, monthly fees, and settlement fees reasonably anticipated to be paid by the debtor over the term of the agreement.
Subd. 3. Determination concerning creditor participation. (a) Before executing a debt settlement services agreement or providing any services, a debt settlement services provider must make a determination, supported by sufficient bases, which creditors listed by the debtor are reasonably likely, and which are not reasonably likely, to participate in the debt settlement services plan set forth in the debt settlement services agreement.
(b) A debt settlement services provider has a defense against a claim that no sufficient basis existed to make a determination that a creditor was likely to participate if the debt settlement services provider can produce:
(1) written confirmation from the creditor that, at the time the determination was made, the creditor and the debt settlement services provider were engaged in negotiations to settle a debt for another debtor; or
(2) evidence that the provider and the creditor had entered into a settlement of a debt for another debtor within the six months prior to the date of the determination.
(c) The debt settlement services provider must notify the debtor as soon as practicable after the provider has made a determination of the likelihood of participation or nonparticipation of all the creditors listed for inclusion in the debt settlement services agreement or debt settlement services plan. If not all creditors listed in the debt settlement services agreement are reasonably likely to participate in the debt settlement services plan, the debt settlement services provider must obtain the written authorization from the debtor to proceed with the debt settlement services agreement without the likely participation of all listed creditors.
Subd. 4. Disclosures. (a) A person offering to provide or providing debt settlement services must disclose both orally and in writing whether or not the person is registered with the Minnesota Department of Commerce and any registration number.
(b) No person may provide debt settlement services unless the person first has provided, both orally and in writing, on a single sheet of paper, separate from any other document or writing, the following verbatim notice:
CAUTION
We CANNOT GUARANTEE that you will successfully reduce or eliminate your debt.
If you stop paying your creditors, there is a strong likelihood some or all of the following may happen:
- YOUR WAGES OR BANK ACCOUNT MAY STILL BE GARNISHED.
- YOU MAY STILL BE CONTACTED BY CREDITORS.
- YOU MAY STILL BE SUED BY CREDITORS for the money you owe.
- FEES, INTEREST, AND OTHER CHARGES WILL CONTINUE TO MOUNT UP DURING THE (INSERT NUMBER) MONTHS THIS PLAN IS IN EFFECT.
Even if we do settle your debt, YOU MAY STILL HAVE TO PAY TAXES on the amount forgiven.
Your credit rating may be adversely affected.
(c) The heading, “CAUTION,” must be in bold, underlined, 28-point type, and the remaining text must be in 14-point type, with a double space between each statement.
(d) The disclosures and notices required under this subdivision must be provided in the debtor’s primary language if the debt settlement services provider advertises in that language, or in the language in which the agreement was negotiated, regardless of whether the debt settlement services provider advertises in that language.
Subd. 5. Required terms. (a) Each debt settlement services agreement must contain on the front page of the agreement, segregated by bold lines from all other information on the page and disclosed prominently and clearly in bold print, the total amount and an itemization of fees, including any origination fees, monthly fees, and settlement fees reasonably anticipated to be paid by the debtor over the term of the agreement.
(b) Each debt settlement services agreement must also contain the following:
(1) a prominent statement describing the terms upon which the debtor may cancel the contract as set forth in section 332B.07;
(2) a detailed description of all services to be performed by the debt settlement services provider for the debtor;
(3) the debt settlement services provider’s refund policy;
(4) the debt settlement services provider’s principal business address, which must not be a post office box, and the name and address of its agent in this state authorized to receive service of process; and
(5) the name of each creditor the debtor has listed and the aggregate debt owed to each creditor that will be the subject of settlement.
Subd. 6. Prohibited terms. A debt settlement services agreement may not contain any of the terms prohibited under section 332A.10, subdivision 4.
Subd. 7. New debt settlement services agreements; modifications of existing agreements. (a) Separate and additional debt settlement services agreements that comply with this chapter may be entered into by the debt settlement services provider and the debtor, provided that no additional origination fee may be charged by the debt settlement services provider.
(b) Any modification of an existing debt settlement services agreement, including any increase in the number or amount of debts included in the debt settlement services agreement, must be in writing and signed by both parties. No fee may be charged to modify an existing agreement.
Subd. 8. Funds held in trust. Debtor funds may be held in trust for the purpose of writing exchange checks for no longer than 42 days. If the registrant holds debtor funds, the registrant must maintain a separate trust account, except that the registrant may commingle debtor funds with the registrant’s own funds, in the form of an imprest fund, to the extent necessary to ensure maintenance of a minimum balance, if the financial institution at which the trust account is held requires a minimum balance to avoid the assessment of fees or penalties for failure to maintain a minimum balance.
332B.07. Right to cancel
Subdivision 1. Debtor’s right to cancel. (a) A debtor has the right to cancel a debt settlement services agreement without cause at any time upon ten days’ written notice to the debt settlement services provider.
(b) In the event of cancellation, the debt settlement services provider must, within ten days of the cancellation, notify the debtor’s creditors with whom the debt settlement services provider is or has been, under the terms of the debt settlement agreement, in communication, of the cancellation and immediately refund all fees paid by the debtor to the debt settlement services provider that exceed the fees allowed under section 332B.09.
(c) Upon cancellation, the debt settlement services provider must cease collection of any monthly fees beginning in the month following cancellation.
(d) Notwithstanding paragraph (c), a debt settlement services provider is entitled to the full amount of the fees provided for in the debt settlement services agreement if the provider can show that:
(1) the provider obtained a settlement offer from the creditor or creditors in accordance with the debt settlement services agreement;
(2) the debtor rejected the settlement offer; or
(3) within the period contemplated in the debt settlement services agreement, the debtor entered into a settlement agreement with the same creditor or creditors for an amount equal to or lower than the settlement offer obtained by the provider.
Subd. 2. Notice of debtor’s right to cancel. A debt settlement services agreement must contain, on its face, in an easily readable type immediately adjacent to the space for signature by the debtor, the following notice: “Right to Cancel: You have the right to cancel this contract at any time on ten days’ written notice.”
Subd. 3. Automatic termination. Upon the payment of all listed or settled debts and fees, the debt settlement services agreement must automatically terminate, and all funds held by the debt settlement services provider that exceed the fees allowed under section 332B.09 must be immediately returned to the debtor.
Subd. 4. Debt settlement services provider’s right to cancel. (a) A debt settlement services provider may cancel a debt settlement services agreement with good cause upon 30 days’ written notice to the debtor.
(b) Within ten days after the cancellation, the debt settlement services provider must notify the debtor’s creditors with whom the debt settlement services provider is or has been, under the terms of the debt settlement services agreement, in communication, of the cancellation.
(c) Upon cancellation, the debt settlement services provider must cease collection of any monthly fees beginning in the month following cancellation.
332B.08. Books, records, and information
Subdivision 1. Records retention; annual report. Every registrant must keep, and use in the registrant’s business, such books, accounts, and records, including electronic records, as will enable the commissioner to determine whether the registrant is complying with this chapter and the rules, orders, and directives adopted by the commissioner under this chapter. Every registrant must preserve such books, accounts, and records for at least six years after making the final entry on any transaction recorded therein. Examinations of the books, records, and method of operations conducted under the supervision of the commissioner shall be done at the cost of the registrant. The cost must be assessed as determined under section 46.131.
Subd. 2. Annual report. On or before March 15 of each calendar year, each registrant must file a report with the commissioner containing information the commissioner may require about the preceding calendar year. The report must be in a form the commissioner prescribes.
Subd. 3. Statements to debtors. (a) Each registrant must:
(1) maintain and make available records and accounts that will enable each debtor to ascertain the amounts paid to the creditors, if any. A statement showing amounts received from the debtor, disbursements, if any, to each creditor, amounts that any creditor has agreed to as payment in full for any debt owed the creditor by the debtor, fees deducted by the registrant, and other information the commissioner may prescribe must be furnished by the registrant to the debtor at least monthly and, in addition, upon any cancellation or termination of the contract;
(2) include in the statement furnished to debtors a list of all activities conducted pursuant to the contract, including the nature of communications and progress of negotiations with each creditor during the reporting period; and
(3) prepare and retain in the file of each debtor a written analysis of the debtor’s income and expenses to substantiate that the plan of payment is feasible and practicable.
(b) Each debtor must have reasonable access, without cost, by electronic or other means, to information in the registrant’s files applicable to the debtor. These statements, records, and accounts must otherwise remain confidential, except for duly authorized state and government officials, the commissioner, the attorney general, the debtor, and the debtor’s representative and designees.
332B.09. Fees; withdrawal of creditors; notification to debtor of settlement offer
Subdivision 1. Choice of fee structure. A debt settlement services provider may calculate fees on a percentage of debt basis or on a percentage of savings basis. The fee structure shall be clearly disclosed and explained in the debt settlement services agreement.
Subd. 2. Calculation of fees. The total amount of the fees claimed, demanded, charged, collected, or received under a debt settlement services agreement shall be:
(1) for fees calculated on a percentage of debt basis, no greater than 15 percent of the aggregate debt; and
(2) for fees calculated on a percentage of savings basis, no greater than 30 percent of the savings actually negotiated by the debt settlement services provider. The savings shall be calculated as the difference between the aggregate debt that is stated in the debt settlement services agreement at the time of its execution and the total amount that the debtor actually pays to settle all the debts included in the debt settlement services agreement, provided that only savings resulting from concessions actually negotiated by the debt settlement services provider may be counted.
Subd. 3. Collection of fees. A debt settlement services provider may not impose or collect any payment pursuant to a debt settlement services agreement before the debt settlement service provider has fully performed all of the following:
(1) the debt settlement services contained in the agreement; and
(2) any additional services the debt settlement services provider has agreed to perform.
If more than one debt is the subject of the debt settlement services agreement, a debt settlement services provider may only charge or collect that proportion of total fees allowable under this section that equals the proportion of the aggregate debt the individual settled debt represents.
Subd. 4. Fees exclusive. No fees, charges, assessments, or any other compensation may be claimed, demanded, charged, collected, or received other than the fees allowed under this section. Any fees collected in excess of those allowed under this section must be immediately returned to the debtor.
Subd. 5. Withdrawal of creditor. Whenever a creditor withdraws from a debt settlement services plan, the debt settlement services provider must promptly notify the debtor of the withdrawal, identify the creditor, and inform the debtor of the right to modify the debt settlement services agreement, unless at least 50 percent of the listed creditors withdraw, in which case the debt settlement services provider must notify the debtor of the debtor’s right to cancel. In no case may this notice be provided more than 15 days after the debt settlement services provider learns of the creditor’s decision to withdraw from a plan.
Subd. 6. Timely notification of settlement offer. A debt settlement services provider must make all reasonable efforts to notify the debtor within 24 hours of a settlement offer made by a creditor.
332B.10. Prohibitions
No debt settlement services provider shall:
(1) engage in any activity, act, or omission prohibited under section 332A.14;
(2) promise, guarantee, or directly or indirectly imply, infer, or in any manner represent that any debt will be settled prior to the presentation to the debtor of an offer by the creditors participating in the debt settlement services plan to settle;
(3) misrepresent the timing of negotiations with creditors;
(4) imply, infer, or in any manner represent that:
(i) fees, interest, and other charges will not continue to accrue prior to the time debts are settled;
(ii) wages or bank accounts are not subject to garnishment;
(iii) creditors will not continue to contact the debtor;
(iv) the debtor is not subject to legal action; and
(v) the debtor will not be subject to tax consequences for the portion of any debts forgiven;
(5) execute a power of attorney or any other agreement, oral or written, express or implied, that extinguishes or limits the debtor’s right at any time to contract or communicate with any creditor or the creditor’s right at any time to communicate with the debtor;
(6) exercise or attempt to exercise a power of attorney after an individual has terminated an agreement;
(7) state, imply, infer, or, in any other manner, indicate that entering into a debt settlement services agreement or settling debts will either have no effect on, or improve, the debtor’s credit, credit rating, and credit score;
(8) challenge a debt without the written consent of the debtor;
(9) make any false or misleading claim regarding a creditor’s right to collect a debt;
(10) falsely represent that the debt settlement services provider can negotiate better settlement terms with a creditor than the debtor alone can negotiate;
(11) provide or offer to provide legal advice or legal services unless the person providing or offering to provide legal advice is licensed to practice law in the state;
(12) misrepresent that it is authorized or competent to furnish legal advice or perform legal services; and
(13) settle a debt or lead an individual to believe that a payment to a creditor is in settlement of a debt to the creditor unless, at the time of settlement, the individual receives a certification from the creditor that the payment is in full settlement of the debt.
332B.11. Advertisement and solicitation of debt settlement services
Subdivision 1. Advertisement. No debt settlement services provider or lead generator may:
(1) make any false, deceptive, or misleading statements or omissions about the rates, terms, or conditions of an actual or proposed debt settlement services plan, or create the likelihood of consumer confusion or misunderstanding regarding its services;
(2) represent that the debt settlement services provider is a nonprofit, not-for-profit, or has similar status or characteristics if some or all of the debt settlement services will be provided by a for-profit company that is a controlling or affiliated party to the debt settlement services provider;
(3) make any communication that gives the impression that the debt settlement services provider is acting on behalf of a government agency; or
(4) represent, claim, imply, or infer that secured debts may be settled.
Subd. 2. Solicitation by lead generators. (a) In all print, electronic, and nonprint solicitations, including websites and radio or television advertising, a lead generator must prominently make the following verbatim disclosure: “This company does not actually provide any debt settlement, debt consolidation, or other credit counseling services. We ONLY refer you to companies that want to provide some or all of those services.”
(b) A lead generator may not, in any advertising or solicitation to debtors:
(1) represent that any service is guaranteed; or
(2) misrepresent the benefits of its services or debt settlement or consolidation in comparison to credit counseling, debt management, or bankruptcy.
332B.12. Debt settlement services agreement rescission
Any debtor has the right to rescind any debt settlement services agreement with a debt settlement services provider that commits a material violation of this chapter. On rescission, all fees paid to the debt settlement services provider or any other person other than creditors of the debtor must be returned to the debtor entering into the debt settlement services agreement within ten days of rescission of the debt settlement services agreement.
332B.13. Enforcement; remedies
Subdivision 1. Violation as deceptive practice. A violation of any of the provisions of this chapter is considered an unfair or deceptive trade practice under section 8.31, subdivision 1. A private right of action under section 8.31 by an aggrieved debtor is in the public interest.
Subd. 2. Private right of action. (a) A debt settlement services provider who fails to comply with any of the provisions of this chapter, or a lead generator who violates section 332B.11, is liable under this section in an individual action for the sum of:
(1) actual, incidental, and consequential damages sustained by the debtor as a result of the failure; and
(2) statutory damages of up to $5,000.
(b) A debt settlement services provider who fails to comply with any of the provisions of this chapter, or a lead generator who violates section 332B.11, is liable to the named plaintiffs under this section in a class action for the amount that each named plaintiff could recover under paragraph (a), clause (1), and to the other class members for such amount as the court may allow.
(c) In determining the amount of statutory damages, the court shall consider, among other relevant factors:
(1) the frequency, nature, and persistence of noncompliance;
(2) the extent to which the noncompliance was intentional; and
(3) in the case of a class action, the number of debtors adversely affected.
(d) A plaintiff or class successful in a legal or equitable action under this section is entitled to the costs of the action, plus reasonable attorney fees.
Subd. 3. Injunctive relief. (a) A debtor may sue a debt settlement services provider for temporary or permanent injunctive or other appropriate equitable relief to prevent violations of any provision of this chapter. A court must grant injunctive relief on a showing that the debt settlement services provider has violated any provision of this chapter, or in the case of a temporary injunction, on a showing that the debtor is likely to prevail on allegations that the debt settlement services provider violated any provision of this chapter.
(b) A debtor may sue a lead generator for temporary or permanent injunctive or other appropriate equitable relief to prevent violations of section 332B.11. A court must grant injunctive relief on a showing that the lead generator has violated section 332B.11, or in the case of a temporary injunction, on a showing that the debtor is likely to prevail on allegations that the lead generator violated section 332B.11.
Subd. 4. Remedies cumulative. The remedies provided in this section are cumulative and do not restrict any remedy that is otherwise available. The provisions of this chapter are not exclusive and are in addition to any other requirements, rights, remedies, and penalties provided by law.
Subd. 5. Public enforcement. The attorney general shall enforce this chapter under section 8.31.
332B.14. Investigations
At any reasonable time, the commissioner may examine the books and records of every registrant and of any person engaged in the business of providing debt settlement services. The commissioner, once during any calendar year, may require the submission of an audit prepared by a certified public accountant of the books and records of each registrant. If the registrant has, within one year previous to the commissioner’s demand, had an audit prepared for some other purpose, this audit may be submitted to satisfy the requirement of this section. The commissioner may investigate any complaint concerning violations of this chapter and may require the attendance and sworn testimony of witnesses and the production of documents.