Relating to the provision of debt management services in connection with educational loans, and making penalties applicable

The bill defines “educational loan” as any loan that is made, insured, or guaranteed under Tit. IV of the federal Higher Education Act solely for educational purposes, or any private educational loan. The bill provides that in addition to any other requirements applicable to a licensed debt management services provider pursuant to Code chapter 533A, a licensee who is engaged primarily in the business of debt management services in connection with educational loans shall do so pursuant to the bill. The bill specifies that the provisions of the bill are not exclusive and do not relieve persons or contracts from compliance with other applicable laws. The bill provides that a licensee shall not receive any compensation in connection with educational loan debt management services until after the licensee has fully performed all services that the licensee contracted to perform or represented the licensee would perform, and shall not request any payment or require payment to any third party prior to fully performing all services. The bill provides that a debtor has an unconditional right to cancel a contract with a licensee for educational loan debt management services at any time prior to midnight of the third business day following the date a contract which complies with the bill is signed and executed. Cancellation of a contract occurs when the debtor delivers, by any means, written notice of cancellation to the specified address. A written notice delivered by mail is effective when deposited in the mail properly addressed with postage prepaid. A written notice delivered by electronic mail is effective upon transmission. A written notice delivered personally is effective upon delivery. A written notice of cancellation may take any form and is effective if it indicates the debtor’s intent to cancel the contract. The bill provides that a contract to provide educational loan debt management services shall be written in clear and understandable language, clearly set forth all terms and conditions, and fully describe all services that the licensee contracts to perform for the debtor. The contract shall be in at least point type and shall include the following: the licensee’s name, electronic mail address, and physical address of the licensee’s place of business; a disclosure statement located in the contract regarding the debtor’s cancellation rights, as specified in the bill; an attached “notice of cancellation” form regarding the debtor’s cancellation rights, as specified in the bill; and a disclosure statement located on the attached “notice of cancellation” form regarding the requirement that a licensee fully perform all services prior to receiving any payment from the debtor, as specified in the bill. The bill prohibits a licensee from doing any of the following: requesting or receiving compensation prior to fully performing all contracted or represented services; executing a contract in violation of the bill; receiving consideration from any third party unless the consideration is first fully disclosed to the debtor; prohibiting or impeding a debtor from contacting any creditor, lender, loan servicer, as defined in the bill, government entity, attorney, or other individual that may seek to help the debtor; accessing or obtaining a debtor’s federal student aid information in violation of federal law; compensating employees and independent contractors on a commission-based system; paying or offering to pay any consideration to any person for referring debtors to the licensee’s business; accepting or receiving any consideration for service to the debtor from any person other than the debtor, the debtor’s representative, or certain third parties; disclosing any information regarding a debtor to anyone other than certain specified entities, or as required by law; or disclosing any information regarding the creditor of a debtor to anyone other than the debtor, the debtor’s representative, or as required by law.16, which relates to consumer frauds. Pursuant to that Code section, the attorney general may investigate, issue subpoenas, and commence civil proceedings seeking restraining orders or injunctions prohibiting persons from engaging in unlawful practices or seeking termination of the business affairs of a person engaging in unlawful practices. A court may further impose a civil penalty of up to $40,000 per violation against a person found guilty of committing an unlawful practice. The bill also provides that a debtor may bring an action against a licensee for a violation of the bill’s provisions. The debtor must bring the action within four years from the date of the alleged violation. If the court finds that a violation has occurred, the court shall award actual damages, appropriate equitable relief, court costs, and reasonable attorney fees.16 allows the superintendent to apply for an injunction in district court upon the belief that a person has engaged in or is about to engage in an act or practice in violation of Code chapter 533A. The superintendent may also investigate or initiate a complaint against a person not licensed under Code chapter 533A to determine whether a violation has occurred, issue an order requiring compliance with Code chapter 533A after providing written notice and the opportunity for a hearing, impose a penalty of up to $5,000 for each violation, and order the person to pay restitution.