HB369.html

To amend Chapter 5 of Title 18 of the Official Code of Georgia Annotated, relating to debt adjustment, so as to limit the maximum charge that may be imposed for the provision of debt adjustment services; to provide for exemptions from those provisions related to debt adjustment; to require persons engaged in the business of debt adjustment to obtain an annual audit of all accounts and to maintain a certain amount and type of insurance coverage; to provide for the disbursement of a debtor´s funds within 30 days of receipt; to require persons engaged in the business of debt adjustment to maintain trust accounts for debtors´ funds; to provide for civil and criminal violations and penalties; to provide for investigation and enforcement; to provide for related matters; to provide for an effective date; to repeal conflicting laws; and for other purposes.

Chapter 5 of Title 18 of the Official Code of Georgia Annotated, relating to debt adjustment, is amended by striking Code Section 18_5_2, relating to the prohibition of debt adjusting, and inserting in its place the following:
"18_5_2.
It shall be unlawful for any person to ~~engage in the business of debt adjusting~~ impose upon a debtor resident of this state either directly or indirectly any charge or fee, other than a reasonable charge for insufficient fund checks, or to receive any contribution of any kind for any purpose whatsoever from a debtor an amount in excess of 7.5 percent of the amount paid monthly by a debtor to such person for distribution to creditors."

Said chapter is further amended by striking Code Section 18_5_3, relating to exemption for incidental debt adjustment in the practice of law, and inserting in its place the following:
"18_5_3.
Nothing in this chapter shall apply to those situations involving debt adjusting incurred incidentally in the practice of law in this state. Nothing in this chapter shall apply to those persons who incidentally engage in debt adjusting in consideration of having received from a debtor a deed to secure debt or mortgage on property owned by the debtor or to any debt which is adjusted by the person, corporation, or other entity to which the debt is owed. Nothing in this chapter shall apply to the following entities or their subsidiaries: the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, or a bank, bank holding company, trust company, savings and loan association, credit union, credit card bank, or savings bank that is regulated and supervised by the Office of the Comptroller of the Currency, the Office of Thrift Supervision, the Federal Reserve, the Federal Deposit Insurance Corporation, the National Credit Union Administration, or the Georgia Department of Banking and Finance."

Said chapter is further amended by adding a new Code section 18_5_3.1to read as follows:
"18_5_3.1.
(a) Any person engaged in the business of debt adjusting for debtors located in this state shall meet the following annual requirements:
(1) Obtain from an independent third party certified public accountant an annual audit of all accounts of such person in which the funds of debtors are deposited and from which payments are made to creditors on behalf of debtors. A copy of the summary results of such annual audit shall be made available upon written request to any party so requesting a copy for a charge not to exceed the cost of the reproduction of the annual audit; and
(2) Obtain and maintain at all times insurance coverage for employee dishonesty, depositor´s forgery, and computer fraud in an amount not less than the greater of $100,000.00 or 10 percent of the monthly average for the immediately preceding six months of the aggregate amount of all deposits made with such person by all debtors. The deductible on such coverage shall not exceed 10 percent of the face amount of the policy coverage. Such policy shall identify the debtors of such person as additional insured parties under the policy and shall be issued by a company rated at least 'A_' or its equivalent by a nationally recognized rating organization.
(b) A copy of the annual audits and insurance policies required by this Code section shall be filed annually with the Governor´s Office of Consumer Affairs."

SECTION 5.

Said chapter is further amended by adding a new Code Section 18_5_3.2 to read as follows:
"18_5_3.2.
(a) Any person engaged in the business of debt adjusting shall disburse to the appropriate creditors all funds received from a debtor, less any fees authorized by this chapter, within 30 days of receipt of such funds.
(b) Any person engaged in the business of debt adjusting shall maintain a separate trust account for the receipt of funds from debtors and the disbursement of such funds on behalf of debtors."

Said chapter is further amended by striking Code Section 18_5_4, relating to penalties for engaging in business of debt adjusting, and inserting in its place the following:
"18_5_4.
(a) Any person who engages in the business of debt adjusting in violation of this chapter shall be guilty of a misdemeanor.
(b) Any person who violates the provisions of Code Section 18_5_3.1 shall be liable for a fine of not less than $50,000.00.
(c) Any person who violates the provisions of Code Section 18_5_2 or 18_5_3.2 shall be liable to the debtor in an amount equal to the total of all fees, charges, or contributions paid by the debtor plus $5,000.00. Such debtor shall have the right to bring a cause of action directly against such person for violation of the provisions of this chapter.
(d) The Attorney General and prosecuting attorneys shall have the authority to conduct the criminal prosecution of all cases arising under this chapter. Concurrent jurisdiction for investigation and enforcement of this chapter shall reside with the administrator of the Governor´s Office of Consumer Affairs pursuant to Code Section 10_1_395 and the 'Georgia Fair Business Practice Act of 1975.'"