Virginia Code 6.2-2040: Licensees providing debt settlement services; prohibited and required business methods
Each licensee engaged in the business of providing or offering to provide debt settlement services to any consumer shall comply with the following requirements:
Terms Used In Virginia Code 6.2-2040
- Consumer: means an individual residing in the Commonwealth who owes money to one or more creditors, for personal, family, or household purposes, including an individual who owes money jointly with one or more other individuals. See Virginia Code 6.2-2026
- Creditor: includes persons that extend credit to, or persons that service loans made to, consumers. See Virginia Code 6.2-2026
- Debt settlement services: means any action or negotiation initiated or taken on behalf of any consumer with any creditor of the consumer for the purpose of obtaining debt forgiveness of all or a portion of the credit extended by the creditor to the consumer or a reduction of payments, charges, or fees payable by the consumer. See Virginia Code 6.2-2026
- Duplicate original: means an exact copy with signatures created by the same impression as the original, an exact copy bearing an original signature, or, in the case of an electronic transaction, an electronic version with electronic signatures. See Virginia Code 6.2-2026
- Electronic signature: means an electronic signature as defined in § 59. See Virginia Code 6.2-2026
- Entity: means any corporation, partnership, association, cooperative, limited liability company, trust, joint venture, government, political subdivision, or other legal or commercial entity. See Virginia Code 6.2-100
- Financial institution: means any bank, trust company, savings institution, industrial loan association, consumer finance company, or credit union. See Virginia Code 6.2-100
- Gift: A voluntary transfer or conveyance of property without consideration, or for less than full and adequate consideration based on fair market value.
- in writing: include any representation of words, letters, symbols, numbers, or figures, whether (i) printed or inscribed on a tangible medium or (ii) stored in an electronic or other medium and retrievable in a perceivable form and whether an electronic signature authorized by Chapter 42. See Virginia Code 1-257
- Licensee: means a person licensed under this chapter. See Virginia Code 6.2-2026
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- Person: means any individual, corporation, partnership, association, cooperative, limited liability company, trust, joint venture, government, political subdivision, or other legal or commercial entity. See Virginia Code 6.2-100
- Power of attorney: A written instrument which authorizes one person to act as another's agent or attorney. The power of attorney may be for a definite, specific act, or it may be general in nature. The terms of the written power of attorney may specify when it will expire. If not, the power of attorney usually expires when the person granting it dies. Source: OCC
- Settlement: Parties to a lawsuit resolve their difference without having a trial. Settlements often involve the payment of compensation by one party in satisfaction of the other party's claims.
- State: when applied to a part of the United States, includes any of the 50 states, the District of Columbia, the Commonwealth of Puerto Rico, Guam, the Northern Mariana Islands, and the United States Virgin Islands. See Virginia Code 1-245
1. Each debt settlement services agreement shall be evidenced by a written agreement, which shall be maintained in either a hard copy, including a faxed copy, or electronic version and which shall be signed by the consumer and a person authorized by the licensee to sign such agreements and dated the same day the debt settlement services agreement is executed by the consumer. The agreement may be signed by the parties either originally or by electronic signature. The agreement shall set forth, at a minimum, (i) the name and address of both the consumer and the licensee; (ii) a full description of all services to be performed for the consumer by the licensee; (iii) a clear explanation, highlighted in bold type, of the costs to the consumer; (iv) a statement that the debt settlement services agreement may be terminated for any reason by the consumer and that the consumer has no obligation to continue the arrangement unless satisfied with the services provided; (v) an explanation of the method of dispute resolution under the agreement; (vi) an explanation of the obligations of the consumer and the licensee that are subject to the agreement; and (vii) notification of privacy policies in compliance with state and federal laws and regulations.
2. A licensee shall give to the consumer a duplicate original of the agreement executed by the consumer and licensee upon full execution.
3. A licensee shall not request or receive payment or other compensation for any debt settlement services until and unless:
a. The licensee has negotiated, settled, reduced, or otherwise altered the terms of at least one debt pursuant to a debt settlement services agreement it executed with a consumer; and
b. The consumer has made at least one payment to a creditor following the licensee’s negotiation, settlement, reduction, or other alteration of at least one debt owned by the consumer to that creditor.
4. Prior to the execution of a debt settlement services agreement with a consumer, a licensee shall disclose to the consumer in writing, and retain a copy of, the following:
a. The amount of time necessary to achieve the represented results and, to the extent that the services may include a settlement offer to any of the customer’s creditors or debt collectors, the time by which the licensee will make a bona fide settlement offer to each of them;
b. To the extent that the services may include a settlement offer to any of the customer’s creditors or debt collectors, the amount of money or the percentage of each outstanding debt that the customer must accumulate before the licensee will make a bona fide settlement offer to each of them; and
c. To the extent that any aspect of the debt settlement services relies upon or results in the consumer’s failure to make timely payments to creditors or debt collectors, that the use of the debt settlement services will likely adversely affect the consumer’s creditworthiness, may result in the consumer being subject to collections or sued by creditors or debt collectors, and may increase the amount of money the consumer owes due to the accrual of fees and interest.
5. A licensee shall not require a consumer to execute a power of attorney, as defined in § 64.2-1600, as a condition of receiving debt settlement services.
6. A licensee shall not require a consumer to open an account, as defined in § 6.2-604, as a condition of receiving debt settlement services. A licensee may request that a consumer open an account in connection with its provision of debt settlement services, provided that:
a. The consumer’s funds are held in an account at an FDIC-insured financial institution;
b. The consumer owns the funds held in the account and is paid accrued interest on the account, if any;
c. The entity administering the account is not owned or controlled by, or in any way affiliated with, the debt settlement services provider;
d. The entity administering the account does not give or accept any money or other compensation in exchange for referrals of business involving the debt settlement services provider; and
e. The consumer may withdraw from the debt settlement services at any time without penalty and must receive all funds in the account, other than the fee earned by the debt settlement services provider for completed services, if any, subject to the limitations imposed in § 6.2-2041.
7. A licensee shall not receive a gift or bonus, premium, reward, or other compensation, directly or indirectly, for advising, arranging, or assisting an individual in connection with obtaining an extension of credit or other service from a creditor, except for educational or counseling services required in connection with a government-sponsored program.
2020, c. 785.