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					                         COM M ISSI ON ER OF FIN AN CI AL R EGULATI ON

                               ADVISORY NOTICE                                    03-0 1

                             DEBT MANAGEMENT APPLIC ANTS

                                                    July 24, 2003

            On May 22, 2003, Governor Robert L. Ehrlich, Jr. signed into law the Maryland Debt
            Management Services Act. Debt Management is a newly regulated area in Maryland for both
            the industry and the Commissioner of Financial Regulation. All prospective licensees are
            encouraged to review the law in its entirety. An unofficial copy of the law can be accessed in
            WORD format from our website. The actual Maryland Debt Management Services Act can be
            found in Financial Institutions Article §12-901 through 12-931 when it is published. The Debt
            Management Application can be found on our website: Hit the
            Licensing Button.

            The purpose of this memo is to outline the major provisions of the law and how the
            Commissioner will process applications. The application, instructions, criminal background
            check request forms and surety bond are all located on our website under Debt Management

            In order to assist us in getting the conditional Debt Management License to applicants on or after
            October 1, 2003, please mail the application to us as soon as possible once you have completed it.
            The Commissioner’s staff will begin reviewing applications as soon as they are received. Since it is
            our experience that certain requirements are time consuming, we encourage all applicants to
            immediately begin the preparation of the following items: the criminal background check, the surety
            bond, and the audited financial statements. The Criminal Justice Information Service will not
            process background checks until after the effective date of the law, October 1, 2003. Once we
            receive, review and approve the application, the Commissioner will issue conditional licenses on and
            after October 1, 2003. If the criminal background results come back to us unsatisfactory, we may
            revoke the conditional license. When we receive satisfactory criminal background results, the
            permanent license will be mailed to you.

            Licensing questions can be answered by Suzanne M. Elbon at (410) 230-6073, e- mail
   or Joseph E. Rooney at (410) 230-6107,

                                                                                                              Rev. 7-24-03

Robert L. Ehrlich, Jr.            Department of Labor, Licensing and Regulation            James D. Fielder, Jr., Ph.D.
Governor                            Division of Financial Regulation                       Secretary
Michael S. Steele                       500 N. Calvert Street, Suite 402                    Charles W. Turnbaugh
Lt. Governor                           Baltimore, Maryland 21202-3651                      Commissioner
Highlights of the Maryland Debt Manage ment Services Act

   1. 12-901 Definitions – The definition section describes terms used in the law. Debt
      management services means, “receiving funds periodically from a consumer under an
      agreement with the consumer for the purpose of distributing the funds among the consumer’s
      creditors in full or partial payment of the consumer’s debts”. It also includes those who
      provide these services on the Internet.

   2. 12-903 Information Sharing – The Commissioner may enter into cooperative and
      information sharing agreements with any federal or state agency that has supervisory
      responsibility over the debt management services business. Documents and other
      information can be shared with these agencies.

   3. 12-905 Debt Management Services Fund - The law provides that a fund be established to
      pay for all costs and expenses incurred by the Commissioner that are related to the regulation
      of the business of debt management. All revenue received through licensing or examination
      of debt management service providers will be part of the fund.

   4. 12-907 & 12-908 Qualifications for Applicants – Some of the more important application
      requirements are as follows:

           Net Worth – The net worth requirement has been established between a minimum of
            $50,000 up to a maximum of $500,000 as determined by the Commissioner. The net
            worth requirement increases by $10,000 for each location in Maryland.

           Financial Statement – Applicants must provide an audited financial statement
            performed by a licensed CPA that indicates the net worth requirement.

           Application Fees – Fees for licensing new applicants are $2,000 for a two-year license
            and a $1,000 investigation fee. Renewal licensing fees will be $2,000 for a two-year
            license. There is a $100 per Maryland location fee for new and renewal applicants.

   5. 12-909 FBI Background Checks – The Commissioner must receive FBI background checks
      on the president of the debt management service provider and any age nt who has access to
      the trust account where consumer’s money is deposited. The Commissioner may require
      other individuals to provide the background check.

   6. 12-911 Notice to Consumers – The new law requires licensees who provide their service on
      the Internet or maintain an office in Maryland to disclose and post the following notice in
      their office and/or website,

“The Commissioner of Financial Regulation for the State of Maryland will accept all questions or
complaints from Maryland residents regarding (Name & License Number of licensee) at 500 North
Calvert Street, Room 402, Baltimore, Maryland 21202, phone number 1- 888 784-0136”.

   7. 12-914 Surety Bond Require ments – Surety Bond requirements have been established from
      a $10,000 minimum to a $350,000 maximum. Bonds must expire December 31, 2005 and
        have the name and address of the licensee on the bond document. The application contains a
        guide to establish the initial bond amount. The Commissioner will set the level of the surety
        bond using five factors:

    The financial condition and business experience of the licensee or applicant;
    For an applicant: the projected monthly and annual volume of debt management services
     provided in the State;
    For a licensee: The average monthly and annual volume of debt manage ment services
     provided in the State;
    The potential loss to consumers who remit funds to the applicant or licensee if the company
     becomes financially impaired;
    Any other factor the Commissioner considers appropriate.

   8. 12-915 Notice to Commissioner When Changing Control or Moving – If a licensee
      changes control or moves its office location, the Commissioner must be notified before in
      writing and the bond changed to reflect the new address.

   9. 12-916 Consumer Plan/Agreement – A consumer must enter into an executed written debt
      management service agreement that describes the services to be performed by the licensee.
      The agreement may be rescinded by either party by giving written notice. The agreement
      must be in at least 12 point type and contain at least the following;

       Be signed and dated by the licensee and the consumer;
       The name, address, and phone number of the consumer;
       The name, address, phone number, and license number of the licensee;
       A description of the debt management services to be provided to the co nsumer and any fees
        to be charged to the consumer for the debt management services;
       A disclosure of the existence of the surety bond required under § 12-914 of this subtitle;
       The name and address of the financial institution in which funds, paid by the consumer to the
        licensee for disbursement to the consumer's creditors, will be held;
       A notice of the right of a party to the debt management services agreement to rescind the debt
        management services agreement by giving written notice of rescission to the other party;
       A schedule of payments that the consumer must make to the debt management services
        provider, including:

       1.     The amount of each payment and the date on which each payment is due; and
       2.     An itemization of the maintenance fees that will be retained by the debt management
       services provider, and the amount of money that will be paid to the consumer's creditors, from
       each payment the consumer makes to the debt management services provider;

       A list of:

               1.    A.      Each participating creditor of the consumer to which payments will be
               made under the debt management services agreement;

                      B.     The amount owed to each creditor; and
                    C.      A schedule of payments that the debt management services provider
                    will make to each participating creditor from the consumer's payments,
                    including the amount of each payment and the date on which each payment will
                    be made; and

             2.    Each creditor that the licensee reasonably expects not to participate in the
             management of the consumer's debt under the debt management services agreement;

    A disclosure that the licensee also may receive compensation from the consumer's creditors
     for providing debt management services to the consumer;

    A disclosure that the licensee may not, as a condition of entering into a debt management
     services agreement, require a consumer to purchase for a fee a counseling session, an
     educational program, or materials and supplies;

    A disclosure that the licensee may not require a voluntary contribution from a consumer for
     any service provided by the licensee to the consumer;

    A disclosure that, by executing the debt management services agreement, the consumer
     authorizes any financial institution in which the licensee has established a trust account for
     deposit of the consumer's funds to disclose to the Commissioner any financial records
     relating to the trust account during the course of any investigation or examination of the
     licensee by the Commissioner;

    A disclosure that execution of a debt management services agreement may impact the
     consumer's credit rating and credit scores; and

    The following notice:


   10. 12-917 Trust Account – Licensees must maintain a trust account in which consumer’s funds
       must be deposited within two (2) business days. Operating funds of the licensee may not be
       commingled with the consumer’s funds. Disbursement of consumer’s funds from the trust
       account to the creditors must be made within eight (8) business days of rece ipt of the funds
       from the consumer.

   11. 12-918 Consumer Fees – A debt management service provider may charge a one-time
       consultation fee not to exceed $50 and/or a monthly maintenance fee not to exceed $8 for
       each creditor with the total not exceeding $40 per month. All fees must be clearly disclosed
       in the debt management services agreement with the consumer.
   12. 12-919 Reports to Cons umers – Licensees must provide reports to consumers on a quarterly
       basis or upon cancellation or termination of the agreement. The reports must disclose the
       amount of money received from the consumer and to whom the money was paid and when
       the money was forwarded to the creditors.

   13. 12-920 Prohibited Activities – This section lists several prohibitions including making false
       or misleading representations to consumers. Other prohibitions are listed below. A licensee
       may not:

    Purchase any debt of a consumer;
    Lend money to a consumer;
    Obtain a mortgage for a consumer;
    Operate as a Collection Agency;
    Offer an incentive, including a gift, bonus, premium, reward, or other compensation to a
     consumer for executing a debt management services agreement with the licensee;
    Charge for or provide credit insurance.

   14. 12-921 Reporting Requirements – Annual reporting requirements to the Commissioner
       have been established and have a due date of April 30 th of each year for activities of the
       previous calendar year. The annual report to the Commissioner must contain the following:

    A copy of the licensee’s audited financial statement prepared in accordance with GAAP.
    An alphabetical list of all debt management counselors who worked for the licensee during
     the preceding year.
    The number of Maryland consumers who signed new debt management agreements with the
     licensee during the year.
    The highest number of Maryland consumers who were enrolled in the licensee’s programs
     during the previous year.

Special reports to the Commissioner are required within 15 days if any of the following events occur
to the licensee:

      Bankruptcy of the licensee,
      Suspension or revocation of the licensee’s license in any other state,
      Felony indictment or conviction of the licensee’s officers, directors, or counselors,
      Any civil action by a consumer or material litigation filed against a licensee, officer, director,
       and counselor.

   15. 12-922 Records Retention – This section outlines which records must be kept and for how
       long. The records include; general ledgers, bank statements, consumer agreements, etc.
       These retention schedules also apply to records in possession of subsidiaries, affiliates or
       other persons. These records must be made available within seven (7) days upon written
       request by the Commissioner.

   16. 12-923 & 12-924 Investigations/Examinations – The Commissioner has the authority to
       investigate and conduct regular examinations of licensees, subsidiaries, affiliates or other
       persons that relate to the debt management services business. Licensees must pay all
      reasonable costs for the examination. The Commissioner may accept the report of
      examination performed by another state.

   17. 12-925 License Number – Licensees must include their debt management license number in
       any advertisement that could reach Maryland consumers.

   18. 12-926, 12-927 & 12-928 Enforcement Provisions, Hearings – The Commissioner has the
       authority to suspend or revoke a license for a variety of reasons. The law allows the
       Commissioner to issue Cease and Desist Orders for fraud, dishonesty, unsafe or unsound
       practices, deceptive advertising, etc. Licensees and applicants have the right to a hearing on
       all administrative actions taken by the Commissioner.

   19. 12-929 Penalties – The penalty for violating the statute is a fine not to exceed $1,000 for the
       first violation and $5,000 for each subsequent violation. The violation of the statute is a
       felony with jail terms not to exceed five years.