By: Eltife S.B. No. 2233

(In the Senate - Filed March 13, 2009; March 31, 2009, read first time and referred to Committee on Business and Commerce; April 27, 2009, reported adversely, with favorable Committee Substitute by the following vote: Yeas 7, Nays 0; April 27, 2009, sent to printer.)

COMMITTEE SUBSTITUTE FOR S.B. No. 2233 By: Eltife

A BILL TO BE ENTITLED

AN ACT

relating to the regulation of debt management services providers; providing a penalty.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Chapter 394, Finance Code, is amended by adding Subchapter D to read as follows:

SUBCHAPTER D. UNIFORM DEBT MANAGEMENT SERVICES ACT

Sec. 394.301. SHORT TITLE. This subchapter may be cited as the Uniform Debt Management Services Act.

Sec. 394.302. DEFINITIONS. In this subchapter:

(1) "Administrator" means the consumer credit commissioner.

(2) "Affiliate":

(A) with respect to an individual who is a debt management services provider, means:

(i) the spouse of the individual provider;

(ii) a sibling of the individual provider or the spouse of a sibling;

(iii) an individual or the spouse of an individual who is a lineal ancestor or lineal descendant of the individual provider or the individual provider's spouse;

(iv) an aunt, uncle, great aunt, great uncle, first cousin, niece, nephew, grandniece, or grandnephew, whether related by the whole or the half blood or adoption, or the spouse of any of them; or

(v) any other individual occupying the residence of the individual provider; and

(B) with respect to an entity, means:

(i) a person that directly or indirectly controls, is controlled by, or is under common control with the entity;

(ii) an officer of, or an individual performing similar functions with respect to, the entity;

(iii) a director of, or an individual performing similar functions with respect to, the entity;

(iv) subject to adjustment of the dollar amount pursuant to Section 394.332(f), a person that receives or received more than $25,000 from the entity in either the current year or the preceding year or a person that owns more than 10 percent of, or an individual who is employed by or is a director of, a person that receives or received more than $25,000 from the entity in either the current year or the preceding year;

(v) an officer or director of, or an individual performing similar functions with respect to, a person described in Subparagraph (i);

(vi) the spouse of, or an individual occupying the residence of, an individual described in Subparagraphs (i) through (v); or

(vii) an individual who has the relationship specified in Paragraph (A)(iv) to an individual provider or the spouse of an individual described in Subparagraphs (i) through (v).

(3) "Agreement" means an agreement between a provider and an individual debtor for the performance of debt management services.

(4) "Bank" means a financial institution, including a commercial bank, savings bank, savings and loan association, credit union, or trust company, engaged in the business of banking, chartered under federal or state law, and regulated by a federal or state banking regulatory authority.

(5) "Business address" means the physical location of a business, including the name and number of a street.

(6) "Certified counselor" means an individual certified by a training program or certifying organization, approved by the administrator, that authenticates the competence of individuals providing education and assistance to debtors in connection with debt management services in which an agreement contemplates that creditors will reduce finance charges or fees for late payment, default, or delinquency.

(7) "Certified debt specialist" means an individual certified by a training program or certifying organization, approved by the administrator, that authenticates the competence of individuals providing education and assistance to debtors in connection with debt management services in which an agreement contemplates that creditors will settle debts for less than the full principal amount of debt owed.

(8) "Concessions" means assent to repayment of a debt on terms more favorable to an individual than the terms of the contract between the individual and a creditor.

(9) "Day" means calendar day.

(10) "Debt management services" means services as an intermediary between an individual and one or more creditors of the individual for the purpose of obtaining concessions. The term does not include:

(A) legal services provided in an attorney-client relationship by an attorney licensed or otherwise authorized to practice law in this state;

(B) accounting services provided in an accountant-client relationship by a certified public accountant licensed to provide accounting services in this state; or

(C) financial planning services provided in a financial planner-client relationship by a member of a financial planning profession whose members the finance commission, by rule, determines are:

(i) licensed by this state;

(ii) subject to a disciplinary mechanism;

(iii) subject to a code of professional responsibility; and

(iv) subject to a continuing education requirement.

(11) "Entity" means a person other than an individual.

(12) "Good faith" means honesty in fact and the observance of reasonable standards of fair dealing.

(13) "Person" means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, or any other legal or commercial entity. The term does not include a public corporation, government, or governmental subdivision, agency, or instrumentality.

(14) "Plan" means a program or strategy in which a provider furnishes debt management services to an individual and which includes a schedule of payments to be made by or on behalf of the individual and used to pay debts owed by the individual.

(15) "Principal amount of the debt" means the amount of a debt at the time of an agreement.

(16) "Provider" means a person that provides, offers to provide, or agrees to provide debt management services directly or through others.

(17) "Record" means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.

(18) "Settlement fee" means a charge imposed on or paid by an individual in connection with a creditor's assent to accept in full satisfaction of a debt an amount less than the principal amount of the debt.

(19) "Sign" means, with present intent to authenticate or adopt a record:

(A) to execute or adopt a tangible symbol; or

(B) to attach to or logically associate with the record an electronic sound, symbol, or process.

(20) "State" means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States.

(21) "Trust account" means an account held by a provider that is:

(A) established in an insured bank;

(B) separate from other accounts of the provider or its designee;

(C) designated as a trust account or other account designated to indicate that the money in the account is not the money of the provider or its designee; and

(D) used to hold money of one or more individuals for disbursement to creditors of the individuals.

Sec. 394.303. APPLICABILITY. (a) This subchapter does not apply to an agreement with an individual who the provider has no reason to know resides in this state at the time of the agreement.

(b) This subchapter does not apply to a provider to the extent that the provider:

(1) provides or agrees to provide debt management, educational, or counseling services to an individual who the provider has no reason to know resides in this state at the time the provider agrees to provide the services; or

(2) receives no compensation for debt management services from or on behalf of the individuals to whom it provides the services or from their creditors.

(c) This subchapter does not apply to the following persons or their employees when the person or the employee is engaged in the regular course of the person's business or profession:

(1) a judicial officer, a person acting under an order of a court or an administrative agency, or an assignee for the benefit of creditors;

(2) a bank;

(3) an affiliate, as defined in Section 394.302(2)(B)(i), of a bank if the affiliate is regulated by a federal or state banking regulatory authority; or

(4) a title insurer, title insurance agent, escrow company, or other person that provides bill-paying services if the provision of debt management services is incidental to the bill-paying services or a disbursement, closing, or settlement.

Sec. 394.304. REGISTRATION REQUIRED. (a) Except as otherwise provided in Subsection (b), a provider may not provide debt management services to an individual who it reasonably should know resides in this state at the time it agrees to provide the services, unless the provider is registered under this subchapter.

(b) If a provider is registered under this subchapter, Subsection (a) does not apply to an employee or agent of the provider.

(c) The administrator shall maintain and publicize a list of the names of all registered providers.

Sec. 394.305. APPLICATION FOR REGISTRATION: FORM, FEE, AND ACCOMPANYING DOCUMENTS. (a) An application for registration as a provider must be in a form prescribed by the administrator.

(b) Subject to adjustment of dollar amounts pursuant to Section 394.332(f), an application for an initial registration must be accompanied by:

(1) the appropriate fees set by the Finance Commission of Texas in an amount necessary to recover the costs of administering this subchapter;

(2) the bond required by Section 394.313;

(3) identification of all trust accounts required by Section 394.322 and an irrevocable consent authorizing the administrator to review and examine the trust accounts;

(4) evidence of insurance in the amount of $250,000:

(A) against the risks of dishonesty, fraud, theft, and other misconduct on the part of the applicant or a director, employee, or agent of the applicant;

(B) issued by an insurance company authorized to do business in this state and rated at least A or equivalent by a nationally recognized rating organization approved by the administrator;

(C) with a deductible not exceeding $5,000;

(D) payable for the benefit of the applicant, this state, and individuals who are residents of this state, as their interests may appear; and

(E) not subject to cancellation by the applicant or the insurer until 60 days' notice after written notice has been given to the administrator; and

(5) a certificate of authority to do business in this state, if applicable.

Sec. 394.306. APPLICATION FOR REGISTRATION: REQUIRED INFORMATION. (a) An application for registration must be signed under oath and include:

(1) the applicant's name, principal business address and telephone number, and all other business addresses in this state, electronic mail addresses, and Internet website addresses;

(2) all names under which the applicant conducts business;

(3) the address of each location in this state at which the applicant will provide debt management services or a statement that the applicant will have no such location;

(4) the name and home address of each officer and director of the applicant and each person that owns at least 10 percent of the applicant;

(5) identification of every jurisdiction in which, during the five years immediately preceding the application:

(A) the applicant or any of its officers or directors has been licensed or registered to provide debt management services; or

(B) individuals have resided when they received debt management services from the applicant;

(6) a statement describing, to the extent it is known or should be known by the applicant, any material civil or criminal judgment or litigation and any material administrative or enforcement action by a governmental agency in any jurisdiction against the applicant, any of its officers, directors, owners, or agents, or any person who is authorized to have access to the trust account required by Section 394.322;

(7) subject to Subsection (b), the applicant's financial statements, reviewed by an independent accountant licensed to practice accounting under Chapter 901, Occupations Code, for each of the two years immediately preceding the application or, if it has not been in operation for the two years preceding the application, for the period of its existence;

(8) evidence of accreditation by an independent accrediting organization approved by the administrator;

(9) evidence that, within 12 months after initial employment, each of the applicant's counselors becomes certified as a certified counselor or certified debt specialist;

(10) a description of the three most commonly used educational programs that the applicant provides or intends to provide to individuals who reside in this state and a copy of any materials used or to be used in those programs;

(11) a description of the applicant's financial analysis and initial budget plan, including any form or electronic model, used to evaluate the financial condition of individuals;

(12) a copy of each form of agreement that the applicant will use with individuals who reside in this state;

(13) the schedule of fees and charges that the applicant will use with individuals who reside in this state;

(14) at the applicant's expense, the results of a criminal records check, including fingerprints, conducted within the immediately preceding 12 months, covering every officer of the applicant and every employee or agent of the applicant who is authorized to have access to the trust account required by Section 394.322;

(15) the names and addresses of all employers of each director during the 10 years immediately preceding the application;

(16) a description of any ownership interest of at least 10 percent by a director, owner, or employee of the applicant in:

(A) any affiliate of the applicant; or

(B) any entity that provides products or services to the applicant or any individual relating to the applicant's debt management services;

(17) if the applicant claims nonprofit or tax-exempt status, or if the applicant's business practices involve holding, accessing, or directing the funds of an individual, a statement of the amount of compensation of the applicant's five most highly compensated employees for each of the three years immediately preceding the application or, if it has not been in operation for the three years preceding the application, for the period of its existence;

(18) the identity of each director who is an affiliate, as defined in Section 394.302(2)(A) or (B)(i), (ii), (iv), (v), (vi), or (vii), of the applicant; and

(19) any other information that the administrator reasonably requires.

(b) If the applicant claims nonprofit or tax-exempt status, or if the applicant's business practices involve holding, accessing, or directing the funds of an individual, the applicant's financial statements required by Subsection (a)(7) must be audited by an accountant licensed to practice accounting under Chapter 901, Occupations Code.

Sec. 394.307. APPLICATION FOR REGISTRATION: OBLIGATION TO UPDATE INFORMATION. An applicant or registered provider shall notify the administrator within 10 days after a change in the information specified in Section 394.305(b)(4) or Section 394.306(a)(1), (3), (6), (12), or (13).

Sec. 394.308. APPLICATION FOR REGISTRATION: PUBLIC INFORMATION. Except for the information required by Sections 394.306(a)(7), (14), and (17) and the addresses required by Section 394.306(a)(4), the administrator shall make the information in an application for registration as a provider available to the public.

Sec. 394.309. CERTIFICATE OF REGISTRATION: ISSUANCE OR DENIAL. (a) Except as otherwise provided in Subsections (c) and (d), the administrator shall issue a certificate of registration as a provider to a person that complies with Sections 394.305 and 394.306.

(b) If an applicant has otherwise complied with Sections 394.305 and 394.306, including a timely effort to obtain the information required by Section 394.306(a)(14), but the information has not been received, the administrator may issue a temporary certificate of registration. The temporary certificate shall expire not later than 180 days after issuance.

(c) The administrator may deny registration if:

(1) the application contains information that is materially erroneous or incomplete;

(2) an officer, director, or owner of the applicant has been convicted of a crime, or suffered a civil judgment, involving dishonesty or the violation of state or federal securities laws;

(3) the applicant or any of its officers, directors, or owners has defaulted in the payment of money collected for others; or

(4) the administrator finds that the financial responsibility, experience, character, or general fitness of the applicant or its owners, directors, employees, or agents does not warrant belief that the business will be operated in compliance with this subchapter.

(d) The administrator shall deny registration with respect to an applicant that claims nonprofit or tax-exempt status if the applicant's board of directors is not independent of the applicant's employees and agents.

(e) Subject to adjustment of the dollar amount pursuant to Section 394.332(f), a board of directors is not independent for purposes of Subsection (d) if more than one-fourth of its members:

(1) are affiliates of the applicant, as defined in Section 394.302(2)(A) or (B)(i), (ii), (iv), (v), (vi), or (vii); or

(2) in the 10 years before initially becoming a director of the applicant, were employed by or directors of a person that received from the applicant more than $25,000 in either the current year or the preceding year.

Sec. 394.310. CERTIFICATE OF REGISTRATION: TIMING. (a) The administrator shall approve or deny an initial registration as a provider not later than the 60th day after the date on which the completed application, including all required documents and payments, is filed. The administrator shall inform the applicant in writing of the reasons for the denial.

(b) If the administrator denies an application for registration as a provider, the applicant may appeal and request a hearing pursuant to Chapter 2001, Government Code. The applicant may appeal and request a hearing on the question of the applicant's qualifications for initial registration as a provider if the administrator has notified the applicant in a record that the initial application has been denied. A request for a hearing may not be made after the 30th day after the date the administrator mails a notice to the applicant stating that the application has been denied and stating the reasons for the denial.

(c) A registration as a provider is valid for one year.

Sec. 394.311. RENEWAL OF REGISTRATION. (a) A provider must obtain a renewal of its registration annually.

(b) An application for renewal of registration as a provider must be in a form prescribed by the administrator, signed under oath, and:

(1) be filed not less than 30 days or more than 60 days before the registration expires;

(2) be accompanied by the fee established by the Finance Commission of Texas and the bond required by Section 394.313;

(3) subject to Subsection (b-1), contain the matters required for initial registration as a provider by Sections 394.306(8) and (9) and a financial statement for the applicant's fiscal year immediately preceding the application;

(4) disclose any changes in the information contained in the applicant's application for registration or its immediately previous application for renewal, as applicable;

(5) supply evidence of insurance in an amount equal to the larger of $250,000 or the highest daily balance in the trust account required by Section 394.322 during the six-month period immediately preceding the application:

(A) against risks of dishonesty, fraud, theft, and other misconduct on the part of the applicant or a director, employee, or agent of the applicant;

(B) issued by an insurance company authorized to do business in this state and rated at least A or equivalent by a nationally recognized rating organization approved by the administrator;

(C) with a deductible not exceeding $5,000;

(D) payable for the benefit of the applicant, this state, and individuals who are residents of this state, as their interests may appear; and

(E) not subject to cancellation by the applicant or the insurer until 60 days after written notice has been given to the administrator;

(6) disclose the total amount of money received by the applicant pursuant to plans during the preceding 12 months from or on behalf of individuals who reside in this state and the total amount of money distributed to creditors of those individuals during that period;

(7) disclose, to the best of the applicant's knowledge, the gross amount of money accumulated during the preceding 12 months pursuant to plans by or on behalf of individuals who reside in this state and with whom the applicant has agreements; and

(8) provide any other information that the administrator reasonably requires to perform the administrator's duties under this section.

(b-1) If the provider claims nonprofit or tax-exempt status, or if a provider's business practices involve holding, accessing, or directing the funds of an individual, the provider's financial statement required by Subsection (b)(3) must be audited by an accountant licensed to practice accounting under Chapter 901, Occupations Code.

(c) Except for the information required by Sections 394.306(a)(7), (14), and (17), the information required by Section 394.306(a)(6) with respect to for-profit entities, and the addresses required by Section 394.306(a)(4), the administrator shall make the information in an application for renewal of registration as a provider available to the public.

(d) If a registered provider files a timely and complete application for renewal of registration, the registration remains effective until the administrator, in a record, notifies the applicant of a denial and states the reasons for the denial.

(d-1) If an application is otherwise complete and the applicant has made a timely effort to obtain the information required by Section 394.306(a)(14) but the information has not been received, the administrator may issue a temporary renewal of registration. The temporary renewal shall expire not later than 180 days after issuance.

(e) If the administrator denies an application for renewal of registration as a provider, the applicant, within 30 days after receiving notice of the denial, may appeal and request a hearing pursuant to Chapter 2001, Government Code. Subject to Section 394.334, while the appeal is pending the applicant shall continue to provide debt management services to individuals with whom it has agreements. If the denial is affirmed, subject to the administrator's order and Section 394.334, the applicant shall continue to provide debt management services to individuals with whom it has agreements until, with the approval of the administrator, it transfers the agreements to another registered provider or returns to the individuals all unexpended money that is under the applicant's control.

Sec. 394.312. REGISTRATION IN ANOTHER STATE. If a provider holds a license or certificate of registration in another state authorizing it to provide debt management services, the provider may submit a copy of that license or certificate and the application for it instead of an application in the form prescribed by Sections 394.305 and 394.306 or by Section 394.311. The administrator shall accept the application and the license or certificate from the other state as an application for registration as a provider or for renewal of registration as a provider, as appropriate, in this state if:

(1) the application in the other state contains information substantially similar to or more comprehensive than that required in an application submitted in this state;

(2) the applicant provides the information required by Sections 394.306(a)(1), (3), (10), (12), and (13); and

(3) the applicant, under oath, certifies that the information contained in the application is current or, to the extent it is not current, supplements the application to make the information current.

Sec. 394.313. BOND REQUIRED. (a) Except as otherwise provided in Section 394.314, a provider that is required to be registered under this subchapter shall file a surety bond with the administrator, which must:

(1) be in effect during the period of registration and for two years after the provider ceases providing debt management services to individuals in this state; and

(2) run to this state for the benefit of this state and of individuals who reside in this state when they agree to receive debt management services from the provider, as their interests may appear.

(b) Subject to adjustment of the dollar amount pursuant to Section 394.332(f), a surety bond filed pursuant to Subsection (a) must:

(1) be in the amount of $50,000 or other larger or smaller amount that the administrator determines is warranted by the financial condition and business experience of the provider, the history of the provider in performing debt management services, the risk to individuals, and any other factor the administrator considers appropriate;

(2) be issued by a bonding, surety, or insurance company authorized to do business in this state and rated at least A by a nationally recognized rating organization; and

(3) have payment conditioned on noncompliance of the provider or its agent with this subchapter.

(c) If the principal amount of a surety bond is reduced by payment of a claim or a judgment, the provider shall immediately notify the administrator and, within 30 days after notice by the administrator, file a new or additional surety bond in an amount set by the administrator. The amount of the new or additional bond must be at least the amount of the bond immediately before payment of the claim or judgment. If for any reason a surety terminates a bond, the provider shall immediately file a new surety bond in the amount of $50,000 or other amount determined pursuant to Subsection (b).

(d) The administrator or an individual may obtain satisfaction out of the surety bond procured pursuant to this section if:

(1) the administrator assesses expenses under Section 394.332(b)(1), issues a final order under Section 394.333(b)(2), or recovers a final judgment under Section 394.333(b)(4) or (5) or 394.333(e); or

(2) an individual recovers a final judgment pursuant to Section 394.335(a), 394.335(b), or 394.335(c)(1), (2), or (4).

(e) If claims against a surety bond exceed or are reasonably expected to exceed the amount of the bond, the administrator, on the initiative of the administrator or on petition of the surety, shall, unless the proceeds are adequate to pay all costs, judgments, and claims, distribute the proceeds in the following order:

(1) to satisfaction of a final order or judgment under Section 394.333(b)(2), (4), or (5) or 394.333(e);

(2) to final judgments recovered by individuals pursuant to Section 394.335(a), 394.335(b), or 394.335(c)(1), (2), or (4), pro rata;

(3) to claims of individuals established to the satisfaction of the administrator, pro rata; and

(4) if a final order or judgment is issued under Section 394.333(b), to the expenses charged pursuant to Section 394.332(b)(1).

Sec. 394.314. BOND REQUIRED; SUBSTITUTE. (a) Instead of the bond required by Section 394.313, a provider may deliver to the administrator a substitute provided by this section. The substitute must be in the amount required by Section 394.313(b) and, except as otherwise provided in Subdivision (2)(A), payable or available to this state and to individuals who reside in this state when they agree to receive debt management services from the provider, as their interests may appear, if the provider or its agent does not comply with this subchapter. On satisfying the requirements of this subsection, a provider may deliver to the administrator one of the following substitutes:

(1) a certificate of insurance:

(A) issued by an insurance company authorized to do business in this state and rated at least A or equivalent by a nationally recognized rating organization approved by the administrator; and

(B) with no deductible, or, if the provider supplies a bond in the amount of $5,000, a deductible not exceeding $5,000; or

(2) with the approval of the administrator:

(A) an irrevocable letter of credit, issued or confirmed by a bank approved by the administrator, payable on presentation of a certificate by the administrator stating that the provider or its agent has not complied with this subchapter; or

(B) bonds or other obligations of the United States or guaranteed by the United States or bonds or other obligations of this state or a political subdivision of this state, to be deposited and maintained with a bank approved by the administrator for this purpose.

(b) If a provider furnishes a substitute pursuant to Subsection (a), Sections 394.313(a), (c), (d), and (e) apply to the substitute.

Sec. 394.315. REQUIREMENT OF GOOD FAITH. A provider shall act in good faith in all matters under this subchapter.

Sec. 394.316. CUSTOMER SERVICE. A provider that is required to be registered under this chapter shall maintain a toll-free communication system, staffed at a level that reasonably permits an individual to speak to a certified counselor, certified debt specialist, or customer service representative, as appropriate, during ordinary business hours.

Sec. 394.317. PREREQUISITES FOR PROVIDING DEBT MANAGEMENT SERVICES. (a) Before providing debt management services, a registered provider shall give the individual an itemized list of goods and services and the charges for each. The list must be clear and conspicuous, be in a record the individual may keep whether or not the individual assents to an agreement, and describe the goods and services the provider offers:

(1) free of additional charge if the individual enters into an agreement;

(2) for a charge if the individual does not enter into an agreement; and

(3) for a charge if the individual enters into an agreement using the following terminology, as applicable, and format: Setup fee ___________________________ (dollar amount of fee) Monthly service fee ___________ (dollar amount of fee or method of determining amount) Settlement fee ________ (dollar amount of fee or method of determining amount) Goods and services in addition to those provided in connection with a plan: ______ (item) _____ (dollar amount or method of determining amount) _____ (item) ______ (dollar amount or method of determining amount).

(b) A provider may not furnish debt management services unless the provider, through the services of a certified counselor or certified debt specialist:

(1) provides the individual with reasonable education about the management of personal finance;

(2) has prepared a financial analysis; and

(3) if the individual is to make regular periodic payments to a creditor or provider:

(A) has prepared a plan for the individual;

(B) has made a determination, based on the provider's analysis of the information provided by the individual and otherwise available to it, that the plan is suitable for the individual and the individual will be able to meet the payment obligations under the plan; and

(C) believes that each creditor of the individual listed as a participating creditor in the plan will accept payment of the individual's debts as provided in the plan.

(c) Before an individual assents to an agreement to engage in a plan, a provider shall:

(1) provide the individual with a copy of the analysis and plan required by Subsection (b) in a record that identifies the provider and that the individual may keep whether or not the individual assents to the agreement; and

(2) inform the individual of the availability, at the individual's option, of assistance by a toll-free communication system or in person to discuss the financial analysis and plan required by Subsection (b).

(d) Before an individual assents to an agreement, the provider shall inform the individual, in a separate record that the individual may keep whether or not the individual assents to the agreement:

(1) of the name and business address of the provider;

(2) that plans are not suitable for all individuals and the individual may ask the provider about other ways, including bankruptcy, to deal with indebtedness;

(3) that establishment of a plan may adversely affect the individual's credit rating or credit scores;

(4) that nonpayment of debt may lead creditors to increase finance and other charges or undertake collection activity, including litigation;

(5) unless it is not true, that the provider may receive compensation from the creditors of the individual; and

(6) that, unless the individual is insolvent, if a creditor settles for less than the full amount of the debt, the plan may result in the creation of taxable income to the individual, even though the individual does not receive any money.

(e) If a provider may receive payments from an individual's creditors and the plan contemplates that the individual's creditors will reduce finance charges or fees for late payment, default, or delinquency, the provider may comply with Subsection (d) by providing the following disclosure, surrounded by black lines: IMPORTANT INFORMATION FOR YOU TO CONSIDER (1) Debt management plans are not right for all individuals, and you may ask us to provide information about other ways, including bankruptcy, to deal with your debts. (2) Using a debt management plan may make it harder for you to obtain credit. (3) We may receive compensation for our services from your creditors. _______________________________________ Name and business address of provider

(f) If a provider will not receive payments from an individual's creditors and the plan contemplates that the individual's creditors will reduce finance charges or fees for late payment, default, or delinquency, a provider may comply with Subsection (d) by providing the following disclosure, surrounded by black lines: IMPORTANT INFORMATION FOR YOU TO CONSIDER (1) Debt management plans are not right for all individuals, and you may ask us to provide information about other ways, including bankruptcy, to deal with your debts. (2) Using a debt management plan may make it harder for you to obtain credit. ______________________________________ Name and business address of provider

(g) If a plan contemplates that creditors will settle debts for less than the full principal amount of debt owed, a provider may comply with Subsection (d) by providing the following disclosure, surrounded by black lines: IMPORTANT INFORMATION FOR YOU TO CONSIDER (1) Our program is not right for all individuals, and you may ask us to provide information about bankruptcy and other ways to deal with your debts. (2) Nonpayment of your debts under our program may:

(A) hurt your credit rating or credit scores;

(B) lead your creditors to increase finance and other charges; and

(C) lead your creditors to undertake activity, including lawsuits, to collect the debts. (3) Reduction of debt under our program may result in taxable income to you, even though you will not actually receive any money. _________________________________________ Name and business address of provider

Sec. 394.318. COMMUNICATION BY ELECTRONIC OR OTHER MEANS. (a) In this section:

(1) "Federal act" means the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. Section 7001 et seq.

(2) "Consumer" means an individual who seeks or obtains goods or services that are used primarily for personal, family, or household purposes.

(b) A provider may satisfy the requirements of Section 394.317, 394.319, or 394.327 by means of the Internet or other electronic means if the provider obtains a consumer's consent in the manner provided by Section 101(c)(1) of the federal act.

(c) The disclosures and materials required by Sections 394.317, 394.319, and 394.327 shall be presented in a form that is capable of being accurately reproduced for later reference.

(d) With respect to disclosure by means of an Internet website, the disclosure of the information required by Section 394.317(d) must appear on one or more screens that:

(1) contain no other information; and

(2) the individual must see before proceeding to assent to formation of an agreement.

(e) At the time of providing the materials and agreement required by Sections 394.317(c) and (d), 394.319, and 394.327, a provider shall inform the individual that on electronic, telephonic, or written request, it will send the individual a written copy of the materials, and shall comply with a request as provided in Subsection (f).

(f) If a provider is requested, before the expiration of 90 days after an agreement is completed or terminated, to send a written copy of the materials required by Sections 394.317(c) and (d), or by Section 394.319 or 394.327, the provider shall send them at no charge within three business days after the request is received, but the provider need not comply with a request more than once per calendar month or if it reasonably believes the request is made for purposes of harassment. If a request is made more than 90 days after an agreement is completed or terminated, the provider shall send within a reasonable time a written copy of the materials requested.

(g) A provider that maintains an Internet website shall disclose on the home page of its website or on a page that is clearly and conspicuously connected to the home page by a link that clearly reveals its contents:

(1) its name and all names under which it does business;

(2) its principal business address, telephone number, and electronic mail address, if any; and

(3) the names of its principal officers.

(h) Subject to Subsection (i), if a consumer who has consented to electronic communication in the manner provided by Section 101 of the federal act withdraws consent as provided in the federal act, a provider may terminate its agreement with the consumer.

(i) If a provider wishes to terminate an agreement with a consumer pursuant to Subsection (h), it shall notify the consumer that it will terminate the agreement unless the consumer, within 30 days after receiving the notification, consents to electronic communication in the manner provided in Section 101(c) of the federal act. If the consumer consents, the provider may terminate the agreement only as permitted by Section 394.319(a)(6)(F).

Sec. 394.319. FORM AND CONTENTS OF AGREEMENT. (a) An agreement must:

(1) be in a record;

(2) be dated and signed by the provider and the individual;

(3) include the name of the individual and the address where the individual resides;

(4) include the name, business address, and telephone number of the provider;

(5) be delivered to the individual immediately on formation of the agreement; and

(6) disclose:

(A) the services to be provided;

(B) the amount, or method of determining the amount, of all fees, individually itemized, to be paid by the individual;

(C) the schedule of payments to be made by or on behalf of the individual, including the amount of each payment, the date on which each payment is due, and an estimate of the date of the final payment;

(D) if a plan provides for regular periodic payments to creditors:

(i) each creditor of the individual to which payment will be made, the amount owed to each creditor, and any concessions the provider reasonably believes each creditor will offer;

(ii) the schedule of expected payments to each creditor, including the amount of each payment and the date on which it will be made; and

(iii) each creditor that the provider believes will not participate in the plan and to which the provider will not direct payment;

(E) how the provider will comply with its obligations under Section 394.327;

(F) that the provider may terminate the agreement for good cause, on return of unexpended money of the individual;

(G) that the individual may cancel the agreement as provided in Section 394.320;

(H) that the individual may contact the administrator with any questions or complaints regarding the provider; and

(I) the address, telephone number, and Internet address or website of the administrator.

(b) For purposes of Subsection (a)(5), delivery of an electronic record occurs when it is made available in a format in which the individual may retrieve, save, and print, and the individual is notified that it is available.

(c) If the administrator supplies the provider with any information required under Subsection (a)(6)(I), the provider may comply with that requirement only by disclosing the information supplied by the administrator.

(d) An agreement must provide that:

(1) the individual has a right to terminate the agreement at any time, without penalty or obligation, by giving the provider written or electronic notice, in which event:

(A) the provider will refund all unexpended money that the provider or its agent has received from or on behalf of the individual for the reduction or satisfaction of the individual's debt;

(B) with respect to an agreement that contemplates that creditors will settle debts for less than the principal amount of debt, the provider will refund 65 percent of any portion of the setup fee that has not been credited against the settlement fee; and

(C) all powers of attorney granted by the individual to the provider are revoked and ineffective;

(2) the individual authorizes any bank in which the provider or its agent has established a trust account to disclose to the administrator any financial records relating to the trust account; and

(3) the provider will notify the individual within five days after learning of a creditor's decision to reject or withdraw from a plan and that this notice will include:

(A) the identity of the creditor; and

(B) the right of the individual to modify or terminate the agreement.

(e) An agreement may confer on a provider a power of attorney to settle the individual's debt for not more than 50 percent of the outstanding amount of the debt owed at the time of settlement. An agreement may not confer a power of attorney to settle a debt for more than 50 percent of that amount, but may confer a power of attorney to negotiate with creditors of the individual on behalf of the individual. An agreement must provide that the provider will obtain the assent of the individual after a creditor has assented to a settlement for more than 50 percent of the outstanding amount of the debt owed at the time of settlement.

(f) An agreement may not:

(1) provide for application of the law of any jurisdiction other than the United States and this state;

(2) except as permitted by Section 2 of the Federal Arbitration Act, 9 U.S.C. Section 2, contain a provision that modifies or limits otherwise available forums or procedural rights, including the right to trial by jury, that are generally available to the individual under law other than this subchapter;

(3) contain a provision that restricts the individual's remedies under this subchapter or law other than this subchapter; or

(4) contain a provision that:

(A) limits or releases the liability of any person for not performing the agreement or for violating this subchapter; or

(B) indemnifies any person for liability arising under the agreement or this subchapter.

(g) All rights and obligations specified in Subsection (e) and Section 394.320 exist even if not provided in the agreement. A provision in an agreement which violates Subsection (d), (e), or (f) is void.

Sec. 394.320. CANCELLATION OF AGREEMENT; WAIVER. (a) An individual may cancel an agreement before midnight of the third business day after the individual assents to it, unless the agreement does not comply with Section 394.319(b) or Section 394.328, in which event the individual may cancel the agreement within 30 days after the individual assents to it. To exercise the right to cancel, the individual must give notice in a record to the provider. Notice by mail is given when mailed.

(b) An agreement must be accompanied by a form that contains in bold-faced type, surrounded by bold black lines: Notice of Right to Cancel You may cancel this agreement, without any penalty or obligation, at any time before midnight of the third business day that begins the day after you agree to it by electronic communication or by signing it. To cancel this agreement during this period, send an e-mail to ____________________ [e-mail address of provider] or mail or deliver a signed, dated copy of this notice, or any other written notice to ____________________ [name of provider] at ____________________ [address of provider] before midnight on [date]. If you cancel this agreement within the three-day period, we will refund all money you already have paid us. You also may terminate this agreement at any later time, but we are not required to refund fees you have paid us. I cancel this agreement, __________________________ [Printed name] __________________________ [Signature] __________________________ [Date]

(c) If a personal financial emergency necessitates the disbursement of an individual's money to one or more of the individual's creditors before the expiration of three days after an agreement is signed, an individual may waive the right to cancel. To waive the right, the individual must send or deliver a signed, dated statement in the individual's own words describing the circumstances that necessitate a waiver. The waiver must explicitly waive the right to cancel. A waiver by means of a standard form record is void.

Sec. 394.321. REQUIRED LANGUAGE. Unless the Finance Commission of Texas, by rule, provides otherwise, the disclosures and documents required by this subchapter must be in English. If a provider communicates with an individual primarily in a language other than English, the provider must furnish a translation into the other language of the disclosures and documents required by this subchapter.

Sec. 394.322. TRUST ACCOUNT. (a) All money paid to a provider by or on behalf of an individual pursuant to a plan for distribution to creditors is held in trust. Within two business days after receipt, the provider shall deposit the money in a trust account established for the benefit of individuals to whom the provider is furnishing debt management services.

(b) Money held in trust by a provider is not property of the provider or its designee. The money is not available to creditors of the provider or designee, except an individual from whom or on whose behalf the provider received money, to the extent that the money has not been disbursed to creditors of the individual.

(c) A provider shall:

(1) maintain separate records of account for each individual to whom the provider is furnishing debt management services;

(2) disburse money paid by or on behalf of the individual to creditors of the individual as disclosed in the agreement, except that:

(A) the provider may delay payment to the extent that a payment by the individual is not final; and

(B) if a plan provides for regular periodic payments to creditors, the disbursement must comply with the due dates established by each creditor; and

(3) promptly correct any payments that are not made or that are misdirected as a result of an error by the provider or other person in control of the trust account and reimburse the individual for any costs or fees imposed by a creditor as a result of the failure to pay or misdirection.

(d) A provider may not commingle money in a trust account established for the benefit of individuals to whom the provider is furnishing debt management services with money of other persons.

(e) A trust account must at all times have a cash balance equal to the sum of the balances of each individual's account.

(f) If a provider has established a trust account pursuant to Subsection (a), the provider shall reconcile the trust account at least once a month. The reconciliation must compare the cash balance in the trust account with the sum of the balances in each individual's account. If the provider or its designee has more than one trust account, each trust account must be individually reconciled.

(g) If a provider discovers, or has a reasonable suspicion of, embezzlement or other unlawful appropriation of money held in trust, the provider immediately shall notify the administrator by a method approved by the administrator. Unless the Finance Commission of Texas by rule provides otherwise, within five days thereafter, the provider shall give notice to the administrator describing the remedial action taken or to be taken.

(h) If an individual terminates an agreement or it becomes reasonably apparent to a provider that a plan has failed, the provider shall promptly refund to the individual all money paid by or on behalf of the individual which has not been paid to creditors, less fees that are payable to the provider under Section 394.323.

(i) Before relocating a trust account from one bank to another, a provider shall inform the administrator of the name, business address, and telephone number of the new bank. As soon as practicable, the provider shall inform the administrator of the account number of the trust account at the new bank.

Sec. 394.323. FEES AND OTHER CHARGES. (a) A provider may not impose directly or indirectly a fee or other charge on an individual or receive money from or on behalf of an individual for debt management services except as permitted by this section.

(b) A provider may not impose charges or receive payment for debt management services until the provider and the individual have signed an agreement that complies with Sections 394.319 and 394.328.

(c) If an individual assents to an agreement, a provider may not impose a fee or other charge for educational or counseling services, or the like, except as otherwise provided in this subsection and Section 394.328(d). The administrator may authorize a provider to charge a fee based on the nature and extent of the educational or counseling services furnished by the provider.

(d) Subject to adjustment of dollar amounts pursuant to Section 394.332(f), fees and other charges must meet the following requirements:

(1) If an individual assents to a plan that contemplates that creditors will reduce finance charges or fees for late payment, default, or delinquency, the provider may charge:

(A) a fee not to exceed $50 for consultation, obtaining a credit report, setting up an account, and the like; and

(B) a monthly service fee, not to exceed $10 times the number of accounts remaining in a plan at the time the fee is assessed, but not more than $50 in any month.

(2) If an individual assents to a plan that contemplates that creditors will settle debts for less than the principal amount of the debt, the provider may charge:

(A) subject to Section 394.319(d), a fee for consultation, obtaining a credit report, setting up an account, and the like, in an amount not to exceed the lesser of $400 or four percent of the debt in the plan at the inception of the plan; and

(B) a monthly service fee, not to exceed $10 times the number of accounts remaining in the plan at the time the fee is assessed, but not more than $50 in any month.

(3) A provider may not impose or receive fees under both Subdivisions (1) and (2).

(4) Except as otherwise provided in Section 394.328(d), if an individual does not assent to an agreement, a provider may receive for educational and counseling services it provides to the individual a fee not to exceed $100 or, with the approval of the administrator, a larger amount. The administrator may approve a fee in an amount greater than $100 if the nature and extent of the educational and counseling services warrant the larger fee.

(e) If, before the expiration of 90 days after the completion or termination of educational or counseling services, an individual assents to an agreement, the provider shall refund to the individual any fee paid pursuant to Subsection (d)(4).

(f) Except as otherwise provided in Subsections (c) and (d), if an agreement contemplates that creditors will settle an individual's debts for less than the principal amount of the debt, compensation for services in connection with settling debt may not exceed one of the following applicable settlement fee limits in Subdivision (1) or (2), the terms of which shall be clearly disclosed in the agreement.

(1) With respect to agreements in which a flat settlement fee is charged based on the overall amount of included debt, the total aggregate amount of fees charged to any individual under this chapter, including fees charged under Subsections (d)(2)(A) and (B), may not exceed 17 percent of the principal amount of debt included in the agreement at the agreement's inception. The flat settlement fee authorized under this subchapter shall be assessed in equal monthly payments over not less than half of the length of the plan, as estimated at the plan's inception, unless:

(A) voluntarily accelerated by the individual in a separate record; and

(B) offers of settlement by creditors have been obtained on at least half of the outstanding debt included in the agreement.

(2) With respect to agreements in which fees are calculated as a percentage of the amount saved by an individual, a settlement fee may not exceed 30 percent of the excess of the outstanding amount of each debt over the amount actually paid to the creditor, as calculated at the time of settlement. Settlement fees authorized under this subsection shall become billable only as debts are settled, and the total aggregate amount of fees charged to any individual under this subchapter, including fees charged under Subsections (d)(2)(A) and (B), may not exceed 20 percent of the principal amount of debt included in the agreement at the agreement's inception.

(3) A provider may not impose or receive fees under both Subdivisions (1) and (2).

(g) Subject to adjustment of the dollar amount pursuant to Section 394.332(f), if a payment to a provider by an individual under this subchapter is dishonored, a provider may impose a reasonable charge on the individual not to exceed the lesser of $25 or the amount permitted by law other than this subchapter.

Sec. 394.324. VOLUNTARY CONTRIBUTIONS. A provider may not solicit a voluntary contribution from an individual or an affiliate of the individual for any service provided to the individual. A provider may accept voluntary contributions from an individual but, until 30 days after completion or termination of a plan, the aggregate amount of money received from or on behalf of the individual may not exceed the total amount the provider may charge the individual under Section 394.323.

Sec. 394.325. VOIDABLE AGREEMENTS. (a) If a provider imposes a fee or other charge or receives money or other payments not authorized by Section 394.323 or 394.324, the individual may void the agreement and recover as provided in Section 394.335.

(b) If a provider is not registered as required by this subchapter when an individual assents to an agreement, the agreement is voidable by the individual.

(c) If an individual voids an agreement under Subsection (b), the provider does not have a claim against the individual for breach of contract or for restitution.

Sec. 394.326. TERMINATION OF AGREEMENTS. (a) If an individual who has entered into an agreement fails for 60 days to make payments required by the agreement, a provider may terminate the agreement.

(b) If a provider or an individual terminates an agreement, the provider shall immediately return to the individual:

(1) any money of the individual held in trust for the benefit of the individual; and

(2) 65 percent of any portion of the setup fee received pursuant to Section 394.323(d)(2) which has not been credited against settlement fees.

Sec. 394.327. PERIODIC REPORTS AND RETENTION OF RECORDS. (a) A provider shall provide the accounting required by Subsection (b):

(1) on cancellation or termination of an agreement; and

(2) before cancellation or termination of any agreement:

(A) at least once each month; and

(B) within five business days after a request by an individual, but the provider does not need to comply with more than one request in any calendar month.

(b) A provider, in a record, shall provide each individual for whom it has established a plan an accounting of the following information:

(1) the amount of money received from the individual since the last report;

(2) the amounts and dates of disbursement made on the individual's behalf, or by the individual on the direction of the provider, since the last report to each creditor listed in the plan;

(3) the amounts deducted from the amount received from the individual;

(4) the amount held in reserve; and

(5) if, since the last report, a creditor has agreed to accept as payment in full an amount less than the principal amount of the debt owed by the individual:

(A) the total amount and terms of the settlement;

(B) the amount of the debt when the individual assented to the plan;

(C) the amount of the debt when the creditor agreed to the settlement; and

(D) the calculation of a settlement fee.

(c) A provider shall maintain records for each individual for whom it provides debt management services for five years after the final payment made by the individual and produce a copy of the records to the individual within a reasonable time after a request for them. The provider may use electronic or other means of storage for the records.

Sec. 394.328. PROHIBITED ACTS AND PRACTICES. (a) A provider may not, directly or indirectly:

(1) misappropriate or misapply money held in trust;

(2) settle a debt on behalf of an individual for more than 50 percent of the outstanding amount of the debt owed a creditor unless the individual assents to the settlement after the creditor has assented;

(3) take a power of attorney that authorizes it to settle a debt, unless the power of attorney expressly limits the provider's authority to settle debts for not more than 50 percent of the actual outstanding balance of the debt owed a creditor;

(4) exercise or attempt to exercise a power of attorney after an individual has terminated an agreement;

(5) initiate a transfer from an individual's account at a bank or with another person unless the transfer is:

(A) a return of money to the individual; or

(B) before termination of an agreement, properly authorized by the agreement and this subchapter, and for:

(i) payment to one or more creditors pursuant to a plan; or

(ii) payment of a fee;

(6) offer a gift or bonus, premium, reward, or other compensation to an individual for executing an agreement;

(7) offer, pay, or give a gift or bonus, premium, reward, or other compensation to a person for referring a prospective customer, if the person making the referral has a financial interest in the outcome of debt management services provided to the customer, unless neither the provider nor the person making the referral communicates to the prospective customer the identity of the source of the referral;

(8) receive a bonus, commission, or other benefit for referring an individual to a person;

(9) structure a plan in a manner that would result in a negative amortization of any of an individual's debts, unless a creditor that is owed a negatively amortizing debt agrees to refund or waive the finance charge on payment of the principal amount of the debt;

(10) compensate its employees on the basis of a formula that incorporates the number of individuals the employee induces to enter into agreements;

(11) 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 by the creditor that the payment is in full settlement of the debt or is part of a payment plan, the terms of which are included in the certification, that on completion will lead to full settlement of the debt;

(12) make a representation that:

(A) the provider will furnish money to pay bills or prevent attachments;

(B) payment of a certain amount will permit satisfaction of a certain amount or range of indebtedness; or

(C) participation in a plan will or may prevent litigation, garnishment, attachment, repossession, foreclosure, eviction, or loss of employment;

(13) misrepresent that it is authorized or competent to furnish legal advice or perform legal services;

(14) represent in its agreements, disclosures required by this subchapter, advertisements, or Internet website that it is:

(A) a nonprofit entity unless it is organized and properly operating as a nonprofit entity under the laws of the state in which it was formed; or

(B) a tax-exempt entity unless it has received certification of tax-exempt status from the Internal Revenue Service and is properly operating as a nonprofit entity under the laws of the state in which it was formed;

(15) take a confession of judgment or power of attorney to confess judgment against an individual; or

(16) employ an unfair, unconscionable, or deceptive act or practice, including the knowing omission of any material information.

(b) If a provider furnishes debt management services to an individual, the provider may not, directly or indirectly or through an affiliate:

(1) purchase a debt or obligation of the individual;

(2) receive from or on behalf of the individual:

(A) a promissory note or other negotiable instrument other than a check or a demand draft; or

(B) a postdated check or demand draft;

(3) lend money or provide credit to the individual, except as a deferral of a settlement fee at no additional expense to the individual;

(4) obtain a mortgage or other security interest from any person in connection with the services provided to the individual;

(5) except as permitted by federal law, disclose the identity or identifying information of the individual or the identity of the individual's creditors, except to:

(A) the administrator or the attorney general, on proper demand;

(B) a creditor of the individual, to the extent necessary to secure the cooperation of the creditor in a plan; or

(C) the extent necessary to administer the plan;

(6) except as otherwise provided in Section 394.323(f), provide the individual less than the full benefit of a compromise of a debt arranged by the provider;

(7) charge the individual for or provide credit or other insurance, coupons for goods or services, membership in a club, access to computers or the Internet, or any other matter not directly related to debt management services or educational services concerning personal finance, except to the extent such services are expressly authorized by the administrator;

(8) furnish legal advice or perform legal services, unless the person furnishing that advice to or performing those services for the individual is licensed to practice law; or

(9) receive compensation for referring, directing, or negotiating a loan or extension of credit on behalf of the individual.

(c) This subchapter does not authorize any person to engage in the practice of law.

(d) A provider may not receive a gift or bonus, premium, reward, or other compensation, directly or indirectly, for advising, arranging, or assisting an individual in connection with obtaining an extension of credit or other service from a lender or service provider, except for educational or counseling services required in connection with a government program or as expressly approved by the administrator.

(e) Unless a person supplies goods, services, or facilities generally and supplies them to the provider at a cost not greater than the cost the person generally charges to others, a provider may not purchase goods, services, or facilities from the person if an employee or a person that the provider should reasonably know is an affiliate of the provider:

(1) owns more than 10 percent of the person; or

(2) is an employee or affiliate of the person.

Sec. 394.329. NOTICE OF LITIGATION. Not later than 30 days after a provider has been served with notice of a civil action for violation of this subchapter by or on behalf of an individual who resides in this state at either the time of an agreement or the time the notice is served, the provider shall notify the administrator in a record that it has been sued.

Sec. 394.330. ADVERTISING. (a) If the agreements of a provider contemplate that creditors will reduce finance charges or fees for late payment, default, or delinquency and the provider advertises debt management services, it shall disclose, in an easily comprehensible manner, that using a debt management plan may make it harder for the individual to obtain credit.

(b) If the agreements of a provider contemplate that creditors will settle for less than the full principal amount of debt and the provider advertises debt management services, it shall disclose, in an easily comprehensible manner, the information specified in Sections 394.317(d)(3) and (4).

Sec. 394.331. LIABILITY FOR CONDUCT OF OTHER PERSONS. If a provider delegates any of its duties or obligations under an agreement or this subchapter to a third-party agent, including an independent contractor, the provider is liable for the person's conduct which, if done by the provider, would violate the agreement or this subchapter.

Sec. 394.332. POWERS OF ADMINISTRATOR. (a) The administrator may receive complaints, act on its own initiative or in response to complaints, take action to obtain voluntary compliance with this subchapter, and seek or provide remedies as provided in this subchapter or Chapter 14.

(b) The administrator or the administrator's representative may investigate and examine, in this state or elsewhere, by subpoena or otherwise, the activities, books, accounts, and records of a person that provides or offers to provide debt management services, or a person to whom a provider has delegated its obligations under an agreement or this subchapter, to determine compliance with this subchapter. Information that identifies individuals who have agreements with the provider may not be disclosed to the public. In connection with the investigation, the administrator may:

(1) charge the person the reasonable expenses necessarily incurred to conduct the examination;

(2) require or permit a person to file a statement under oath as to all the facts and circumstances of a matter to be investigated or examined; and

(3) seek a court order authorizing seizure from a bank at which the person maintains a trust account required by Section 394.322, any or all money, books, records, accounts, and other property of the provider that is in the control of the bank and relates to individuals who reside in this state.

(c) The Finance Commission of Texas may adopt rules to implement this subchapter in accordance with Chapter 2001, Government Code.

(d) The administrator may enter into cooperative arrangements with any other federal or state agency having authority over providers and may exchange with any of those agencies information about a provider, including information obtained during an examination of the provider.

(e) The Finance Commission of Texas by rule shall establish reasonable fees to be paid by providers for the expense of administering this subchapter.

(f) The administrator shall compute and publish the dollar amounts instead of those specified in Sections 394.302, 394.305, 394.309, 394.313, 394.323, 394.333, and 394.335 to reflect inflation, as measured by the United States Bureau of Labor Statistics Consumer Price Index for All Urban Consumers or, if that index is not available, another index adopted by finance commission rule. The administrator shall adopt a base year and adjust the dollar amounts, effective on July 1 of each year, if the change in the index from the base year, as of December 31 of the preceding year, is at least 10 percent. The dollar amount must be rounded to the nearest $100, except that the amounts in Section 394.323 must be rounded to the nearest dollar.

(g) The administrator shall notify registered providers of any change in dollar amounts made pursuant to Subsection (f) and make that information available to the public.

(h) Information obtained under an examination is confidential.

Sec. 394.333. ADMINISTRATIVE REMEDIES. (a) For purposes of enforcing this subchapter, the administrator:

(1) has the powers granted to the administrator under Chapter 14;

(2) may exercise those powers in the same manner as those powers may be exercised under:

(A) Chapters 14 and 392; and

(B) Subtitle B, Title 4; and

(3) has any authority granted to the administrator by other law.

(b) The administrator may enforce this subchapter and rules adopted under this subchapter by taking one or more of the following actions:

(1) ordering a provider or a director, employee, or other agent of a provider to cease and desist from any violations;

(2) ordering a provider or a person that has caused a violation to correct the violation, including making restitution of money or property to a person aggrieved by a violation;

(3) subject to adjustment of the dollar amount pursuant to Section 394.332(f), imposing against a provider or a person that has caused a violation a civil penalty in an amount not to exceed $10,000 for each violation;

(4) prosecuting a civil action to:

(A) enforce an order; or

(B) obtain restitution or an injunction or other equitable relief, or both; or

(5) intervening in an action brought under Section 394.335.

(c) Subject to adjustment of the dollar amount pursuant to Section 394.332(f), if a person violates or knowingly authorizes, directs, or aids in the violation of a final order issued under Subsection (b)(1) or (2), the administrator may assess an administrative penalty in an amount not to exceed $20,000 for each violation.

(d) The administrator may maintain an action to enforce this subchapter in any county at the administrator's sole discretion.

(e) The administrator may recover the reasonable costs of enforcing this subchapter under Subsections (b) and (d), including attorney's fees based on the hours reasonably expended and the hourly rates for attorneys of comparable experience in the community.

(f) In determining the amount of an administrative penalty to impose under Subsection (b) or (c), the administrator shall consider:

(1) the seriousness of the violation;

(2) the good faith of the violator;

(3) any previous violations by the violator;

(4) the deleterious effect of the violation on the public;

(5) the net worth of the violator; and

(6) any other factor the administrator considers relevant to the determination of the penalty.

Sec. 394.334. SUSPENSION, REVOCATION, OR NONRENEWAL OF REGISTRATION. (a) In this section, "insolvent" means:

(1) having generally ceased to pay debts in the ordinary course of business other than as a result of a good faith dispute;

(2) being unable to pay debts as they become due; or

(3) being insolvent within the meaning of federal bankruptcy law, 11 U.S.C. Section 101 et seq.

(b) The administrator may suspend, revoke, or deny renewal of a provider's registration if:

(1) a fact or condition exists that, if it had existed when the registrant applied for registration as a provider, would have been a reason for denying registration;

(2) the provider has committed a material violation of this subchapter or a rule or order of the administrator under this subchapter;

(3) the provider is insolvent;

(4) the provider or an employee or affiliate of the provider has refused to permit the administrator to make an examination authorized by this subchapter, failed to comply with Section 394.332(b)(2) within 15 days after request, or made a material misrepresentation or omission in complying with Section 394.332(b)(2); or

(5) the provider has not responded within a reasonable time and in an appropriate manner to communications from the administrator.

(c) If a provider does not comply with Section 394.322(f) or if the administrator otherwise finds that the public health or safety or general welfare requires emergency action, the administrator may order a summary suspension of the provider's registration, effective on the date specified in the order.

(d) If the administrator suspends, revokes, or denies the renewal of the registration of a provider, the administrator may seek a court order authorizing seizure of any or all of the money in a trust account required by Section 394.322, books, records, accounts, and other property of the provider that are located in this state.

(e) If the administrator suspends or revokes a provider's registration, the provider may appeal and request a hearing pursuant to Chapter 2001, Government Code.

Sec. 394.335. PRIVATE ENFORCEMENT. (a) In addition to the recovery under Subsection (b)(3), if an individual voids an agreement under Section 394.325(a) or (b), the individual may recover in a civil action all money paid or deposited by or on behalf of the individual under the agreement, other than amounts paid to creditors.

(b) An individual with respect to whom a provider violates this subchapter or a rule adopted under this subchapter or commits any unfair or deceptive act may recover in a civil action from the provider and any third party that caused the violation or committed the act or practice, not including a provider's officers, directors, employees, or investors:

(1) actual damages for injury caused by the violation or conduct;

(2) punitive damages not to exceed three times actual damages only upon a finding of unconscionable conduct relating to a violation of this subchapter or a rule adopted under this subchapter; and

(3) reasonable attorney's fees and costs.

(c) In addition to the remedy available under Subsection (b), if a provider violates an individual's rights under Section 394.320, the individual may recover in a civil action all money paid or deposited by or on behalf of the individual under the agreement, except for amounts paid to creditors.

(d) A provider is not liable under this section for a violation of this subchapter if the provider proves that the violation was not intentional and resulted from a good faith error, notwithstanding the maintenance of reasonable procedures adopted to avoid the error. An error of legal judgment with respect to a provider's obligations under this subchapter is not a good faith error. If, in connection with a violation, the provider has received more money than authorized by an agreement or this subchapter, the defense provided by this subsection is not available unless the provider refunds the excess amount not later than the seventh calendar day after the date of learning of the violation.

(e) The administrator shall assist an individual in enforcing a judgment against the surety bond or other security provided under Section 394.313 or 394.314.

(f) An administrative penalty or fine under this title or federal law that is assessed by or agreed to with an administrative agency or the attorney general shall be considered and applied as a bar or credit to recovery of further fines, penalties, or enhanced damages for substantially the same act, practice, or violation in a suit or other proceeding brought by a private litigant under this title, the Business & Commerce Code, or other applicable law of this state. This subsection and Subsection (g) do not apply to a claim for restitution for unreimbursed actual damages.

(g) A suit or other proceeding by a private litigant does not affect or restrict any state or federal agency from pursuing a person for any administrative remedy, including an administrative penalty. An administrative agency of this state, however, shall consider as a mitigating factor any relief recovered in a private suit or proceeding when the agency determines an administrative remedy.

Sec. 394.336. VIOLATION OF DECEPTIVE TRADE PRACTICES ACT. If an act or practice of a provider violates both this subchapter and Chapter 17, Business & Commerce Code, an individual may not recover under both for the same act or practice.

Sec. 394.337. STATUTE OF LIMITATIONS. (a) An action or proceeding brought pursuant to Section 394.333(a), (b), or (c), must be commenced within four years after the conduct that is the basis of the administrator's complaint.

(b) An action brought under Section 394.335 must be commenced within two years after the latest of:

(1) the individual's last transmission of money to a provider;

(2) the individual's last transmission of money to a creditor at the direction of the provider;

(3) the provider's last disbursement to a creditor of the individual;

(4) the provider's last accounting to the individual pursuant to Section 394.327;

(5) the date on which the individual discovered or reasonably should have discovered the facts giving rise to the individual's claim; or

(6) termination of actions or proceedings by the administrator with respect to a violation of this subchapter.

(c) The period prescribed in Subsection (b)(5) is tolled during any period in which the provider or, if different, the defendant has materially and wilfully misrepresented information required by this subchapter to be disclosed to the individual, if the information so misrepresented is material to the establishment of the liability of the defendant under this subchapter.

Sec. 394.338. UNIFORMITY OF APPLICATION AND CONSTRUCTION. In applying and construing this subchapter, consideration must be given to the need to promote uniformity of the law with respect to the subject matter of this subchapter among states that have enacted a law substantially similar to this subchapter.

Sec. 394.339. RELATION TO ELECTRONIC SIGNATURES IN GLOBAL AND NATIONAL COMMERCE ACT. This subchapter modifies, limits, and supersedes the federal Electronic Signatures in Global and National Commerce Act (15 U.S.C. Section 7001 et seq.) but does not modify, limit, or supersede 15 U.S.C. Section 7001(c) or authorize electronic delivery of any of the notices described in 15 U.S.C. Section 7003(b).

SECTION 2. Subchapter C, Chapter 394, Finance Code, is repealed.

SECTION 3. A transaction entered into before the effective date of this Act and the rights, duties, and interests resulting from the transaction may be completed, terminated, or enforced as required or permitted by a law amended, repealed, or modified by this Act as though the amendment, repeal, or modification had not occurred.

SECTION 4. This Act takes effect January 1, 2010.

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