State Regulation:
Mississippi
Note: This is another recent addition, enacted in 2003 and
revised in 2006. There appears to be a trend of states
enacting laws to address debt management companies and
including credit services/credit repair organizations under
the same regulatory structure, even though that industry is
already regulated at the federal level.
MS ST § 81-22-3
Chapter 22. Mississippi Debt Management Services Act
Title 81. Banks and Financial Institutions
Chapter 22. Mississippi Debt Management Services Act (Refs
& Annos)
§ 81-22-1. Short title
This chapter may be known and cited as the "Mississippi Debt
Management Services Act."
§ 81-22-3. Definitions
As used in this chapter, unless the context otherwise
indicates, the following terms have the following meanings:
(a) "Commissioner" means the Commissioner of Banking and
Consumer Finance of the State of Mississippi .
(b) "Debt management service" means:
(i) The receiving of money from a consumer for the purpose
of distributing one or more payments to or among one or more
creditors of the consumer in full or partial payment of the
consumer's obligation;
(ii) Arranging or assisting a consumer to arrange for the
distribution of one or more payments to or among one or more
creditors of the consumer in full or partial payment of the
consumer's obligation;
(iii) Exercising control, directly or indirectly, or
arranging for the exercise of control over funds of the
consumer for the purpose of distributing payments to or
among one or more creditors of the consumer;
(iv) Acting or offering to act as an intermediary between a
consumer and one or more creditors of the consumer for the
purpose of adjusting, compromising, negotiating, settling,
discharging or otherwise deferring, reducing or altering the
terms of payment of the consumer's obligation; or
(v) Improving or offering to improve a consumer's credit
record, history or rating.
(c) "Debt management service provider" means a person that
provides or offers to provide to a consumer in this state
any debt management services, in return for a fee or other
consideration. "Debt management service provider" does not
include:
(i) Those situations involving debt adjusting incurred
incidentally in the lawful practice of law in this state;
(ii) Title insurers who adjust debts out of escrow funds
only incidentally in the regular course of their principal
business;
(iii) Judicial officers or others acting under court
orders;
(iv) Those situations involving debt adjusting incurred
incidentally in connection with the lawful practice as a
certified public accountant;
(v) Bona fide trade or mercantile associations in the course
of arranging adjustment of debts with business
establishments;
(vi) Employers who adjust debts for their employees;
(vii) Any person who, at the request of a debtor, makes a
loan to the debtor, and who, at the authorization of the
debtor, acts as an adjuster of the debtor's debts solely in
the disbursement of the proceeds of the loan, without
compensation for the services rendered in adjusting the
debts; or
(viii) Any institution that is regulated, supervised or
licensed by the department or any out of state institution
that is insured by the Federal Deposit Insurance Corporation
or the National Credit Union Administration.
(d) "Department" means the Department of Banking and
Consumer Finance of the State of Mississippi .
(e) "Fair share contribution" means voluntary contributions
paid to the licensee by the creditor for collecting funds
from clients pursuant to debt management services.
(f) "Licensee" means a person or entity who is required to
be licensed as a debt management service provider.
(g) "Person" means an individual or an organization.
(h) "Records" or "documents" means any item in hard copy or
produced in a format of storage commonly described as
electronic, imaged, magnetic, microphotographic or
otherwise, and any reproduction so made shall have the same
force and effect as the original thereof and be admitted in
evidence equally with the original.
(i) "Third-party payment processor" means any entity that
holds, or has access to, or can effectuate possession of, by
any means, the monies of a licensee's debtors, or
distributes, or is in the chain or distribution of such
monies, to the creditors of such debtors, pursuant to an
agreement or contract with the licensee. This term shall not
include entities that solely provide the electronic routing
and settlement of financial transactions and their
sponsoring banks.
§ 81-22-5. Licensure and annual relicensure
(1) Licensure and relicensure. No person or entity may act
as a debt management service provider with respect to
consumers who are residents of this state without a license
issued under this chapter. The license application must be
in a form prescribed by the commissioner. The commissioner
may refuse the application if it contains erroneous or
incomplete information. A license may not be issued unless
the commissioner, upon investigation, finds that the
financial soundness and responsibility, insurance coverage,
consumer education programs and services component,
character and fitness of the applicant and, when applicable,
its partners, officers or directors, warrant belief that the
business will be operated honestly and fairly within the
purposes of this chapter. Each license shall remain in full
force and effect until relinquished, suspended, revoked or
expired. With each initial application for a license, the
applicant shall pay to the commissioner a license fee of
Seven Hundred Fifty Dollars ($750.00), and on or before
December 31 of each year thereafter, an annual renewal fee
of Four Hundred Seventy-five Dollars ($475.00). If the
annual renewal fee remains unpaid after December 31, the
license shall expire. If any person engages in business as
provided for in this chapter without paying the license fee
provided for in this subsection before beginning business or
before the expiration of the person's current license, as
the case may be, then the person shall be liable for the
full amount of the license fee, plus a penalty in an amount
not to exceed Twenty-five Dollars ($25.00) for each day that
the person has engaged in such business without a license or
after the expiration of a license. All licensing fees and
penalties shall be paid into the Consumer Finance Fund of
the department.
(2) Action on registration application. The commissioner
shall take action on an application within thirty (30) days
after the commissioner has accepted the application as
complete. Upon written request, the applicant is entitled to
a hearing on the question of the applicant's qualifications
for license if the commissioner has notified the applicant
in writing that the application has been denied or the
commissioner has not issued a license within thirty (30)
days after the application for the license was accepted as
complete by the commissioner. A request for a hearing may
not be made more than sixty (60) days after the application
was accepted as complete or the commissioner has mailed a
written notice to the applicant stating that the application
has been denied and stating the reasons for the denial of
the application.
§ 81-22-7. Bond required
To be eligible for a license, an applicant shall file with
the commissioner a bond with good security in the penal sum
of Fifty Thousand Dollars ($50,000.00), payable to the State
of Mississippi for the faithful performance by the licensee
of the duties and obligations pertaining to the business so
licensed and the prompt payment of any judgment that may be
recovered against the licensee on account of charges or
other claims arising directly or collectively from any
violation of the provisions of this chapter. The applicant
may file, in lieu of the bond, cash, a certificate of
deposit or government bonds in the amount of Fifty Thousand
Dollars ($50,000.00). Those deposits shall be filed with the
commissioner and are subject to the same terms and
conditions as are provided for in the surety bond required
in this paragraph. Any interest or earnings on those
deposits are payable to the depositor.
§ 81-22-9. Handling of consumer funds
(1) Funds deposited in escrow account. The debt management
service provider shall deposit, within two (2) business days
of receipt, all funds received from or on behalf of a
consumer for payment to a creditor or creditors in a
federally insured escrow account for the benefit of the
consumer in a supervised financial organization. Any escrow
account established to receive consumer funds is free from
trustee process and unavailable to creditors of the debt
management service provider.
(2) Requirements for handling of funds. The debt management
service provider shall:
(a) Maintain separate records of account for each consumer
receiving debt management services;
(b) Remit funds received from or on behalf of a consumer to
the consumer's creditor or creditors within fifteen (15)
business days of receipt of the funds; and
(c) Correct or remedy any misdirected payments resulting
from an error by the debt management service provider and
reimburse the consumer for any actual costs or fees imposed
by a creditor as a result of such misdirection.
(3) Commingling of funds. The debt management service
provider may not commingle escrow accounts established for
the benefit of consumers with any operating accounts of the
debt management service provider.
§ 81-22-11. Requirement for written agreement
(1) Written agreement. A debt management service provider
may not perform debt management services for a consumer
unless the consumer and the debt management service provider
first have executed a written agreement with regard to the
debt management services to be provided. A copy of the
completed agreement must be given to the consumer.
(2) Required provisions. Each agreement between a consumer
and a debt management service provider must be dated and
signed by the consumer and must include the following:
(a) The name and address of the consumer and the debt
management service provider;
(b) A full description of the services to be performed for
the consumer, any fees to be charged to the consumer for
those services and any contributions, fees or charges the
consumer has agreed to make or pay to the debt management
service provider;
(c) Disclosure of the existence of the surety bond on file
with the commissioner under Section 81-22-7 and a notice
that the consumer may contact the Department of Banking and
Consumer Finance at P.O. Box 23729, Jackson, MS 39225-3729
or 1-800-844-2499 with any questions or complaints regarding
the debt management service provider;
(d) The identification of the federally insured institution
where funds remitted by a consumer for payment to one or
more creditors will be held;
(e) The right of a party to cancel the agreement by
providing a written notice of cancellation to the other
party;
(f) A complete list of the consumer's obligations that are
subject to the agreement and the names and addresses of the
creditors holding those obligations;
(g) A full description and schedule of the periodic amounts
to be remitted to the debt management service provider for
payment to the consumer's creditor or creditors and the
amounts to be remitted to each creditor;
(h) A notice to the consumer that by executing the agreement
the consumer authorizes the federally insured institution to
disclose financial records relating to the escrow account in
which the consumer's funds are held under Section 81-22-9 to
the commissioner during the course of any examination of the
debt management service provider by the commissioner; and
(i) The following notice:
NOTICE TO CONSUMER: Do not sign this agreement before you
read it. You must be given a copy of this agreement.
§ 81-22-13. Fees charged to the consumer
A debt service management provider may only charge a
consumer the following fees for providing debt management
services:
(a) A maintenance fee not to exceed Thirty Dollars ($30.00)
per month after a consumer has received a free initial
counseling session;
(b) A one-time setup fee not to exceed Seventy-five Dollars
($75.00);
(c) A fee for obtaining the consumer's credit report not to
exceed Fifteen Dollars ($15.00) for an individual report or
Twenty-five Dollars ($25.00) for a joint report; and
(d) A fee not to exceed Fifty Dollars ($50.00) for
educational courses/products that will assist the consumer
in achieving financial stability. Products shall be
educational in nature and may include, but not be limited
to, the following topics: Home Buyer Education, Financial
Literacy Education, and Credit Report Review. However, the
consumer must be informed that those courses and products
are not a mandatory condition to receive debt management
services.
(e) A bankruptcy consultation fee, not to exceed Fifty
Dollars ($50.00) per consumer, may be charged by nonprofit
credit counseling agencies approved by the U.S. Trustees
pursuant to 11 USC Section 111.
§ 81-22-15. Reports and records
(1) Written reports to consumers. A debt management service
provider shall provide to each consumer receiving debt
management services periodic written reports accounting for
funds received from the consumer for payment to the
consumer's creditor or creditors whose obligations are
listed in the consumer's agreement with the debt management
service provider and disbursements made to each such
creditor on the consumer's behalf since the last report. The
debt management service provider shall provide those reports
to the consumer not less than once each calendar quarter.
(2) Maintenance of records. Any person required to be
licensed under this chapter shall maintain in its offices,
or such other location as the department permits, the books,
accounts and records necessary for the department to
determine whether or not the person is complying with the
provisions of this chapter and the rules and regulations
adopted by the department under this chapter. These books,
accounts and records shall be maintained apart and separate
from any other business in which the person is involved. A
debt management service provider shall maintain books and
records for each consumer for whom it provides debt
management services for six (6) years following the final
transaction with the consumer.
(3) Verification of Payments to Creditors. Licensees that
participate in fair share contributions with creditors shall
maintain records that reflect client accounts were credited
for the full amount of any payments due and not the net
amount as a result of a fair share contribution. Such
records may consist of either a copy of the client's
statement from the creditor or the licensee may send a
monthly or quarterly statement to clients that reflect
payments remitted to creditors.
(4) Within fifteen (15) days of the occurrence of any of the
following events, a licensee shall file a written report
with the commissioner describing the event and its expected
impact on the activities on the licensee's business in this
state:
(a) The filing for bankruptcy or reorganization by the
licensee;
(b) The institution of revocation or suspension proceedings
against the licensee by any state or governmental authority;
or
(c) Any felony indictment or conviction of the licensee or
any of its directors or principal officers.
§ 81-22-17. Powers and functions of commissioner
The commissioner may exercise the following powers and
functions:
(a) Complaint investigation. The commissioner may receive
and act on complaints, take action to obtain voluntary
compliance with this chapter or refer cases to the Attorney
General, who shall appear for and represent the commissioner
in court.
(b) Rules. The commissioner may adopt reasonable
administrative regulations, not inconsistent with law, for
the enforcement of this chapter.
(c) Examination of licensees. To assure compliance with the
provisions of this chapter, the department may examine the
books and records of any licensee without notice during
normal business hours. The commissioner shall charge the
licensee an examination fee in an amount not less than Three
Hundred Dollars ($300.00) nor more than Six Hundred Dollars
($600.00) for each office or location within the State of
Mississippi, plus any actual expenses incurred while
examining the licensee's records or books that are located
outside the State of Mississippi. However, in no event shall
a licensee be examined more than once in a two-year period
unless for cause shown based upon consumer complaint and/or
other exigent reasons as determined by the commissioner.
(d) Examination of nonlicensees. The department, its
designated officers and employees, or its duly authorized
representatives, for the purposes of discovering violations
of this chapter and for the purpose of determining whether
any person or individual reasonably suspected by the
commissioner of conducting business that requires a license
under this chapter, may investigate those persons and
individuals and examine all relevant books, records and
papers employed by those persons or individuals in the
transaction of business, and may summon witnesses and
examine them under oath concerning matters as to the
business of those persons, or other such matters as may be
relevant to the discovery of violations of this chapter,
including, without limitation, the conduct of business
without a license as required under this chapter.
§ 81-22-19. Prohibited acts
A debt management service provider may not:
(a) Purchase debt. Purchase any debt or obligation of a
consumer;
(b) Lend money. Lend money or provide credit to any
consumer;
(c) Mortgage interest. Obtain a mortgage or other security
interest in property of a consumer;
(d) Debt collector. Operate as a debt collector in this
state; or
(e) Negative amortization. Structure an agreement for the
consumer that, at the conclusion of the projected term for
the consumer's participation in the debt management service
agreement, would result in negative amortization of any of
the consumer's obligations to creditors.
§ 81-22-21. Advertising
(1) False advertising. A debt management service provider
may not engage in this state in false or misleading
advertising concerning the terms and conditions of any
services or assistance offered.
(2) Required words. A debt management service provider may
not advertise its services in Mississippi in any media
disseminated primarily in this state, whether print or
electronic, without the words "Licensed Debt Management
Service Provider."
(3) Dissemination; no liability. This section does not
impose liability on the owner or personnel of any medium in
which an advertisement appears or through which an
advertisement is disseminated.
§ 81-22-23. Effects of violations on rights of parties
(1) Violations; unfair, unconscionable or deceptive
practices. A debt management service provider that violates
any provision of this chapter or any rule adopted by the
commissioner, or that through any unfair, unconscionable or
deceptive practice causes actual damage to a consumer is
subject to enforcement action under subsection (2) of this
section.
(2) Enforcement actions. The following enforcement actions
may be taken by the commissioner or an aggrieved consumer
against a debt management service provider for violations of
any provision of this chapter or any rule adopted under this
chapter, or for unfair, unconscionable or deceptive
practices that cause actual damage to a consumer:
(a) When the commissioner has reasonable cause to believe
that a person is violating any provision of this chapter,
the commissioner, in addition to and without prejudice to
the authority provided elsewhere in this chapter, may enter
an order requiring the person to stop or to refrain from the
violation. The commissioner may sue in any chancery court of
the state having jurisdiction and venue to enjoin the person
from engaging in or continuing the violation or from doing
any act in furtherance of the violation. In such an action,
the court may enter an order or judgment awarding a
preliminary or permanent injunction;
(b) The commissioner may, after notice and hearing, impose a
civil penalty against any licensee if the licensee,
individual required to be registered, or employee is
adjudged by the commissioner to be in violation of the
provisions of this chapter. The civil penalty shall not
exceed Five Hundred Dollars ($500.00) per violation and
shall be deposited into the Consumer Finance Fund of the
department;
(c) The state may enforce its rights under the surety bond
as required in Section 81-22-7 as an available remedy for
the collection of any civil penalties, criminal fines or
costs of investigation and/or prosecution incurred;
(d) A civil action by an aggrieved consumer in which that
consumer has the right to recover actual damages from the
debt management service provider in an amount determined by
the court plus costs of the action together with reasonable
attorney's fees; or
(e) Revocation, suspension or nonrenewal of the debt
management service provider's license under Section
81-22-25.
§ 81-22-25. Suspension or revocation of registration
(1) Suspension or revocation. After notice and hearing, the
commissioner may suspend or revoke a debt management service
provider's license if the commissioner finds that one of the
conditions of subsection (2) of this section is met.
(2) Conditions for suspension or revocation. The following
conditions are grounds for suspension or revocation of a
registration:
(a) A fact or condition exists that, if it had existed at
the time when the licensee applied for a license, would have
been grounds for denying the application;
(b) The licensee knowingly violates a material provision of
this chapter or rule or order validly adopted by the
commissioner under authority of this chapter;
(c) The licensee is insolvent;
(d) The licensee refuses to permit the commissioner to make
an examination authorized by this chapter; or
(e) The licensee fails to respond within a reasonable time
and in an appropriate manner to communications from the
commissioner.
§ 81-22-27. Commissioner authorized to hire additional
full-time employees
The commissioner may employ the necessary full-time
employees above the number of permanent full-time employees
authorized for the department for the fiscal year 2003, to
carry out and enforce the provisions of this chapter. The
commissioner also may expend the necessary funds and equip
and provide necessary travel expenses for those employees.
§ 81-22-28. Third party payment processors; utilization;
regulation
(1) If a licensee seeks to utilize a third-party payment
processor, to hold, have access to, effectuate possession
of, by any means, or to distribute or be in the chain of
distribution of the monies of another licensee's consumers,
the licensee shall give the Department of Banking and
Consumer Finance ten (10) days' written notice.
(2) Such notice shall contain the name and address of the
third-party payment processor, a description of the
services, a copy of the agreement or contract between the
licensee and the third-party payment processor and the
highest daily amount of consumer funds to be held or
transmitted. The third-party payment processor shall submit
to the department, upon request, the highest daily amount
held or transmitted during the previous month.
(3) Each third-party payment processor shall file with the
commissioner a surety bond, issued by a bonding company or
insurance company authorized to do business in the State of
Mississippi, in the principal sum of Fifty Thousand Dollars
($50,000.00) and in an additional principal sum of Fifty
Thousand Dollars ($50,000.00) for each additional licensee
it contracts with, but in no event shall the bond be
required to be in excess of One Hundred Fifty Thousand
Dollars ($150,000.00). In lieu of the surety bond, a
third-party payment processor may file other assets such as
cash, a certificate of deposit or government bonds.
(4) A licensee shall not use a third-party payment processor
until the licensee receives written notice from the
department confirming that the department has received a
surety bond or other assets from the third-party payment
processor.
(5) Prior to performing any of its services, the third-party
payment processor shall provide written authorization for
the department to examine all books, records, documents and
materials, including those maintained in electronic form, as
they relate to the consumers' monies held by, or distributed
by the third-party payment processor to the creditors of the
consumers and shall have received written confirmation from
the department that the written authorization is sufficient.
The cost of the examination shall be paid by the licensee.
(6) All agreements or contracts between a licensee and a
third-party payment processor shall provide for a thirty-day
written notice of termination to the party against whom
termination is being sought. A licensee shall immediately
notify the department in writing of the notice of
termination.
(7) In the event a licensee elects to maintain cash, a
certificate of deposit or government bonds on deposit, and
utilizes the services of a third-party payment processor,
there is no requirement that the third-party payment
processor obtain a surety bond or maintain other assets on
deposit with the department.
§ 81-22-29. Repealed by Laws 2006, Ch. 398, § 18, eff. July
1, 2006
§ 81-22-31. Repeal of chapter
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