2011 AICCCA Summer Conference Legislation and Regulation Christopher Viale, President and CEO.

2011 AICCCA Summer Conference

Legislation and RegulationChristopher Viale, President and CEO

Cambridge Credit Counseling Corp.

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The Year In Legislation

2010-2011 was a particularly active year, and keeping up with all of the changes, potential new

rules and false alarms has kept all of us busy.

A dozen or so states introduced new bills or revised existing laws.

The Uniform Debt Management Services Act underwent significant revisions, which were

ratified last week at the NCCUSL meeting in Vail. They should be available on their website:

www.nccusl.org.

The FTC’s revised Telemarketing Sales Rule began to have an effect on the debt settlement

industry – contraction has begun, but good players will survive.

Perhaps best of all, in the face of all this activity, a number of AICCCA member agencies came

together in working groups, occasionally with our counterparts in the NFCC and ACCPros, to

work for or against certain pieces of legislation. This type of cooperation will pay dividends for

all of us.

http://www.nccusl.org/


State Regulations 3


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A R E V I E W O F N E W L AW S . T H E F I N A L V E R S I O N S O F B I L L S T H AT H AV E PA S S E D A R E

AVA I L A B L E I N A I C C C A’ S L E G I S L AT I V E D ATA B A S E .

New Laws


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New Laws

North Dakota: HB 1038, which regulates debt settlement and caps completion fees at 30% of savings (based on the debt at enrollment), passed the senate on March 25, 2011 and has been signed by the governor.

Missouri: HB 661, which has passed through the legislature but has yet to be signed by the governor, is only slightly better than Texas’s new law, allowing for credit counseling fees equal to the greater of 8% of the monthly disbursement or $35. On the settlement side, while the advance fee ban is consistent with the new TSR, there is

no fee cap in place at plan completion.

Colorado: HB 1206, a revision of the state’s existing Uniform Act, became effective on July 1. This was an odd change. It removed the certification requirements for counselors and opened the door for

settlement companies to abuse Colorado residents by removing the 18% fee cap. On the credit counseling side, the bill also removed the administrator’s authority to adjust

fees based on the rate of inflation. Mike Kerr has indicated that straightening out Colorado will be a high on his agenda, as

these changes were made without so much as a courtesy call to NCCUSL.


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New Laws

Texas: Although they claimed to be enacting legislation in line with the revised TSR, the home

state of many settlement companies predictably passed bills that will do little to curb abuse.

Senate Bill 141, which becomes law on September 1, still allows for advance fees under certain

conditions, and removes the 30% completion fee cap whenever a settlement company doesn’t

charge advance fees.

AICCCA presented testimony that would have supported tougher rules, but we were met with

resistance from legislators and the state’s Consumer Credit Commission.

A variety of excuses were offered for their failure to insist on stronger regulations, from the

possible impact on Texas jobs to the need to present a bill that stood some chance of passing.

These are two arguments often used by the settlement folks before state legislators.

We know that the settlement companies spent a lot of time and money in the state, which

also helped drown out our arguments.


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New Laws

Indiana: The new Indiana law does away with the 24-month contract term limit, replacing that

requirement with counselor reviews to be performed every 30 months during the client’s

enrollment.

So far, the only problematic aspect of the new law is the disclosure requirement, which stipulates

four statements that must be made on the contract.

Unfortunately, two of these statements are appropriate to credit counseling agencies, while the

other two are appropriate only to settlement companies.

We have spoken to Mark Tarpey about this issue and, at his suggestion, made a formal written

request to their legal department to address this issue.

(Mr. Tarpey agreed that consumers would be unnecessarily confused by seeing all four

disclosures, but he was unwilling to regulate in a way that would be inconsistent with the

letter of the law.)


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T H E F O L L O W I N G B I L L S W E R E N O T A D O P T E D .

Introduced Legislation


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Bills Introduced – Not Passed

Delaware: An attempt to revise the state’s version of the Uniform Act was introduced in 2011 (apparently without consultation with Sherry Hoffman and the AG’s office). We sent them the new version of the UDMSA, which had been released just a few

days earlier, but it was too late to incorporate much of the new act in the bill. We were successful in persuading the state to remove credit counseling agencies

from the requirement for separately administered trust accounts, but the 30% fee cap for settlement survived.

The fee limits for CCCs are $50 initial; $10 per creditor monthly, not to exceed $50. When the state’s legislative session ended, HB 72 was tabled in the House Economic

Development/Banking/Insurance/Commerce Committee. We remain in contact with Representative Keeley, the bill sponsor. She will work with Attorney General Biden to amend the bill, as appropriate, in

January and move forward on this issue.


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Florida: SB 1828 was casually dropped off by the settlement folks at Senator Richter’s office,

as if they expected him to give it his unconditional blessing and send it along.

Fortunately, the senator had other priorities, including tort and insurance reform, and he

was opposed to the absence of a fee cap.

We worked with the senator’s aide to ensure that this weak bill went nowhere, and it

eventually died in committee.

When we last spoke with Senator Richter’s aide three weeks ago, she was very interested

in the prospects for the federal legislation, which would make their lives easier.

If nothing happens at that level, we’ll resume working with Senator Richter this

September when committee work begins in Florida.


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California: Several of us, including Sue Niemiec at Novadebt and Zynda Sellers at

MMI, worked together with the Coalition for Quality Credit Counseling and the

Center for Responsible Lending to support SB 708, a bill that would have very

closely regulated the settlement industry.

Of course, the settlement reps resorted to their usual combination of heavy

spending, misleading and inaccurate information - and occasional outright

lying, to force amendments to the bill.

In the end, SB 708’s 15% fee cap was eliminated, at which point we withdrew

our support, along with Senator Corbett, the bill’s sponsor.

The bill is dead.


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New York: A number of bills were introduced in the Empire State, including the old UDMSA

and a bill that would have capped settlement fees at 30%.

We had been working with the staff of Senator Griffo, the UDMSA sponsor, to bring them

up to speed on the new bill, but interestingly, the settlement folks dropped the proposed

cap to 25% at the last minute.

One complicating factor that we’ll all soon be dealing with in New York is the fact that the

Banking and Insurance Departments will be merging in October. (Good luck to us all!)

Three weeks ago we spoke with the staff of Representative Joe Morelle, who had sponsored

the bill with the 25% cap.

They’d prefer that the federal bill take care of this issue for them, as would most states.

All bills are dead in NY now, but we’ll be in contact with each office after Labor Day.


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New Mexico: HB 313 has passed the House for several years in a row, but

consistently fails in the Senate, where it has been opposed by the attorney general.

Whatever happens at the federal level, we’ll work with Representative Cervantes,

the frustrated sponsor, to introduce a bill next session.

Please note, however, that if a revised bill were to be introduced in the 2012

session, under New Mexico’s Constitution, the Governor would have to place

this issue on her call for the 30-day session.

It is impossible to predict at this point whether she will do so.

If she doesn’t, we would have to wait until 2013 and the next 60-day session. (The

state alternates the length of its legislative sessions.)


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Massachusetts: House Bill 291, which had been sponsored by a

representative who had resigned from the legislature to take a sheriff’s

position, had been presumed to be dead in committee.

Even without an active sponsor, however, the bill advanced to a hearing

before the Joint Committee on Financial Services on May 31.

AICCCA filed testimony in opposition, and Steve Trumble of ACCC, Marty

Lynch from Cambridge CC, and the local MMI office president were all on

hand to testify in person against the bill, which is quite weak.

A follow-up meeting was held with committee representatives on July 11,

and Steve will provide us with a brief update.


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New Jersey: AB 1949 is completely inconsistent with the TSR and would need

significant revision for it to be advanced out of the Financial Institutions and Insurance

Committee.

Ohio: HB 222, which would regulate debt settlement, is currently in the Financial

Institutions, Housing & Urban Development Committee.

The bill contains no cap on completion fees.

The Ohio legislature is not in session at this time, but it reconvenes in September.

AICCCA reached out to Representative Mecklenborg, the bill sponsor, to let him

know about possible movement on this issue at the federal level.


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Summary

AICCCA’s Legislative Committee is always

available for questions regarding these

issues and they’re always looking for help

if you have time (and even if you don’t!).

If you’re looking for an organized list of

bills, don’t forget to access the Legislative

Database on AICCCA’s website. Kevin

Porter has done a great job with that

section of the site, where you can find

links to the full text of any bill you have an

interest in.


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Consumer Financial Protection Bureau

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Who Will The CFPB Regulate?

Several meetings were held

on July 7th with

representatives of the debt

relief industry and the CFPB.

Most of the feedback has

been similar?

• What is the make-up of the

industry?

• Who are the major players?

• Should the CFPB regulate

the industry?


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Who Will The CFPB Regulate?

The chance that credit counseling will be left unregulated is slim. Debt settlement lobbyists will work hard to

subject us to the same oversight.

Current regulation of our industry is a mixed bag – tough in many states, lax in others. The CFPB will take note of

this inconsistency. In the absence of state law, its role will be to protect vulnerable consumers through regulation.

Our efforts to make new regulation appropriate and manageable should follow two tracks:

Demonstrate how complying with regulations in tough states extends protections to consumers in relatively

unregulated states. A best-practices approach, as embodied by the AICCCA standards, could be offered as a

model for the CFPB to adopt. The costs of compliance should also be emphasized, though not overly so, to let

our focus on consumer protection remain in the forefront.

We must ensure that the CFPB knows and understands credit counseling as distinct from debt settlement. We

have not achieved this in the states. We cannot let our work be confused with theirs.


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Working With The CFPB

We have two choices:

Work with the CFBP to establish effective and responsible oversight, or…

Make an assertion that debt relief does not require CFPB oversight

Inaction can create unintended consequences:

Onerous regulations

Unachievable metrics of success


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Public Comments On The Debt Relief Industry

The CFPB is required to issue an initial “larger participant” rule (defining who to govern in the debt relief space) no later than July 21, 2012, one year after the designated transfer date.

This notice and request for comment (“Notice”) seeks public comment on the development of such a rule. After considering any comments on this Notice and other relevant information, the CFPB will

draft and publish a proposed rule for public comment.

Comments must be received by August 15, 2011.

Comments can be made online http://www.regulations.gov/#!documentDetail;D=CFPB-2011-0002-0001

http://www.regulations.gov/

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How Will The CFPB Regulate Our Industry?

Many staffers are already familiar with credit counseling and debt settlement, which could be a positive factor. Many staffers are already familiar with credit counseling and debt settlement, which could be a negative factor. What can we do to help them form a better opinion of credit counseling?

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We Need To Control How Credit Counseling Is Portrayed.

Debt settlers have successfully confused regulators, legislators and consumers. We’ve continued to blame poor DMP results on “the nature of the consumers we’re dealing with.” While true in some ways, this argument will not resonate. We must look within our own agencies, innovate when necessary, and share good results. CFPB will be looking for accurate, reliable data that has been independently verified.


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Transparent Data Disclosure Will Most Likely Be Required

Our industry needs to define the value we provide. 70% to 85% of our counseling efforts are tied to our core mission and

charitable purpose of financial education and empowerment. What benefit does the counseling / budgeting / education process provide a

consumer that does not enroll in a plan?

Is the offer of benefits in a DMP solution truly realized by consumers? What is the typical client experience, as supported by agency data? What is the likelihood of plan acceptance by creditors? What rate reductions and savings are actually achieved? How many clients fail to complete their plan, and why?

• Definitions of success and data must be standardized through working groups.


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Summary

Preparation for CFPB regulation begins now.

Working groups should be formed ASAP to determine reporting standards.

Independent data verification is required. (Your local college may be a low-

cost alternative.)

We each employ plenty of talented individuals. Bringing them together on

these issues will benefit AICCCA and our industry.

Thank You

Christopher VialePresident and CEO Cambridge Credit Counseling Corp. [email protected]

2011 AICCCA Summer Conference Legislation and Regulation Christopher Viale, President and CEO.

Documents

credit counseling agencies

new bills

new act

credit counseling fees

new tsr

new version

settlement companies

new indiana law