DEPARTMENT OF BANKING AND INSURANCE
DIVISION OF BANKING
Debt Adjustment and Credit Counseling
Proposed Readoption with Amendments: N.J.A.C. 3:25
Authorized By: Holly C. Bakke, Commissioner, Department of Banking and Insurance
Authority: N.J.S.A. 17:1-15e and 17:16G-4, 5 and 6
Calendar Reference: See Summary below for explanation of exception to calendar requirement.
Proposal Number: PRN 2002-276
Submit comments by October 4, 2002 to:
Karen Garfing, Assistant Commissioner
Office of Legislative and Regulatory Affairs
New Jersey Department of Banking and Insurance
20 West Street
P.O. Box 325
Trenton, NJ 08625-0325
Fax: (609) 292-0896
The agency proposal follows:
The Department of Banking and Insurance ("Department") proposes to readopt N.J.A.C. 3:25, which was scheduled to expire on July 23, 2002. Pursuant to N.J.S.A. 14B:5.1c, the submission of this notice of proposal to the Office of Administrative Law extended that expiration date 180 days, to January 19, 2003. The Department has reviewed these rules and has determined that they continue to be necessary, reasonable and proper for the purpose for which they were originally promulgated, as required by Executive Order No. 66 (1978), and is therefore proposing to readopt the rules with the amendments noted below.
N.J.S.A. 17:16G-1 et seq. regulates debt adjustment and credit counseling services that are provided to consumers. N.J.S.A. 17:16G-2 restricts licenses for debt adjustment and credit counseling to non-profit social service agencies. In this period of increasing consumer debt, these licensees provide an important service to persons who are in debt as well as providing, in many cases, the only means by which creditors may realize some portion of the money owed them.
The definition of "credit counseling" is being amended in N.J.A.C. 3:25-1.1, Definitions, to include any guidance or educational program or advice offered by a non-profit social service agency or non-profit consumer credit counseling agency regarding the use of credit or debt management. Also, the definition of "debtor" is being amended to include a person or two or more persons who are jointly and severally indebted.
N.J.A.C. 3.25-1.2 sets forth fees charged by licensees. The Department proposes an amendment that provides that licensee fees for credit counseling shall not exceed $60.00 in any one month.
The Department proposes to amend the annual audit requirement in N.J.A.C. 3:25-2.6 so that a licensee shall be responsible for submitting or verifying the submission of the audit report to the Commissioner within 30 days of issuance.
The Department proposes to add a provision to subchapter 2, which deals with licensing requirements. The new subsection (d) to N.J.A.C. 3:25-2.2 provides that a person who provides debt adjusting and counseling services to a New Jersey resident shall be licensed by the Department as a debt adjuster and credit counselor irrespective of whether the person providing such debt adjustment and credit counseling service is located in this State.
The Department also proposes to add a provision to subchapter 3. This subchapter provides for civil penalties, injunctions and other relief for violation of the provisions of the Act. The Department proposes an amendment to N.J.A.C. 3:25-3.1 by adding subsection (c), which provides that any person who knowingly and willfully engages in the business of debt adjustment and credit counseling without a license shall be guilty of a crime of the fourth degree pursuant to N.J.S.A. 2C:21-19f.
The rules proposed for readoption with amendments have a beneficial social impact. They make it possible for individuals who have incurred a large amount of consumer debt to receive assistance with their problems from entities that have demonstrated to the Commissioner that they are qualified to provide such services. Also beneficial to the society is the newly created criminal penalties for engaging in debt adjustment and credit counseling without a license. This will ensure that only properly licensed entities are engaged in credit counseling and debt adjustment.
The rules proposed for readoption with amendments have an economic impact on licensees who are required to pay license fees as well as be bonded and be subject to annual financial examinations. These charges are necessary to reimburse the Department for administrative costs to process and issue licenses. The bonding and financial examinations ensure that the licensees have the financial resources to provide debt adjustment and credit counseling services. No changes in the license fees or bond amounts are being proposed. Licensees can charge fees for their services with the maximum amount of fees capped by statute. No increase in the fees charged to consumers is being proposed.
Federal Standards Statement
A Federal standards analysis is not required because the rules proposed for readoption with amendments are not subject to any Federal requirements or standards.
The Department does not anticipate that any jobs will be lost or generated as a result of the rules proposed for readoption with amendments.
The Department invites commenters to submit any data or studies concerning the jobs impact of the proposed readoption with amendments together with their written comments on other aspects of this proposal.
Agriculture Industry Impact
The Department does not expect any agriculture industry impact from the rules proposed for readoption with amendments.
Regulatory Flexibility Analysis
The rules proposed for readoption with amendments impose reporting, recordkeeping and other compliance requirements on "small business." The Regulatory Flexibility Act, N.J.S.A. 52:14B-1 et seq., defines a "small business" as any business resident in this State that employs fewer than 100 employees, is independently owned and operated and is not dominant in its field. Many of the entities affected by the proposed readoption are small businesses. The Department believes that the reporting, recordkeeping and compliance requiremennts in the rules proposed for readoption as described in the Summary above are necessary for the Commissioner to determine that licensees are qualified and possess the necessary financial resources to sustain its operation. Compliance costs are discussed in the Economic Impact statement above. Because of the potential for entities offering credit counseling or debt adjustment services to take advantage of consumers, no differing requirements based on business size can be made.
Smart Growth Impact
The rules proposed for readoption with amendments will have no impact on the achievement of growth and implementation of the State Development and Redevelopment Plan
Full text of the proposed readoption may be found in the New Jersey Administrative Code at N.J.A.C. 3:23.
Full text of the proposed amendments follows (additions indicated in boldface thus; deletions indicated in brackets [thus]).
SUBCHAPTER 1. DEBT ADJUSTMENT AND CREDIT COUNSELING FEES
The following words and terms, when used in this chapter, shall have the following meanings unless the context clearly indicates otherwise.
. . .
"Credit counseling" means any guidance or educational program or advice offered by a non profit social service agency or nonprofit consumer credit counseling agency [for the purpose of fostering the responsible] regarding the use of credit [and]or debt management.
. . .
"Debtor" means [an individual debtor] a person or two or more [individuals] persons who are jointly and severally indebted.
3:25-1.2 Fees charged by licensees
(a) A licensee may charge a fee to cover the cost of providing debt adjustment and credit counseling.
1. (No change.)
2. The [maximum] fee that [a client] the licensee may [be charged] charge a client for credit counseling services [is] shall not exceed $60.00 in any one month.
SUBCHAPTER 2. LICENSING REQUIREMENTS
3:25-2.2 Application for license
(a) - (c) (No change.)
(d) A person who provides debt adjusting and credit counseling services to a New Jersey resident shall be licensed by the Department as a debt adjuster and credit counselor, irrespective of whether the person providing such debt adjustment and credit counseling service is located in this State.
3:25-2.6 Annual audit requirement
Each licensee shall have its financial records relating to debt adjustment audited annually by a certified public accountant or a public accountant. The auditor shall certify that the salaries and expenses paid by the licensee are reasonable compared to those incurred by comparable organizations providing similar services. The [audit report shall be submitted] licensee shall be responsible for submitting or verifying the submission of the audit report to the Commissioner within 30 days if its issuance.
SUBCHAPTER 3. [ADMINISTRATIVE] PENALTIES AND EXAMINATION
3.25-3.1 [Administrative penalties] Penalties
(a) - (b) (No change.)
(c) Any person who knowingly and willfully engages in the business of debt adjustment and credit counseling without a license shall be guilty of a crime of the fourth degree pursuant to N.J.S.A. 2C:21-19f.