[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3331 Introduced in House (IH)]







108th CONGRESS
  1st Session
                                H. R. 3331

 To amend the Consumer Credit Protection Act to protect consumers from 
    unfair and deceptive practices by organizations providing debt 
 counseling, debt consolidation, or debt settlement services, and for 
                            other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            October 17, 2003

   Ms. Carson of Indiana (for herself, Mr. Owens, Mr. Lipinski, Mrs. 
    Napolitano, Mrs. Jones of Ohio, Mr. Ryan of Ohio, Mr. Davis of 
 Illinois, Mr. Hinchey, Mr. Thompson of Mississippi, Ms. Lee, and Mr. 
   Sanders) introduced the following bill; which was referred to the 
                    Committee on Financial Services

_______________________________________________________________________

                                 A BILL


 
 To amend the Consumer Credit Protection Act to protect consumers from 
    unfair and deceptive practices by organizations providing debt 
 counseling, debt consolidation, or debt settlement services, and for 
                            other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Debt Counseling, Debt Consolidation, 
and Debt Settlement Practices Improvement Act of 2003''.

SEC. 2. DEBT COUNSELING, DEBT CONSOLIDATION, AND DEBT SETTLEMENT 
              PRACTICES.

    The Consumer Credit Protection Act (15 U.S.C. 1601 et seq.) is 
amended by adding at the end the following new title:

  ``TITLE X--DEBT COUNSELING, DEBT CONSOLIDATION, AND DEBT SETTLEMENT 
                               PRACTICES

``SEC. 1001. SHORT TITLE; TABLE OF CONTENTS.

    ``(a) Short Title.--This title may be cited as the ``Debt 
Counseling, Debt Consolidation, and Debt Settlement Practices Act''.
    ``(b) Table of Contents.--The table of contents for this title is 
as follows:

  ``TITLE X--DEBT COUNSELING, DEBT CONSOLIDATION, AND DEBT SETTLEMENT 
                               PRACTICES

        ``Sec. 1001. Short title; table of contents.
        ``Sec. 1002. Definitions.
        ``Sec. 1003. Prohibited practices.
        ``Sec. 1004. Debt counseling, debt consolidation, or debt 
                            settlement organization contracts.
        ``Sec. 1005. Right to cancel contract.
        ``Sec. 1006. Noncompliance with this title.
        ``Sec. 1007. Registration of organization.
        ``Sec. 1008. Civil liability.
        ``Sec. 1009. Administrative enforcement.
        ``Sec. 1010. Statute of limitations.
        ``Sec. 1011. Relation to State law.
        ``Sec. 1012. Effective date.

``SEC. 1002. DEFINITIONS.

    ``For purposes of this title, the following definitions shall 
apply:
            ``(1) Commission.--The term `Commission' means the Federal 
        Trade Commission.
            ``(2) Consumer.--The term `consumer' means an individual.
            ``(3) Creditor.--The term `creditor' has the same meaning 
        as in section 103.
            ``(4) Debt consolidation.--The term `debt consolidation' 
        means a transaction involving a loan or other extension of 
        credit to a consumer for a purpose that at least includes the 
        repayment in full of 2 or more existing loans or extensions of 
        credit to the consumer, without regard to whether any of such 
        existing loans or extensions of credit is in troubled 
        condition.
            ``(5) Debt consolidation organization.--The term `debt 
        consolidation organization'--
                    ``(A) means any person who uses any instrumentality 
                of interstate commerce or the mails to sell, provide, 
                or perform (or represent that such person can or will 
                sell, provide, or perform) any service, in return for 
                the payment of money or other valuable consideration, 
                for the express or implied purpose of--
                            ``(i) engaging in a debt consolidation 
                        transaction with a consumer; or
                            ``(ii) providing any advice or assistance 
                        to any consumer with regard to any activity or 
                        service which results in or may result in a 
                        debt consolidation transaction;
                    ``(B) includes any nonprofit organization which is 
                exempt from taxation under section 501(c)(3) of the 
                Internal Revenue Code of 1986 other than an 
                organization described in subparagraph (C); and
                    ``(C) does not include--
                            ``(i) any creditor, with respect to any 
                        consumer, to the extent the creditor is 
                        assisting the consumer to restructure any debt 
                        owed by the consumer to the creditor;
                            ``(ii) any depository institution (as that 
                        term is defined in section 3 of the Federal 
                        Deposit Insurance Act) or any Federal or State 
                        credit union (as those terms are defined in 
                        section 101 of the Federal Credit Union Act), 
                        or any affiliate or subsidiary of such a 
                        depository institution or credit union;
                            ``(iii) any government-sponsored enterprise 
                        (as defined in section 1404(e)(1) of the 
                        Financial Institutions Reform, Recovery, and 
                        Enforcement Act of 1989);
                            ``(iv) any attorney at law, if providing 
                        debt counseling, debt consolidation, or debt 
                        settlement services are incidental to, and not 
                        the principal business of, the practice of such 
                        attorney;
                            ``(v) any certified public accountant, if 
                        providing debt counseling, debt consolidation, 
                        or debt settlement services are incidental to, 
                        and not the principal business of, the 
                        accounting practice of such accountant;
                            ``(vi) any title insurer or abstract 
                        company, while doing escrow business; or
                            ``(vii) a judicial officer or person acting 
                        under court order.
            ``(6) Debt counseling organization.--The term `debt 
        counseling organization' means any person who--
                    ``(A) uses any instrumentality of interstate 
                commerce or the mails to provide education, counseling 
                to individuals or groups, or debt management services 
                to help consumers manage money and credit; and
                    ``(B) is not a debt consolidation organization or a 
                debt settlement organization.
            ``(7) Debt settlement.--The term `debt settlement' means 
        any action or negotiation initiated or taken by or on behalf of 
        any consumer with any creditor of the consumer for the purpose 
        of obtaining debt forgiveness of a portion of the credit 
        extended by the creditor to the consumer, or troubled debt 
        restructuring on terms that are more favorable to the consumer.
            ``(8) Debt settlement organization.--The term `debt 
        settlement organization'--
                    ``(A) means any person who uses any instrumentality 
                of interstate commerce or the mails to sell, provide, 
                or perform (or represent that such person can or will 
                sell, provide, or perform) any service, in return for 
                the payment of money or other valuable consideration, 
                for the express or implied purpose of--
                            ``(i) providing any debt settlement service 
                        to, for, or on behalf of a consumer; or
                            ``(ii) providing any advice or assistance 
                        to any consumer with regard to any activity or 
                        service described in clause (i);
                    ``(B) includes any nonprofit organization which is 
                exempt from taxation under section 501(c)(3) of the 
                Internal Revenue Code of 1986 other than an 
                organization described in subparagraph (C); and
                    ``(C) does not include--
                            ``(ii) any creditor, with respect to any 
                        consumer, to the extent the creditor is 
                        assisting the consumer to restructure any debt 
                        owed by the consumer to the creditor;
                            ``(iii) any depository institution (as that 
                        term is defined in section 3 of the Federal 
                        Deposit Insurance Act) or any Federal or State 
                        credit union (as those terms are defined in 
                        section 101 of the Federal Credit Union Act), 
                        or any affiliate or subsidiary of such a 
                        depository institution or credit union;
                            ``(iv) any attorney at law, if providing 
                        debt counseling, debt consolidation, or debt 
                        settlement services are incidental to, and not 
                        the principal business of, the practice of such 
                        attorney;
                            ``(v) any certified public accountant, if 
                        providing debt counseling, debt consolidation, 
                        or debt settlement services are incidental to, 
                        and not the principal business of, the 
                        accounting practice of such accountant;
                            ``(vi) any title insurer or abstract 
                        company, while doing escrow business; or
                            ``(vii) a judicial officer or person acting 
                        under court order.

``SEC. 1003. PROHIBITED PRACTICES.

    ``(a) In General.--A debt counseling organization, a debt 
consolidation organization and a debt settlement organization may not--
            ``(1) unreasonably disclose information to third parties 
        regarding amounts owed by any consumer;
            ``(2) make any fraudulent, deceptive, or misleading 
        representation to obtain information about any consumer, to 
        solicit business with any consumer, or in connection with 
        providing services for or on behalf of any consumer;
            ``(3) use any unconscionable means to obtain a contract 
        with any consumer collect or attempt to collect a debt owed to 
        the seller;
            ``(4) advertise, announce, solicit, or otherwise represent 
        as free or available without charge (including by use of other 
        words of similar meaning) any debt counseling, debt 
        consolidation, or debt settlement service for which the 
        organization charges the consumer or receives consideration 
        from a third party (including a related party); or
            ``(5) engage in any unfair or deceptive act or practice in 
        connection with any debt counseling, debt consolidation, or 
        debt settlement service provided to any consumer, in offering 
        or establishing any term or condition in any contract with a 
        consumer for providing any such service, or any advertisement 
        or solicitation relating to any such service.
    ``(b) Undisclosed Relationship Between a Debt Counseling 
Organization and a Debt Consolidation or Debt Settlement 
Organization.--No debt counseling organization may offer any service to 
any consumer, or provide any advice or referral to any consumer, with 
respect to any debt consolidation organization or any debt settlement 
organization of which the debt counseling organization is an affiliate, 
for which it is an agent, or with which the debt counseling 
organization has an on-going business relationship or any reciprocal 
referral agreement, unless the debt counseling organization--
            ``(1) fully discloses, orally and in writing, the existence 
        of the affiliation, agency, or business relationship or 
        reciprocal referral agreement to the consumer;
            ``(2) fully discloses, orally and in writing, the detail of 
        the financial relationship between the debt counseling 
        organization and the debt consolidation or debt settlement 
        organization, including the extent to which the debt counseling 
        organization benefits financially from any services or advice 
        provided by the counseling organization to the consumer that 
        results in any debt consolidation or debt settlement contract, 
        agreement, or transaction between the consumer and the debt 
        consolidation or debt settlement organization; and
            ``(3) such other information as the Commission may require 
        in regulations.
    ``(c) Diversion of Periodic Payments From Creditor to Debt 
Settlement Organization.--
            ``(1) Offer or advice to consumer.--No debt counseling 
        organization, debt consolidation organization, or debt 
        settlement organization may suggest or advise any consumer to 
        stop making any payment or any portion of any payment, whether 
        periodic or otherwise, due from the consumer to any creditor 
        under the terms of a loan or extension of credit from the 
        creditor to the consumer for the purpose of facilitating debt 
        settlement negotiations with such creditor by or on behalf of 
        the consumer, unless the organization provides full written 
        disclosure to the consumer, and obtains a signed statement from 
        the consumer that the consumer has read and understood the 
        disclosure, that--
                    ``(A) such action is or may be a violation of the 
                terms of the agreement between the consumer and the 
                creditor if the creditor has not agreed in writing to a 
                new payment arrangement;
                    ``(B) the failure to make timely payments on any 
                loan or extension of credit in accordance with the 
                terms of the contract--
                            ``(i) will be, or is likely to be, reported 
                        as a late payment or a nonpayment to a consumer 
                        reporting agency;
                            ``(ii) will, or is likely to have, an 
                        adverse effect on the creditworthiness of the 
                        consumer such that the consumer may have 
                        difficulty obtaining credit; and
                    ``(C) if the consumer has not missed or failed to 
                make payments to the creditor, such action may not be 
                necessary in order for the consumer to obtain debt 
                settlement from the creditor.
            ``(2) Acceptance of payments diverted from a creditor.--No 
        debt settlement organization may accept or hold any payments 
        from a consumer intended for a creditor after a settlement has 
        been reached between the creditor and the debt settlement 
        organization beyond a reasonable amount of time necessary 
        solely for payment-processing purposes.
    ``(d) Payment in Advance.--
            ``(1) In general.--No debt counseling organization, debt 
        consolidation organization, or debt settlement organization may 
        collect any payment from a consumer prior to the payment being 
        earned as specifically defined in the contract between the 
        parties.
            ``(2) Full or final payment.--No debt counseling 
        organization, debt consolidation organization, or debt 
        settlement organization may charge or receive full or final 
        payment for the performance of any service which such 
        organization has agreed to perform for any consumer before such 
        service is fully performed by both parties in accordance with 
        the contract between the parties.

``SEC. 1004. DEBT COUNSELING, DEBT CONSOLIDATION, OR DEBT SETTLEMENT 
              ORGANIZATION CONTRACTS.

    ``(a) Written Contracts Required.--No services that require any 
payment, voluntary donation, fee, or other consideration may be 
provided by any debt counseling organization, debt consolidation 
organization, or debt settlement organization for any consumer unless a 
written and dated contract (for the purchase of such services) which 
meets the requirements of subsection (b) has been signed by the 
consumer.
    ``(b) Terms and Conditions of Contract.--No contract referred to in 
subsection (a) meets the requirements of this subsection unless such 
contract includes (in writing)--
            ``(1) the terms and conditions of payment, including--
                    ``(A) a reasonable estimate of all payments and 
                fees to be made by the consumer to the debt counseling 
                organization, debt consolidation organization, or debt 
                settlement organization or to any other person over the 
                term of the contract, including a maximum amount; and
                    ``(B) the amount of any monthly or other periodic 
                payment required under the contract to any such 
                organization or other person, the number of such 
                monthly or other periodic payments, and the terms 
                applicable with respect to such payments and any late 
                payment of, or default on, any such amount;
            ``(2) a full and detailed description of the services to be 
        performed by the debt counseling organization, debt 
        consolidation organization, or debt settlement organization for 
        the consumer, including--
                    ``(A) all guarantees of performance; and
                    ``(B) an estimate of--
                            ``(i) the date by which the performance of 
                        the services (to be performed by the 
                        organization or any other person) will be 
                        complete; or
                            ``(ii) the length of the period necessary 
                        to perform such services;
            ``(3) the name and principal business address of the debt 
        counseling organization, debt consolidation organization, or 
        debt settlement organization;
            ``(4) a conspicuous statement in bold face type, in 
        immediate proximity to the space reserved for the consumer's 
        signature on the contract, which reads as follows: ``You may 
        cancel this contract without penalty or obligation at any time 
        before midnight of the 3rd business day after the date on which 
        you signed the contract. See the attached notice of 
        cancellation form for an explanation of this right.''; and
            ``(5) no charges or fees may be imposed by the debt 
        counseling organization, debt consolidation organization, or 
        debt settlement organization for any activities or services 
        undertaken on behalf of the consumer by the organization before 
        the end of the 3-business-day period beginning on the date the 
        contract is signed, if the consumer exercises the right to 
        cancel the contract before the end of such period.

``SEC. 1005. RIGHT TO CANCEL CONTRACT.

    ``(a) In General.--Any consumer may cancel any contract with any 
debt counseling organization, debt consolidation organization, or debt 
settlement organization without penalty or obligation by notifying the 
organization of the consumer's intention to do so at any time 
before midnight of the 3rd business day which begins after the date on 
which the contract or agreement between the consumer and the 
organization is executed or would, but for this subsection, become 
enforceable against the parties.
    ``(b) Cancellation Form and Other Information.--Each contract shall 
be accompanied by a form, in duplicate, which has the heading `Notice 
of Cancellation' and contains in bold face type the following 
statement:
            `You may cancel this contract, without any penalty or 
        obligation, at any time before midnight of the 3rd day which 
        begins after the date the contract is signed by you.
            `To cancel this contract, mail or deliver in person a 
        signed, dated copy of this cancellation notice, or any other 
        written notice to [ name of debt counseling organization, debt 
        consolidation organization, or debt settlement organization ] 
        at [ address of such organization ] before midnight on [ date ]
            `I hereby cancel this transaction,
            [ date ]
            [ purchaser's signature ].'.
    ``(c) Consumer Copy of Contract Required.--Any consumer who enters 
into any contract with any debt counseling organization, debt 
consolidation organization, or debt settlement organization shall be 
given, by the organization--
            ``(1) a copy of the completed contract and the disclosure 
        statement required under section 1004; and
            ``(2) a copy of any other document the organization 
        requires the consumer to sign,
at the time the contract or the other document is signed.
    ``(d) Retention of Contract Records.--Any debt counseling 
organization, debt consolidation organization, and debt settlement 
organization shall maintain a copy of the contract signed by the 
consumer for not less than 3 years after the date the services provided 
under the contract have been fully performed, together with the 
complete name, address, and phone number of the consumer at the time 
the contract became effective.

``SEC. 1006. NONCOMPLIANCE WITH THIS TITLE.

    ``(a) Consumer Waivers Invalid.--Any waiver by any consumer of any 
protection provided by or any right of the consumer under this title--
            ``(1) shall be treated as void; and
            ``(2) may not be enforced by any Federal or State court or 
        any other person.
    ``(b) Attempt To Obtain Waiver.--Any attempt by any person to 
obtain a waiver from any consumer of any protection provided by or any 
right of the consumer under this title shall be treated as a violation 
of this title.
    ``(c) Contracts Not in Compliance.--Any contract for services which 
does not comply with the applicable provisions of this title--
            ``(1) shall be treated as void; and
            ``(2) may not be enforced by any Federal or State court or 
        any other person.

``SEC. 1007. REGISTRATION OF ORGANIZATION.

    ``Any person who owns or controls a debt counseling organization, 
debt consolidation organization, or debt settlement organization shall 
register the organization (whether or not the organization is licensed 
as a debt counseling organization, debt consolidation organization, or 
debt settlement organization in any State) with the Secretary of the 
Treasury not later than the end of the 180-day period beginning on the 
later of--
                    ``(A) the date of enactment of the Debt Counseling, 
                Debt Consolidation, and Debt Settlement Practices 
                Improvement Act of 2003; or
                    ``(B) the date on which the organization is 
                established.
            ``(2) Form and manner of registration.--Subject to the 
        requirements of subsection (b), the Secretary of the Treasury 
        shall prescribe, by regulation, the form and manner for 
        registering a debt counseling organization, debt consolidation 
        organization, or debt settlement organization pursuant to 
        paragraph (1) which may be consistent with the registration 
        requirements for money transmitting businesses under section 
        5130 of title 31, United States Code.
            ``(3) Organizations remain subject to state law.--This 
        section shall not be construed as superseding any requirement 
        of State law relating to debt counseling organizations, debt 
        consolidation organizations, or debt settlement organizations 
        operating in such State, except to the extent provided in 
        section 1011.
            ``(4) False and incomplete information.--The filing of 
        false or materially incomplete information in connection with 
        the registration of a debt counseling organization, debt 
        consolidation organization, or debt settlement organization 
        shall be considered as a failure to comply with the 
        requirements of this section.
    ``(b) Contents of Registration.--The registration of a debt 
counseling organization, debt consolidation organization, or debt 
settlement organization under subsection (a) shall include the 
following information:
            ``(1) The name and location of the organization.
            ``(2) The name and address of each person who--
                    ``(A) owns or controls the organization;
                    ``(B) is a director or officer of the organization; 
                or
                    ``(C) otherwise participates in the conduct of the 
                affairs of the organization.
            ``(3) Such other information as the Federal Trade 
        Commission may require.
    ``(c) Civil Penalty for Failure To Comply With Registration 
Requirements.--
            ``(1) In general.--Any person who fails to comply with any 
        requirement of this section or any regulation prescribed under 
        this section shall be liable to the United States for a civil 
        penalty of $5,000 for each such violation.
            ``(2) Continuing violation.--Each day a violation described 
        in paragraph (1) continues shall constitute a separate 
violation for purposes of such paragraph.
            ``(3) Assessments.--Any penalty imposed under this 
        subsection shall be assessed and collected by the Secretary of 
        the Treasury in the manner provided in section 5321 of title 
        31, United States Code.

``SEC. 1008. CIVIL LIABILITY.

    ``(a) Liability Established.--Any person who fails to comply with 
any provision of this title with respect to any other person shall be 
liable to such person in an amount equal to the sum of the amounts 
determined under each of the following paragraphs:
            ``(1) Actual damages.--The greater of--
                    ``(A) the amount of any actual damage sustained by 
                such person as a result of such failure; or
                    ``(B) any amount paid by the person to the debt 
                counseling organization, debt consolidation 
                organization, or debt settlement organization.
            ``(2) General damages.--
                    ``(A) Individual actions.--In the case of any 
                action by an individual, such additional amount as the 
                court may allow.
                    ``(B) Class actions.--In the case of a class 
                action, the sum of--
                            ``(i) the aggregate of the amount which the 
                        court may allow for each named plaintiff; and
                            ``(ii) the aggregate of the amount which 
                        the court may allow for each other class 
                        member, without regard to any minimum 
                        individual recovery.
            ``(3) Attorneys' fees.--In the case of any successful 
        action to enforce any liability under paragraph (1) or (2), the 
        costs of the action, together with reasonable attorneys' fees.
    ``(b) Factors To Be Considered in Awarding General Damages.--In 
determining the amount of any liability of any debt counseling 
organization, debt consolidation organization, or debt settlement 
organization under subsection (a)(2), the court shall consider, among 
other relevant factors--
            ``(1) the frequency and persistence of noncompliance by the 
        organization;
            ``(2) the nature of the noncompliance;
            ``(3) the extent to which such noncompliance was 
        intentional; and
            ``(4) in the case of any class action, the number of 
        consumers adversely affected.

``SEC. 1009. ADMINISTRATIVE ENFORCEMENT.

    ``(a) Federal Trade Commission.--
            ``(1) In general.--Except as provided in subsection (b), 
        compliance with the requirements imposed under this title with 
        respect to debt counseling organizations, debt consolidation 
        organizations, and debt settlement organizations shall be 
        enforced under the Federal Trade Commission Act by the Federal 
        Trade Commission.
            ``(2) Violations of this title treated as violations of 
        federal trade commission act.--
                    ``(A) In general.--For the purpose of the exercise 
                by the Federal Trade Commission of the Commission's 
                functions and powers under the Federal Trade Commission 
                Act, any violation of any requirement or prohibition 
                imposed under this title with respect to debt 
                counseling organizations, debt consolidation 
                organizations, and debt settlement organizations shall 
                constitute an unfair or deceptive act or practice in 
                commerce in violation of section 5(a) of the Federal 
                Trade Commission Act.
                    ``(B) Enforcement authority under other law.--All 
                functions and powers of the Federal Trade Commission 
                under the Federal Trade Commission Act shall be 
                available to the Commission to enforce compliance with 
                this title by any person subject to enforcement by the 
                Federal Trade Commission pursuant to this subsection, 
                including the power to enforce the provisions of this 
                title in the same manner as if the violation had been a 
                violation of any Federal Trade Commission trade 
                regulation rule, without regard to whether the debt 
                counseling organization, debt consolidation 
                organization, or debt settlement organization--
                            ``(i) is engaged in commerce; or
                            ``(ii) meets any other jurisdictional tests 
                        in the Federal Trade Commission Act.
    ``(b) Civil Penalties.--
            ``(1) Penalty authorized.--The Federal Trade Commission may 
        impose a civil penalty on any debt counseling organization, 
        debt consolidation organization, or debt settlement 
        organization that violates any provision of this title other 
        than section 1007.
            ``(2) Maximum amount limitation.--The amount of any civil 
        money penalty imposed under paragraph (1) shall not exceed--
                    ``(A) in the case of any person who knowingly or 
                recklessly violates this title, the greater of--
                            ``(i) the amount (not to exceed $100,000) 
                        of the debt of the consumer that was subject to 
                        debt counseling, debt consolidation, or debt 
                        settlement; or
                            ``(ii) $25,000; and
                    ``(B) in the case of any person who negligently 
                violates this title, $2000.
            ``(3) Continuing violations.--Each day a violation 
        continues under this title shall be treated as a separate 
        violation.
            ``(4) Time limitations for assessments and commencement of 
        civil actions.--
                    ``(A) Assessments.--The Federal Trade Commission 
                may assess a civil penalty under this subsection at any 
                time before the end of the 6-year period beginning on 
                the date of the violation with respect to which the 
                penalty is assessed.
                    ``(B) Civil actions.--The Commission may commence a 
                civil action to recover a civil penalty assessed under 
                this subsection at any time before the end of the 2-
                year period beginning on the date the penalty was 
                assessed in any court with jurisdiction.
            ``(5) Criminal penalty not exclusive of civil penalty.--A 
        civil money penalty may be imposed under this subsection with 
        respect to any violation of this title (other than section 
        1007) notwithstanding the fact that a criminal penalty is 
        imposed with respect to the same violation.
            ``(6) Pattern of negligent activity.--If any debt 
        counseling organization, debt consolidation organization, or 
        debt settlement organization engages in a pattern of negligent 
        violations of any provision of this title (other than section 
        1007), or any regulation prescribed under this title, the 
        Federal Trade Commission may, in addition to any penalty 
        imposed under paragraph (2)(B) with respect to any such 
        violation, impose a civil money penalty of not more than 
        $50,000 on such organization.
            ``(7) Procedural provisions.--
                    ``(A) Authority to modify or remit penalty.--The 
                Federal Trade Commission may compromise, modify, or 
                remit any penalty which the Commission may assess or 
                has already assessed under this subsection.
                    ``(B) Mitigating factors.--In determining the 
                amount of any penalty imposed under this subsection, 
                the Commission shall take into account the 
                appropriateness of the penalty with respect to--
                            ``(i) the size of financial resources and 
                        good faith of the organization charged;
                            ``(ii) the gravity of the violation;
                            ``(iii) the history of previous violations; 
                        and
                            ``(iv) such other matters as justice may 
                        require.
                    ``(C) Appropriateness of penalty not reviewable.--
                In any civil action under paragraph (4)(B), the 
                validity and appropriateness of the penalty shall not 
                be subject to review.
                    ``(D) Disbursement.--All penalties collected under 
                authority of this paragraph shall be deposited into the 
                Treasury.
                    ``(E) Regulations.--The Federal Trade Commission 
                shall prescribe regulations, after notice and 
                opportunity for a hearing under section 553 of title 5, 
                United States Code, establishing such procedures as may 
                be necessary to carry out this subsection.
    ``(c) State Action for Violations.--
            ``(1) Authority of states.--In addition to such other 
        remedies as are provided under State law, whenever the chief 
        law enforcement officer of a State, or an official or agency 
        designated by a State, has reason to believe that any person 
        has violated or is violating this title, the State--
                    ``(A) may bring an action to enjoin such violation;
                    ``(B) may bring an action on behalf of its 
                residents to recover damages for which the person is 
                liable to such residents under section 409 as a result 
                of the violation; and
                    ``(C) in the case of any successful action under 
                subparagraph (A) or (B), shall be awarded the costs of 
                the action and reasonable attorney fees as determined 
                by the court.
            ``(2) Rights of commission.--
                    ``(A) Notice to commission.--The State shall serve 
                prior written notice of any civil action under 
                paragraph (1) upon the Federal Trade Commission and 
                provide the Commission with a copy of its complaint, 
                except in any case where such prior notice is not 
                feasible, in which case the State shall serve such 
                notice immediately upon instituting such action.
                    ``(B) Intervention.--The Commission shall have the 
                right--
                            ``(i) to intervene in any action referred 
                        to in subparagraph (A);
                            ``(ii) upon so intervening, to be heard on 
                        all matters arising in the action; and
                            ``(iii) to file petitions for appeal.
            ``(3) Investigatory powers.--For purposes of bringing any 
        action under this subsection, nothing in this subsection shall 
        prevent the chief law enforcement officer, or an official or 
        agency designated by a State, from exercising the powers 
        conferred on the chief law enforcement officer or such official 
        by the laws of such State to conduct investigations or to 
        administer oaths or affirmations or to compel the attendance of 
        witnesses or the production of documentary and other evidence.
            ``(4) Limitation.--Whenever the Federal Trade Commission 
        has instituted a civil action for violation of this title, no 
        State may, during the pendency of such action, bring an action 
        under this section against any defendant named in the complaint 
        of the Commission for any violation of this title that is 
        alleged in that complaint.

``SEC. 1010. STATUTE OF LIMITATIONS.

    ``(a) In General.--Any action to enforce any liability under this 
title may be brought before the end of the 5-year period beginning on 
the date on which the occurrence of the violation is discovered or 
reasonably should have been discovered by the exercise of due 
diligence.
    ``(b) Willful Misrepresentation.--The limitations period prescribed 
in subsection (a) shall be tolled during any period during which a 
defendant has materially and willfully misrepresented any information 
required under this title to be disclosed to an individual, and the 
information so misrepresented is material to the establishment of the 
liability of the defendant to that individual under this title.''.

``SEC. 1011. RELATION TO STATE LAW.

    ``No requirement or prohibition may be imposed under the laws of 
any State with respect to any subject matter regulated under this 
title.

``SEC. 1012. EFFECTIVE DATE.

    ``This title shall apply after the end of the 6-month period 
beginning on the date of the enactment of the Debt Counseling, Debt 
Consolidation, and Debt Settlement Practices Improvement Act of 2003, 
except with respect to contracts entered into by a debt counseling 
organization, debt consolidation organization, or debt settlement 
organization before the end of such period.''.

SEC. 3. STUDY OF DEBT CONSOLIDATION AND DEBT SETTLEMENT INDUSTRY.

    (a) Study Required.--The Federal Trade Commission and the Board of 
Governors of the Federal Reserve System shall jointly conduct a study 
of--
            (1) the benefits and detrimental effects of the activities 
        of debt consolidation organizations and debt settlement 
        organizations for consumers and creditors generally, and the 
        economy, including the extent to which such activities have 
        contributed to a substantial decline in the total amount of 
        household debt and the average amount of debt per household; 
        and
            (2) the extent to which such organizations are affiliates 
        of creditors, or maintain formal or informal relationships with 
        1 or more creditors in providing debt consolidation or debt 
        settlement services.
    (b) Report.--Before the end of the 1-year period beginning on the 
date of the enactment of this Act, the Federal Trade Commission and the 
Board of Governors of the Federal Reserve System shall jointly submit a 
report to the Congress containing the findings and conclusions of the 
Commission and the Board pursuant to the study conducted pursuant to 
subsection (a), together with such recommendations for legislative or 
administrative action as the Commission and the Board may determine to 
be appropriate.
    (c) Definitions.--For purposes of this section, the terms 
``creditor'', ``debt consolidation organization'', and ``debt 
settlement organization'' have the same meaning as in the amendment 
made by section 2.
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