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Dreher Tomkies LLP
Attorneys at Law
2750 Huntington Center
41 South High Street
Columbus, Ohio 43215
Telephone (614) 628-8000
Fax (614) 628-1600



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CREDIT CARD COMPANIES SUED IN NORTH CAROLINA

On May 22, 2003, Governor Robert L. Ehrlich Jr. signed into law the Maryland Debt Management Services Act, Md. Code Ann. Fin. Inst. 12-901 et seq., which will take effect October 1, 2003. The Act regulates debt management service providers, which generally are businesses that contract to receive funds from consumers for the purpose of distributing funds to creditors in full or partial payment of the consumers' debts. The Act requires debt management service providers to do the following:

  • Obtain a license;
  • Post a surety bond;
  • Give specified disclosures to consumers (e.g., a description of the services to be performed and the fees to be charged for such services);
  • Maintain consumer funds in regulated trust accounts;
  • Provide consumers with copies of debt management service agreements;
  • Disburse funds to creditors within a certain amount of time after receipt and comply with other specified creditor payment requirements; and
  • Comply with recordkeeping requirements.

In addition to the above requirements, the Act regulates fees that debt management service providers may impose and prohibits, among other things, a debt management service provider from performing any services unless it has a reasonable expectation based on past experience that a consumer's creditors will accept payment of the consumer's debts as provided in the agreement entered into with the consumer.

Violators of the Act are subject to injunctive relief, civil penalties and criminal penalties for violations that are committed knowingly and willfully. Moreover, the Act permits a consumer to bring a civil action to recover damages, including costs and attorneys' fees, that are caused by a violation of the Act.

Maryland is only one of a growing number of states that license and regulate debt management service providers. Such entities that engage in business on a multi-state basis should structure their procedures and revise their program documentation so that they comply with the varying state requirements and prohibitions that may be applicable.

Mike Tomkies and Chuck Gall