[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5387 Introduced in House (IH)]

111th CONGRESS
  2d Session
                                H. R. 5387

 To amend the Consumer Credit Protection Act to provide for regulation 
          of debt settlement services, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 25, 2010

 Mr. Gutierrez (for himself, Ms. Moore of Wisconsin, and Mr. Ellison) 
 introduced the following bill; which was referred to the Committee on 
                           Financial Services

_______________________________________________________________________

                                 A BILL


 
 To amend the Consumer Credit Protection Act to provide for regulation 
          of 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 Settlement Consumer Protection 
Act of 2010''.

SEC. 2. REGULATION OF DEBT SETTLEMENT SERVICES.

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

                  ``TITLE X--DEBT SETTLEMENT SERVICES

``Sec. 1001. Definitions.
``Sec. 1002. Required acts.
``Sec. 1003. Prohibited acts.
``Sec. 1004. Fees.
``Sec. 1005. Consumer settlement accounts.
``Sec. 1006. Cancellation of contract.
``Sec. 1007. Obligation of good faith.
``Sec. 1008. Invalidation of contracts.
``Sec. 1009. Advertising, marketing, and communication practices.
``Sec. 1010. Rulemaking by Federal Trade Commission.
``Sec. 1011. Civil liability.
``Sec. 1012. Enforcement by Federal Trade Commission.
``Sec. 1013. Action by States.
``Sec. 1014. Statute of limitations.
``Sec. 1015. Relation to State law.

``SEC. 1001. DEFINITIONS.

    ``In this title:
            ``(1) Attorney general of a state.--The term `attorney 
        general of a State' means the attorney general or other chief 
        law enforcement officer of a State.
            ``(2) Commission.--The term `Commission' means the Federal 
        Trade Commission.
            ``(3) Consumer.--The term `consumer' means any person.
            ``(4) Consumer settlement account.--The term `consumer 
        settlement account' means any account or other means or device 
        in which payments, deposits, or other transfers from a consumer 
        are held or transferred to a debt settlement provider for the 
        accumulation of the consumer's funds in anticipation of 
        proffering an adjustment or settlement of a debt or obligation 
        of the consumer to a creditor on behalf of the consumer.
            ``(5) Debt settlement program.--The term `debt settlement 
        program' means the actions and activities undertaken by a debt 
        settlement provider and a consumer in connection with the 
        provision of debt settlement service.
            ``(6) Debt settlement provider.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the term `debt settlement provider' 
                means any person or entity engaging in, or holding 
                itself out as engaging in, the business of providing 
                debt settlement services in exchange for a fee or 
                compensation, or any person who solicits for or acts on 
                behalf of any person or entity engaging in, or holding 
                itself out as engaging in, the business of providing 
                debt settlement services in exchange for any fee or 
                compensation.
                    ``(B) Exception.--The term `debt settlement 
                provider' does not include the following:
                            ``(i) Attorneys when--
                                    ``(I) acting in the ordinary 
                                practice of their professions;
                                    ``(II) acting through any entity in 
                                the ordinary practice of their 
                                profession;
                                    ``(III) acting in the States where 
                                they are licensed to practice their 
                                profession; and
                                    ``(IV) not holding themselves out 
                                as debt settlement providers or 
                                providing debt settlement service.
                            ``(ii) Escrow agents, accountants, broker 
                        dealers in securities, or investment advisors 
                        in securities, when acting--
                                    ``(I) in the ordinary practice of 
                                their professions; and
                                    ``(II) through any entity in the 
                                ordinary practice of their profession.
                            ``(iii) Any bank, agent of a bank, trust 
                        company, savings and loan association, savings 
                        bank, credit union, crop credit association, 
                        development credit corporation, industrial 
                        development corporation, title insurance 
                        company, or insurance company operating or 
                        organized under the laws of a State or the 
                        United States.
                            ``(iv) Mortgage servicers (as such term is 
                        defined in section 6(i) of the Real Estate 
                        Settlement Procedures Act of 1974 (12 U.S.C. 
                        2605(i)(2)) carrying out mortgage loan 
                        modifications.
                            ``(v) Any person who performs credit 
                        services for such person's employer while 
                        receiving a regular salary or wage when the 
                        employer is not engaged in the business of 
                        offering or providing debt settlement service.
                            ``(vi) An organization that is described in 
                        section 501(c)(3) and subject to section 501(q) 
                        of the Internal Revenue Code of 1986 and exempt 
                        from tax under section 501(a) of such Code.
                            ``(vii) Public officers while acting in 
                        their official capacities and persons acting 
                        under court order.
                            ``(viii) Any person while performing 
                        services incidental to the dissolution, winding 
                        up, or liquidating of a partnership, 
                        corporation, or other business enterprise.
            ``(7) Debt settlement service.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the term `debt settlement service' 
                means--
                            ``(i) offering to provide advice or 
                        service, or to act or acting as an intermediary 
                        between or on behalf of a consumer and one or 
                        more of a consumer's creditors, where the 
                        primary purpose of the advice, service, or 
                        action is to obtain a settlement, adjustment, 
                        or satisfaction of the consumer's debt to a 
                        creditor in an amount less than the full amount 
                        of the principal amount of the debt or in an 
                        amount less than the current outstanding 
                        balance of the debt; or
                            ``(ii) offering to provide services related 
                        to or providing services advising, encouraging, 
                        assisting, or counseling a consumer to 
                        accumulate funds for the primary purpose of 
                        proposing, obtaining, or seeking to obtain a 
                        settlement, adjustment, or satisfaction of the 
                        consumer's debt to a creditor in an amount less 
                        than the full amount of the principal amount of 
                        the debt or in an amount less than the current 
                        outstanding balance of the debt.
                    ``(B) Exception.--The term `debt settlement 
                service' does not include services of an attorney in 
                providing information, advice, or legal representation 
                with respect to filing a case or proceeding under title 
                11, United States Code.
            ``(8) Enrollment fee.--The term `enrollment fee' means any 
        fee, obligation, or compensation paid or to be paid by the 
        consumer to a debt settlement provider in consideration of or 
        in connection with establishing a contract or other agreement 
        with a consumer related to the provision of debt settlement 
        service.
            ``(9) Maintenance fee.--The term `maintenance fee' means 
        any fee, obligation, or compensation paid or to be paid by a 
        consumer on a periodic basis to a debt settlement provider in 
        consideration of maintaining the relationship and services to 
        be provided by a debt settlement provider in accordance with a 
        contract with a consumer related to the provision of debt 
        settlement service.
            ``(10) Principal amount of the debt.--The term `principal 
        amount of the debt' means the total amount or outstanding 
        balance owed by a consumer to one or more creditors for a debt 
        that is included in a contract for debt settlement service at 
        the time when the consumer enters into a contract for debt 
        settlement service pursuant to section 1002(a).
            ``(11) Settlement fee.--The term `settlement fee' means any 
        fee, obligation, or compensation paid or to be paid by a 
        consumer to a debt settlement provider in consideration of or 
        in connection with an agreement or other arrangement on the 
        part of a creditor to accept less than the principal amount of 
        the debt as satisfaction of the creditor's claim against the 
        consumer.

``SEC. 1002. REQUIRED ACTS.

    ``(a) Contract Required.--
            ``(1) In general.--A debt settlement provider may not 
        provide a debt settlement service to a consumer or receive any 
        fee from a consumer for a debt settlement service without a 
        written contract described in paragraph (2) that is signed by 
        the consumer.
            ``(2) Contract contents.--A contract described in this 
        paragraph is a contract between a debt settlement provider and 
        a consumer for debt settlement services that includes the 
        following:
                    ``(A) The name and address of the consumer.
                    ``(B) The date of execution of the contract.
                    ``(C) The legal name of the debt settlement 
                provider, including any other business names used by 
                the debt settlement provider.
                    ``(D) The corporate address and regular business 
                address, including a street address, of the debt 
                settlement provider.
                    ``(E) The license or registration number under 
                which the debt settlement provider is licensed or 
                registered if the consumer resides in a State that 
                requires a debt settlement provider to obtain a license 
                or registration as a condition of providing debt 
                settlement service in that State.
                    ``(F) The telephone number at which the consumer 
                may speak with a representative of the debt settlement 
                provider during normal business hours.
                    ``(G) A complete list of the consumer's accounts, 
                debts, and obligations covered under the debt 
                settlement service covered by the contract, including 
                the name of each creditor and principal amount of each 
                debt.
                    ``(H) A description of the services to be provided 
                by the debt settlement provider, including the expected 
                timeframe for settlement for each account, debt, or 
                obligation included in subparagraph (G).
                    ``(I) A clear and conspicuous itemized list of all 
                fees, including any enrollment fee and settlement fees 
                to be paid by the consumer to the debt settlement 
                provider, and the date, approximate date, or 
                circumstances under which each fee will become due.
                    ``(J) A clear and conspicuous statement of a good 
                faith estimate of the total amount of all fees to be 
                collected by the debt settlement provider from the 
                consumer for the provision of debt settlement service 
                under the contract.
                    ``(K) A clear and conspicuous statement of the 
                proposed savings goals for the consumer, stating the 
                amount to be saved per month or other period, the time 
                period over which the savings goals extend, and the 
                total amount of the savings expected to be paid by the 
                consumer pursuant to the terms of the contract.
                    ``(L) A notice to the consumer that unless the 
                consumer is insolvent, if a creditor settles a debt for 
                an amount less than the consumer's current outstanding 
                balance at the time of settlement, the consumer may 
                incur a tax liability.
                    ``(M) A written notice to the consumer, which 
                includes a form that the consumer may use and the 
                address to which the form may be returned to the debt 
                settlement provider, that the consumer may cancel the 
                contract pursuant to the provisions of section 1006.
                    ``(N) A clear and conspicuous written notice to the 
                consumer that--
                            ``(i) the consumer may cancel the 
                        contract--
                                    ``(I) within 90 days of--
                                            ``(aa) the execution of the 
                                        contract; or
                                            ``(bb) the provision of the 
                                        notice of the right to cancel 
                                        and cancellation form; or
                                    ``(II) at any time in the event of 
                                a violation of this title on the part 
                                of the debt settlement provider; and
                            ``(ii) in the case the consumer cancels the 
                        contract as described in clause (i)--
                                    ``(I) the consumer will be entitled 
                                to a full refund--
                                            ``(aa) of all fees and 
                                        compensation paid by the 
                                        consumer to the debt settlement 
                                        provider, except any settlement 
                                        fee; and
                                            ``(bb) of all funds 
                                        provided by the consumer to the 
                                        debt settlement provider for a 
                                        consumer settlement account, 
                                        except for funds actually paid 
                                        to a creditor on behalf of the 
                                        consumer, under the terms of 
                                        the contract for debt 
                                        settlement service; and
                                    ``(II) all powers of attorney 
                                granted to the debt settlement provider 
                                by the consumer will be revoked and 
                                voided.
    ``(b) Notification Required.--A debt settlement provider shall, 
before the earlier of the date of entering into a written contract with 
a consumer for debt settlement services or rendering debt settlement 
services to a consumer, provide to the consumer in writing the 
following:
            ``(1) An individualized financial analysis of the consumer, 
        including an assessment of the consumer's income, expenses, and 
        debts.
            ``(2) A description of the debt settlement service being 
        offered to the consumer by the debt settlement provider, 
        including the following:
                    ``(A) A description of the debt settlement program 
                being offered as part of the service.
                    ``(B) A list of each of the consumer's debts, 
                creditors, and debt collectors that will be covered 
                under the program.
            ``(3) A statement containing the following:
                    ``(A) A good-faith estimate of the length of time 
                it will take to achieve settlement of each debt covered 
                under the program.
                    ``(B) The specific time by which the debt 
                settlement service provider will make a bona fide 
                settlement offer to each creditor and debt collector 
                covered under the program.
                    ``(C) The total amount of debt owed by the consumer 
                to each creditor covered under the program.
                    ``(D) An estimate of the total and the monthly 
                savings the consumer will be required to accumulate to 
                complete the program.
            ``(4) A clear and conspicuous statement that--
                    ``(A) the consumer remains legally obligated to 
                make periodic or scheduled payments to creditors while 
                participating in a debt settlement program; and
                    ``(B) the debt settlement provider will not make 
                any periodic or scheduled payments to creditors on 
                behalf of the consumer.
            ``(5) A clear and conspicuous notice to the consumer that--
                    ``(A) the utilization of debt settlement service 
                may not be suitable for all consumers;
                    ``(B) the utilization of debt settlement service 
                may adversely impact the consumer's credit history and 
                credit score;
                    ``(C) the consumer may inquire about other means of 
                dealing with indebtedness, including nonprofit credit 
                counseling and bankruptcy;
                    ``(D) the failure to make periodic or scheduled 
                payments to a creditor--
                            ``(i) is likely to affect adversely the 
                        consumer's creditworthiness;
                            ``(ii) may result in continued collection 
                        activity by creditors or debt collectors;
                            ``(iii) may result in the consumer being 
                        sued by one or more creditors or debt 
                        collectors, and in the garnishment of the 
                        consumer's wages; and
                            ``(iv) may increase the amount of money the 
                        consumer owes to one or more creditors or debt 
                        collectors due to the imposition by the 
                        creditor of interest charges, late fees, and 
                        other penalty fees; and
                    ``(E) any savings the consumer realizes from use of 
                a debt settlement service may be taxable income.
    ``(c) Determination of Benefit to Consumers Required.--A debt 
settlement provider may not enter into a written contract with a 
consumer unless the debt settlement provider makes written 
determinations, supported by the financial analysis, that--
            ``(1) the consumer can reasonably meet the requirements of 
        the proposed debt settlement program included in the debt 
        settlement service offered to the consumer, including the fees 
        and the periodic savings amounts set forth in the savings goals 
        under the program;
            ``(2) there is a net tangible financial benefit to the 
        consumer of entering into the proposed debt settlement program; 
        and
            ``(3) the debt settlement program is suitable for the 
        consumer at the time the contract is to be signed.
    ``(d) Choice of Language.--If a debt settlement provider 
communicates with a consumer primarily in a language other than 
English, the debt settlement provider shall furnish to the consumer a 
translation of the disclosures and documents required by this title in 
that other language.
    ``(e) Monthly Statements Required.--A debt settlement provider 
shall, not less frequently than monthly, provide each consumer with 
which it has a contract for the provision of debt settlement service a 
statement of account balances, fees paid, settlements completed, 
remaining debts, and any other term considered appropriate by the 
Commission.

``SEC. 1003. PROHIBITED ACTS.

    ``(a) Loans.--A debt settlement provider may not make loans or 
offer credit or solicit or accept any note, mortgage, or negotiable 
instrument other than a check signed by the consumer and dated no later 
than the date of signature.
    ``(b) Confession of Judgment.--A debt settlement provider may not 
take any confession of judgment or power of attorney to confess 
judgment against the consumer or appear as the consumer or on behalf of 
the consumer in any judicial or non-judicial proceedings.
    ``(c) Release or Waiver of Obligation.--A debt settlement provider 
may not take any release or waiver of any obligation to be performed on 
the part of the debt settlement provider or any right of the consumer.
    ``(d) Receipt of Third-Party Compensation.--A debt settlement 
provider may not receive any cash, fee, gift, bonus, premium, reward, 
or other compensation from any person other than the consumer 
explicitly for the provision of debt settlement service to that 
consumer, without prior disclosure of such to the consumer.
    ``(e) Confidentiality.--A debt settlement provider may not (without 
prior written consent of the consumer) disclose to anyone the name or 
any personal information of a consumer for whom the debt settlement 
provider has provided or is providing debt settlement service other 
than to a consumer's own creditors or the debt settlement provider's 
agents, affiliates, or contractors for the purpose of providing debt or 
settlement service.
    ``(f) Misrepresentation, Omission, and False Promises.--A debt 
settlement provider may not misrepresent, directly or by implication, 
any material fact, make a material omission, or make a false promise 
directed to one or more consumers in connection with the solicitation, 
offering, contracting or provision of debt settlement service, 
including the following:
            ``(1) The total costs to purchase, receive, or use the 
        services, or the nature of the services to be provided.
            ``(2) Any material restriction, limitation, or condition to 
        receive the offered debt settlement service.
            ``(3) Any material aspect of the performance, efficacy, 
        nature, or central characteristics of the offered debt 
        settlement service.
            ``(4) Any material aspect of the nature of terms of the 
        seller's cancellation policies.
            ``(5) Any claim of affiliation with, or endorsement or 
        sponsorship by, any person or government entity.
            ``(6) Any material aspect of any debt settlement service, 
        including the following:
                    ``(A) The amount of time necessary to achieve 
                settlement of all debt.
                    ``(B) The amount of money or the percentage of the 
                debt amount that the consumer must accumulate before 
                the provider will initiate attempts with the consumer's 
                creditors or debt collectors to settle the debt.
                    ``(C) The effect of the service on a consumer's 
                creditworthiness.
                    ``(D) Whether the provider is a nonprofit or a for-
                profit entity.
    ``(g) Purchasing of Debts.--A debt settlement provider may not 
purchase debts or engage in the practice or business of debt 
collection.
    ``(h) Secured Debt.--A debt settlement provider may not include in 
a debt settlement agreement any secured debt.
    ``(i) Unfair or Deceptive Acts or Practices.--A debt settlement 
provider may not employ any unfair, unconscionable, or deceptive act or 
practice, including the knowing omission of any material information.
    ``(j) Limitation on Communication.--A debt settlement provider may 
not--
            ``(1) obtain a power of attorney or other authorization 
        from a consumer that prohibits or limits the consumer or any 
        creditor from communication directly with one another; or
            ``(2) represent, expressly or by implication, that a 
        consumer cannot or should not contact or communicate with any 
        creditor.

``SEC. 1004. FEES.

    ``(a) Types of Fees Permitted.--The types of fees that a debt 
settlement provider may charge a consumer are the following:
            ``(1) Enrollment fees.
            ``(2) Settlement fees.
    ``(b) Types of Fees Prohibited.--All fee types not included under 
subsection (a) are prohibited, including maintenance fees.
    ``(c) Enrollment Fee Amounts.--The amount of an enrollment fee 
charged by a debt settlement provider shall not exceed the lesser of--
            ``(1) the amount that is reasonable and commensurate to the 
        debt settlement service provided to a consumer; and
            ``(2) $50.
    ``(d) Debt Settlement Fee Amounts.--The amount of a settlement fee 
charged by a debt settlement provider shall not exceed the lesser of--
            ``(1) the amount that is reasonable and commensurate to the 
        debt settlement service provided to a consumer; and
            ``(2) the amount that is 5 percent of the difference 
        between--
                    ``(A) the principal amount of that debt; and
                    ``(B) the amount--
                            ``(i) paid by the debt settlement provider 
                        to the creditor pursuant to a settlement 
                        negotiated by the debt settlement provider on 
                        behalf of the consumer as full and complete 
                        satisfaction of the creditor's claim with 
                        regard to that debt; or
                            ``(ii) negotiated by the debt settlement 
                        provider and paid by the consumer to the 
                        creditor pursuant to a settlement negotiated by 
                        the debt settlement provider on behalf of the 
                        consumer as full and complete satisfaction of 
                        the creditor's claim with regard to that debt.
    ``(e) Timing of Debt Settlement Fees.--A debt settlement provider 
shall not collect any debt settlement fee from a consumer until--
            ``(1) a creditor enters into a legally enforceable 
        agreement with the consumer to accept funds in a specific 
        dollar amount as full and complete satisfaction of the 
        creditor's claim with regard to that debt; and
            ``(2) those funds are provided--
                    ``(A) by the debt settlement provider on behalf of 
                the consumer; or
                    ``(B) directly by the consumer to the creditor 
                pursuant to a settlement negotiated by the debt 
                settlement provider.

``SEC. 1005. CONSUMER SETTLEMENT ACCOUNTS.

    ``(a) Trust Account Required.--A debt settlement provider who 
receives funds from a consumer shall hold all funds received for a 
consumer settlement account in a properly designated trust account in a 
federally insured depository institution. Such funds shall remain the 
property of the consumer until the debt settlement provider disburses 
the funds to a creditor on behalf of the consumer as full or partial 
satisfaction of the consumer's debt to the creditor or the creditor's 
claim against the consumer.
    ``(b) Independent Administration of Account.--A debt settlement 
provider may not hold funds received for a consumer settlement account 
under subsection (a) in an account administered by an entity that--
            ``(1) is owned by, controlled by, or in any way affiliated 
        with the debt settlement service provider; or
            ``(2) gives or accepts any money or other compensation in 
        exchange for referrals of business involving the debt 
        settlement service provider.
    ``(c) Limitations.--A debt settlement service provider shall not--
            ``(1) be named on a consumer's bank account;
            ``(2) take a power of attorney in a consumer's bank 
        account;
            ``(3) create a demand draft on a consumer's bank account;
            ``(4) exercise any control over any bank account held by or 
        on behalf of the consumer; or
            ``(5) obtain any information about a consumer's bank 
        account from any person other than the consumer.

``SEC. 1006. CANCELLATION OF CONTRACT.

    ``(a) In General.--A consumer may cancel a contract with a debt 
settlement provider at any time.
    ``(b) Refunds.--
            ``(1) Cancellation within 90 days or upon violation of this 
        title.--If a consumer cancels a contract with a debt settlement 
        provider not later than 90 days after the date of the execution 
        of the contract or at any time upon a violation of a provision 
        of this title by the debt settlement provider, the debt 
        settlement provider shall refund to the consumer all--
                    ``(A) fees paid to the debt settlement provider by 
                the consumer, with the exception of any earned 
                settlement fee; and
                    ``(B) funds paid by the consumer to the debt 
                settlement provider that--
                            ``(i) have accumulated in a consumer 
                        settlement account; and
                            ``(ii) the debt settlement provider has not 
                        disbursed to creditors.
            ``(2) Cancellations after 90 days.--If a consumer cancels a 
        contract with a debt settlement provider later than 90 days 
        after the date of the execution of the contract and for any 
        reason other than for a violation of a provision of this title 
        by the debt settlement provider, the debt settlement provider 
        shall refund to the consumer--
                    ``(A) half of all of the fees collected from the 
                consumer, with the exception of any earned settlement 
                fees; and
                    ``(B) all funds paid by the consumer to the debt 
                settlement provider that have accumulated in a consumer 
                settlement account and which the debt service provider 
                has not disbursed to creditors.
            ``(3) Timing of refunds.--A debt settlement provider shall 
        make any refund required under this subsection not later than 5 
        business days after a notice of cancellation is made on behalf 
        of the consumer under subsection (d).
            ``(4) Statement of account.--A debt settlement provider 
        making a refund to a consumer under this subsection shall 
        include with such refund a full statement of account showing 
        the following:
                    ``(A) The fees received by the debt settlement 
                provider from the consumer.
                    ``(B) The fees refunded to the consumer by the debt 
                settlement provider.
                    ``(C) The savings of the consumer held by the debt 
                settlement provider.
                    ``(D) The payments made by the debt settlement 
                provider to creditors on behalf of the consumer.
                    ``(E) The settlement fees earned, if any, by the 
                debt settlement provider by settling debt on behalf of 
                the consumer.
                    ``(F) The savings of the consumer refunded to the 
                consumer by the debt settlement provider.
    ``(c) Revocation of Powers of Attorney and Direct Debit 
Authorizations.--Upon cancellation of a contract by a consumer--
            ``(1) all powers of attorney and direct debit 
        authorizations granted to the debt settlement provider by the 
        consumer are revoked and voided; and
            ``(2) the debt settlement provider shall immediately take 
        any action necessary to reflect cancellation of the contract, 
        including notifying the recipient of any direct debit 
        authorization.
    ``(d) Notice of Cancellation to Creditors.--Upon the cancellation 
of a contract under this section of the Act, the debt settlement 
provider shall provide timely notice of the cancellation of such 
contract to each of the creditors with whom the debt settlement 
provider has had any prior communication on behalf of the consumer in 
connection with the provision of any debt settlement service.

``SEC. 1007. OBLIGATION OF GOOD FAITH.

    ``A debt settlement provider shall act in good faith in all matters 
under this title.

``SEC. 1008. INVALIDATION OF CONTRACTS.

    ``(a) Consumer Waivers Invalid.--A waiver by a consumer of any 
protection provided or any right of the consumer under this title--
            ``(1) is void; and
            ``(2) may not be enforced by 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 or protection of the consumer or any obligation or requirement of 
the debt settlement provider under this title shall be considered a 
violation of a provision of this title.
    ``(c) Contracts Not in Compliance.--Any contract for a debt 
settlement service that does not comply with the provisions of this 
title--
            ``(1) shall be treated as void;
            ``(2) may not be enforced by any other person; and
            ``(3) upon notice of a void contract, a refund by the debt 
        settlement provider to the consumer shall be made as if the 
        contract had been cancelled as provided in section 1006(b)(1) 
        of this title.

``SEC. 1009. ADVERTISING, MARKETING, AND COMMUNICATION PRACTICES.

    ``A debt settlement provider shall not state or imply claims, 
results, or outcomes in any advertising, marketing, or other 
communication with consumers that represent or reflect results or 
outcomes, including about the percentage or dollar amount by which debt 
may be reduced or the amount a consumer may save or the historical 
experience of its customers with respect to debt reduction, that--
            ``(1) are materially different from the actual average 
        result or outcome achieved by that debt settlement provider on 
        all of the debt of consumers who enter the program; or
            ``(2) are not verified by an independent audit that 
        documents that the described result or outcome was achieved for 
        all debt enrolled in the program by at least 80 percent of the 
        customers who began the service in the most recent 2 calendar 
        year period.

``SEC. 1010. RULEMAKING BY FEDERAL TRADE COMMISSION.

    ``(a) In General.--The Commission may prescribe rules with respect 
to advertising and marketing practices, record retention, provision of 
accountings to consumers, and such other matters as the Commission 
considers necessary to improve the consumer experience with debt 
settlement providers.
    ``(b) Debt Relief Service Rules.--
            ``(1) In general.--Except as provided in paragraph (2), the 
        Commission may prescribe rules with respect to the providers of 
        debt relief service not otherwise covered by this title.
            ``(2) Exception.--Any rule prescribed under paragraph (1) 
        shall not be applicable to or otherwise include services 
        provided by those persons or entities identified in section 
        1001(6)(B) or section 1001(7)(B).
            ``(3) Debt relief service defined.--In this subsection, the 
        term `debt relief service' means any service represented, 
        directly or by implication, to renegotiate, or in any way alter 
        the terms of payment or other terms of the debt between a 
        consumer and one or more unsecured creditors or debt 
        collectors, including a reduction in the balance, interest 
        rate, or fees owed by a consumer to an unsecured creditor or 
        debt collector.
    ``(c) Procedure.--All rulemaking under this title shall be 
conducted in accordance with section 553 of title 5, United States 
Code, and shall not be subject to other procedures set forth in section 
18 of the Federal Trade Commission Act (15 U.S.C. 57a).

``SEC. 1011. CIVIL LIABILITY.

    ``(a) Liability Established.--Any debt settlement provider who 
fails to comply with any provision of this title with respect to any 
consumer shall be liable to such consumer in an amount equal to the sum 
of the amounts determined under each of the following:
            ``(1) Actual damages.--The greater of--
                    ``(A) the amount of any actual damage sustained by 
                such consumer as a result of such failure; or
                    ``(B) any amount paid by the consumer to the debt 
                settlement provider.
            ``(2) Statutory damages.--An amount determined by the court 
        of not less than $1,000 nor more than $5,000 per violation.
            ``(3) Punitive 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.
            ``(4) Attorneys' fees.--In the case of any successful 
        action to enforce any liability under paragraph (1), (2), or 
        (3), the costs of the action, together with reasonable 
        attorneys' fees.
    ``(b) Factors To Be Considered in Awarding Punitive Damages.--In 
determining the amount of any liability of any debt settlement provider 
under subsection (a)(2), the court shall consider, among other relevant 
factors--
            ``(1) the frequency and persistence of noncompliance by the 
        debt settlement provider;
            ``(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. 1012. ENFORCEMENT BY FEDERAL TRADE COMMISSION.

    ``(a) In General.--The Commission shall enforce the provisions of 
this title in the same manner, by the same means, and with the same 
jurisdiction, powers, and duties as though all applicable terms and 
provisions of the Federal Trade Commission Act (15 U.S.C. 41 et seq.) 
were incorporated into and made part of this title.
    ``(b) Unfair or Deceptive Acts or Practices.--A failure to comply 
with a provision of this title or a violation of a rule prescribed 
under section 1010 shall be treated as a violation of a rule defining 
an unfair or deceptive act or practice prescribed under section 
18(a)(1)(B) of the Federal Trade Commission Act (15 U.S.C. 
57a(a)(1)(B)).

``SEC. 1013. ACTION BY STATES.

    ``(a) In General.--In any case in which the attorney general of a 
State has reason to believe that an interest of the residents of the 
State has been or is threatened or adversely affected by the engagement 
of any person subject to a provision of this title or a rule prescribed 
under section 1010 in a practice that violates such provision or rule, 
the State may, as parens patriae, bring a civil action on behalf of the 
residents of the State in an appropriate district court of the United 
States or other court of competent jurisdiction--
            ``(1) to enjoin that practice;
            ``(2) to enforce compliance with the provision or rule; or
            ``(3) to obtain damages under section 1011 on behalf of 
        residents of the State.
    ``(b) Attorneys' Fees.--In the case of any successful action under 
paragraph (1), (2), or (3) of subsection (a), the attorney general of 
the State bringing the action shall be awarded the costs of the action 
and reasonable attorneys' fees as determined by the court.
    ``(c) Rights of Federal Trade Commission.--
            ``(1) Notice to federal trade commission.--
                    ``(A) In general.--Except as provided in 
                subparagraph (C), the attorney general of a State shall 
                notify the Federal Trade Commission in writing of any 
                civil action under subsection (a), prior to initiating 
                such civil action.
                    ``(B) Contents.--The notice required by 
                subparagraph (A) shall include a copy of the complaint 
                to be filed to initiate such civil action.
                    ``(C) Exception.--If it is not feasible for the 
                attorney general of a State to provide the notice 
                required by subparagraph (A), the State shall provide 
                notice immediately upon instituting a civil action 
                under subsection (a).
            ``(2) Intervention by federal trade commission.--Upon 
        receiving notice required by paragraph (1) with respect to a 
        civil action, the Commission may--
                    ``(A) intervene in such action; and
                    ``(B) upon intervening--
                            ``(i) be heard on all matters arising in 
                        such civil action;
                            ``(ii) remove the action to the appropriate 
                        district court of the United States; and
                            ``(iii) file petitions for appeal of a 
                        decision in such action.
    ``(d) Investigatory Powers.--Nothing in this section may be 
construed to prevent the attorney general of a State from exercising 
the powers conferred on such attorney general 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.
    ``(e) Effect of Action by Federal Trade Commission.--If the Federal 
Trade Commission institutes a civil action or an administrative action 
to enforce a violation of a provision of this title or a rule 
prescribed under section 1010, no State may, during the pendency of 
such action, bring a civil action under subsection (a) against any 
defendant named in the complaint of the Commission for violation of a 
provision of this title or rule prescribed under section 1010 that is 
alleged in such complaint.
    ``(f) Actions by Other State Officials.--
            ``(1) In general.--In addition to actions brought by an 
        attorney general of a State under subsection (a), an action may 
        be brought by officials in a State who are so authorized.
            ``(2) Savings provision.--Nothing contained in this section 
        may be construed to prohibit an authorized official of a State 
        from proceeding in a court of such State on the basis of an 
        alleged violation of any civil or criminal statute of such 
        State.

``SEC. 1014. STATUTE OF LIMITATIONS.

    ``Any action to enforce any liability under section 1011 may be 
brought before the later of--
            ``(1) the end of the 5-year period beginning on the date of 
        the occurrence of the violation involved; or
            ``(2) in any case in which any debt settlement provider has 
        materially and willfully misrepresented any information that 
        the debt settlement provider is required, by any provision of 
        this title, to disclose to any consumer and that is material to 
        the establishment of the debt settlement provider's liability 
        to the consumer under this title, the end of the 5-year period 
        beginning on the date of the discovery by the consumer of the 
        violation.

``SEC. 1015. RELATION TO STATE LAW.

    ``This title shall not annul, alter, affect, or exempt any person 
subject to the provisions of this title from complying with the law of 
any State except to the extent that such law is inconsistent with any 
provision of this title, and then only to the extent of the 
inconsistency. For purposes of this section, a State statute, 
regulation, order, or interpretation is not inconsistent with the 
provisions of this title if the protection such statute, regulation, 
order, or interpretation affords any person is greater than the 
protection provided under this title and any subsequent amendments. 
Nothing in this title shall limit or prohibit a State from prohibiting 
or otherwise restricting the provision of debt settlement services, or 
imposing and administering a system of additional requirements, 
prohibitions, registration, or licensure.''.
    (b) Initial Regulations.--
            (1) In general.--Not later than 60 days after the date of 
        the enactment of this Act, the Federal Trade Commission shall 
        commence a rulemaking to prescribe the following:
                    (A) The form of the written notices required under 
                subparagraphs (M) and (N) of subsection (a)(2) and 
                subsection (b)(5) of section 1002 of the Consumer 
                Credit Protection Act, as added by subsection (a) of 
                this section.
                    (B) The form of the statement required under 
                subsection (e) of such section 1002.
            (2) Deadline.--The Federal Trade Commission shall complete 
        the rulemaking required by paragraph (1) not later than 1 year 
        after the date of the enactment of this Act.
            (3) Procedure.--All rulemaking under paragraph (1) shall be 
        conducted in accordance with section 553 of title 5, United 
        States Code, and shall not be subject to other procedures set 
        forth in section 18 of the Federal Trade Commission Act (15 
        U.S.C. 57a).
    (c) Effective Date.--Title X of the Consumer Credit Protection Act, 
as added by subsection (a) of this section, shall take effect on the 
date that is 60 days after the date of the enactment of this Act.
                                 <all>