[Federal Register Volume 73, Number 22 (Friday, February 1, 2008)]
[Proposed Rules]
[Pages 6062-6073]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-1451]
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DEPARTMENT OF JUSTICE
28 CFR Part 58
[Docket No: EOUST 102]
RIN 1105-AB17
Application Procedures and Criteria for Approval of Nonprofit
Budget and Credit Counseling Agencies by United States Trustees
AGENCY: Executive Office for United States Trustees (``EOUST''),
Justice.
ACTION: Notice of proposed rulemaking.
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SUMMARY: This notice of proposed rulemaking (``rule'') sets forth
proposed procedures and criteria United States Trustees shall use when
determining whether applicants seeking to become and remain approved
nonprofit budget and credit counseling agencies satisfy all
prerequisites of the United States Code, as implemented under this
rule. Under current law every individual debtor shall have received
adequate counseling from an approved nonprofit budget and credit
counseling agency within 180 days before the date of filing for
bankruptcy relief. The current law enumerates mandatory prerequisites
and minimum standards applicants seeking to become approved nonprofit
budget and credit counseling agencies must meet. Under this rule,
United States Trustees will approve applicants for inclusion on
publicly available agency lists in one or more federal judicial
districts, if an applicant establishes it meets all the requirements of
the United States Code, as implemented under this rule. After obtaining
such an approval, a nonprofit budget and credit counseling agency shall
be authorized to provide credit counseling in a federal judicial
district during the time the agency remains approved.
DATES: Submit comments on or before April 1, 2008.
ADDRESSES: Comments on the rule may be submitted via
www.regulations.gov, by telefax to (202) 305-8536, or by postal mail to
Executive Office for United States Trustees (``EOUST''), 20
Massachusetts Ave., NW., 8th Floor, Washington, DC 20530. To ensure
proper handling of comments, please reference ``Docket No. EOUST 102''
on all written and electronic correspondence.
FOR FURTHER INFORMATION CONTACT: Henry Hobbs, Acting Chief, Credit
Counseling & Debtor Education Unit, at (202) 514-4100 (not a toll-free
number).
SUPPLEMENTARY INFORMATION:
Posting of Public Comments
Please note that all comments received are considered part of the
public record and made available for public inspection online at http://www.regulations.gov. Such information includes personal identifying
information (such as your name, address, etc.) voluntarily submitted by
the commenter. If you want to submit personal identifying information
(such as your name, address, etc.) as part of your comment, but do not
want it to be posted online, you must include the phrase ``PERSONAL
IDENTIFYING INFORMATION'' in the first paragraph of your comment. You
must also locate all the personal identifying information you do not
want posted online in the first paragraph of your comment and identify
what information you want redacted.
If you want to submit confidential business information as part of
your comment but do not want it to be posted online, you must include
the phrase ``CONFIDENTIAL BUSINESS INFORMATION'' in the first paragraph
of your comment. You must also prominently identify confidential
business information to be redacted within the comment. If a comment
has so much confidential business information that it cannot be
effectively redacted, all or part of that comment
[[Page 6063]]
may not be posted on http://www.regulations.gov.
Personal identifying information and confidential business
information identified and located as set forth above will be placed in
the agency's public docket file, but not posted online. If you wish to
inspect the agency's public docket file in person by appointment,
please see the FOR FURTHER INFORMATION CONTACT paragraph. Comments
filed after the end of the comment period may be considered to the
extent feasible.
Discussion of Rule
This rule implements those sections of Public Law No. 109-8, 119
Stat. 23, 37, 38 (April 20, 2005) codified at 11 U.S.C. 109(h)(1) and
111. Effective October 17, 2005, an individual may not be a debtor
under title 11 of the United States Code unless during the 180-day
period preceding the date of filing a bankruptcy petition, the
individual receives adequate counseling from an approved nonprofit
budget and credit counseling agency. 11 U.S.C. 109(h)(1) and 111. See
also H.R. Rep. 109-31, pt. 1 at 2 (the Bankruptcy Code ``requires
debtors to receive credit counseling before they can be eligible for
bankruptcy relief so that they will make an informed choice about
bankruptcy, its alternatives, and consequences'').
Section 111(b) of title 11, United States Code, governs the
approval by United States Trustees of nonprofit budget and credit
counseling agencies for inclusion under 11 U.S.C. 111(a)(1) on publicly
available agency lists in one or more United States district courts.
Section 111 of title 11 provides that, in applicable jurisdictions, a
United States Trustee may approve an application to become an approved
nonprofit budget and credit counseling agency only after the United
States Trustee has thoroughly reviewed the applicant's (a)
qualifications, and (b) services. 11 U.S.C. 111(b)(1). A United States
Trustee has statutory authority to require an applicant to provide
information with respect to such review. 11 U.S.C. 111(b)(1).
After completing that thorough review, a United States Trustee may
approve a nonprofit budget and credit counseling agency only if the
agency establishes that it fully satisfies all requisite standards. 11
U.S.C. 111(b). Among other things, an applicant must establish it will
(a) provide qualified counselors, (b) maintain adequate provision for
safekeeping and payment of client funds, (c) provide adequate
counseling with respect to client credit problems, and (d) deal
responsibly and effectively with other matters relating to the quality,
effectiveness, and financial security of the services it provides. 11
U.S.C. 111(c)(1).
This proposed rule will implement those statutory requirements. By
accomplishing that, the rule will help debtors obtain adequate
counseling from competent credit counseling agencies, and help
safeguard their funds. It also will provide an appropriate mechanism by
which entities can apply for approval under section 111 of title 11 to
become nonprofit budget and credit counseling agencies, and will enable
such applicants to attempt to meet their burden of establishing they
should be approved by United States Trustees under 11 U.S.C. 111.
This rule, once final, will supersede the provisions that address
credit counseling agencies in EOUST's Interim Final Rule published on
July 5, 2006 (71 FR 38076) entitled Application Procedures and Criteria
for Approval of Nonprofit Budget and Credit Counseling Agencies and
Approval of Providers of a Personal Financial Management Instructional
Course by United States Trustees (``Interim Final Rule''). The credit
counseling provisions are currently codified at 28 CFR 58.15, 58.16,
and 58.17. Due to the necessity of quickly establishing a regulation to
govern the credit counseling application process, EOUST promulgated the
Interim Final Rule rather than a notice of proposed rulemaking. Based
upon experience administering the Interim Final Rule, and upon
consideration of comments received regarding the Interim Final Rule,
EOUST promulgates this rule as a notice of proposed rulemaking in an
effort to maximize public input. EOUST will respond to the comments to
the Interim Final Rule and this rule when it publishes the final rule.
EOUST will also publish another notice of proposed rulemaking that
addresses providers of a financial management instructional course with
a RIN number of 1105-AB31.
In an effort to make information more accessible and
understandable, several changes to the Interim Final Rule are proposed
in this rule, along with other changes to enhance consumer protections.
Some of the more significant changes include the following: (1) Adding
identification procedures for clients when accessing Internet or
telephone counseling sessions; (2) establishing a limit for credit
counseling fees to be presumed reasonable; (3) preserving clients'
rights under 11 U.S.C. 502(k); (4) requiring agencies to provide
additional counseling at no extra cost to clients when a debt repayment
plan has been completed or terminated so that clients may file
bankruptcy if they so choose; (5) providing guidance on agencies'
responsibilities to individuals with limited English proficiency; and
(6) requiring appropriate disclosures be made before providing services
to clients, such as an agency's fee policy and the prohibition from
receiving referral fees.
Executive Order 12866
This rule has been drafted and reviewed in accordance with
Executive Order 12866, ``Regulatory Planning and Review'' section 1(b),
The Principles of Regulation. The Department has determined that this
rule is a ``significant regulatory action'' and, accordingly, this rule
has been reviewed by the Office of Management and Budget (``OMB'').
The Department has also assessed both the costs and benefits of
this rule as required by section 1(b)(6) and has made a reasoned
determination that the benefits of this regulation justify its costs.
The costs considered in this regulation include the required costs for
the submission of an application. Costs considered also include the
cost of establishing and maintaining the approved list in each federal
judicial district. In an effort to minimize the burden on applicants,
the application keeps the number of items on the application to a
minimum.
The costs to an applicant will be minimal. The anticipated costs
are the photocopying and mailing of the requested records, along with
the salaries of the employees who complete the applications. Based upon
the available information, experience with the credit counseling
industry, and informal communications with credit counseling agencies,
it is anticipated that this cost should equal approximately $500 per
application for agencies. This cost is not new; it is the same cost
that credit counseling agencies incurred when applying under the
Interim Final Rule. Public comments regarding the cost to applicants in
completing the application are requested.
Applicants that offer debt repayment plans must also obtain a
surety bond in the amount of 2% of the agency's disbursements made
during the previous 12 months from all trust accounts attributable to
the federal judicial districts (or, if not feasible to determine, the
states) in which the agency seeks approval from the United States
Trustee or equal to the average daily balance maintained for the 6
months immediately prior to submission of the application in all trust
accounts attributable to the federal judicial districts (or, if not
feasible to
[[Page 6064]]
determine, the states) in which the agency seeks approval from the
United States Trustee. In addition, credit counseling agencies that
offer debt repayment plans must obtain employee fidelity insurance in a
face amount equal to 50% of the surety bond. Credit counseling agencies
are entitled to receive a credit for any state bond or employee
fidelity insurance already obtained.
Although applicants may charge a fee for providing the credit
counseling services in accordance with this rule, agencies must provide
credit counseling without regard to a client's ability to pay the fee.
Based upon the available information, current practice of many credit
counseling agencies, experience with the credit counseling industry,
and informal communications with credit counseling agencies, $50 is
presumed to be a reasonable fee for credit counseling. The United
States Government Accountability Office, after conducting a study on
credit counseling, found that $50 was the typical rate charged by
credit counseling agencies and that industry observers and consumer
advocates considered this amount to be reasonable. Public comments as
to the reasonableness of $50 for credit counseling are requested.
The amount presumed to be reasonable for credit counseling fees
will be reviewed periodically, but not less than every four years, and
the amount presumed to be reasonable will be published by notice in the
Federal Register and identified on EOUST's Web site. In addition, all
applicants must waive the fee if the client demonstrates a lack of
ability to pay the fee, which shall be presumed if the client's
household current income is less than 150% of the income of the
official poverty line as identified by the United States Department of
Health and Human Services applicable to a household of the same size.
The number of applicants that will ultimately apply is unknown,
although EOUST believes that approximately 300 may ultimately apply to
be approved credit counseling agencies. Currently, there are
approximately 160 approved agencies. The annual hour burden on agencies
is estimated to be 10 hours. This estimate is based on consultations
with individuals in the credit counseling industry, and experience with
applicants who completed the initial applications. Public comments
regarding the annual hour burden on credit counseling agencies in
completing the application are requested.
The EOUST consulted with the Federal Trade Commission (``FTC'') and
with the Internal Revenue Service (``IRS'') in drafting this rule and
the EOUST does not believe the rule has an adverse effect upon either
agency.
The benefits of this rule include the development of standards that
increase consumer protections, such as a limit on the presumption of
reasonable fees, requirement that agencies provide adequate disclosures
concerning agencies' policies, and the preservation of clients' rights
under section 502(k). This rule also provides for greater supervision
by the United States Trustee to ensure agencies employ proper
procedures to safeguard client funds. These benefits justify its costs
in complying with Congress' mandate that a list of approved agencies be
established. Public Law No. 109-8, Sec. 106(e)(1).
Executive Order 13132
This rule will not have a substantial direct effect on the States,
on the relationship between the national government and the States, or
on the distribution of power and responsibilities among the various
levels of government. Therefore, in accordance with Executive Order
13132, it is determined that this rule does not have sufficient
federalism implications to warrant the preparation of a Federalism
Assessment.
Paperwork Reduction Act
The information collection requirements contained in this rule have
been approved by OMB in accordance with the Paperwork Reduction Act of
1995, 44 U.S.C. 3501 to 3520, and assigned OMB control number 1105-0084
for form EOUST-CC1, the ``Application for Approval as a Nonprofit
Budget and Credit Counseling Agency.'' The Department notes that full
notice and comment opportunities were provided to the general public
through the Paperwork Reduction Act process, and that the applications
and associated requirements were modified to take into account the
concerns of those who commented in this process.
Regulatory Flexibility Act
In accordance with the Regulatory Flexibility Act (5 U.S.C.
605(b)), the Director has reviewed this rule and by approving it
certifies that it will not have a significant economic impact on a
substantial number of small entities. This certification is based upon
experience in administering the Interim Final Rule where the surety
bond and insurance requirements are less than 1% of gross revenue and
also less than 1% of total expenditures for the large majority of
credit counseling agencies considered to be small businesses.
Unfunded Mandates Reform Act of 1995
This rule does not require the preparation of an assessment
statement in accordance with the Unfunded Mandates Reform Act of 1995,
2 U.S.C. 1531. This rule does not include a federal mandate that may
result in the annual expenditure by State, local, and tribal
governments, in the aggregate, or by the private sector, of more than
the annual threshold established by the Act ($100 million). Therefore,
no actions were deemed necessary under the provisions of the Unfunded
Mandates Reform Act of 1995.
Small Business Regulatory Enforcement Fairness Act of 1996
This rule is not a major rule as defined by section 804 of the
Small Business Regulatory Enforcement Fairness Act of 1996, 5 U.S.C.
801 et seq. This rule will not result in an annual effect on the
economy of $100 million or more; a major increase in costs or prices;
or significant adverse effects on competition, employment, investment,
productivity, and innovation; or on the ability of United States-based
companies to compete with foreign-based companies in domestic and
export markets.
Privacy Act Statement
Section 111 of title 11, United States Code, authorizes the
collection of this information. The primary use of this information is
by the United States Trustee to approve nonprofit budget and credit
counseling agencies. The United States Trustee will not share this
information with any other entity unless authorized under the Privacy
Act, 5 U.S.C. 552a et seq. EOUST has published a System of Records
Notice that delineates the routine use exceptions authorizing
disclosure of information. 71 FR 59818, 59827 (Oct. 11, 2006), JUSTICE/
UST-005, Credit Counseling and Debtor Education Files and Associated
Records.
Public Law 104-134 (April 26, 1996) requires that any person doing
business with the federal government furnish a Social Security Number
or Tax Identification Number. This is an amendment to section 7701 of
title 31, United States Code. Furnishing the Social Security Number, as
well as other data, is voluntary, but failure to do so may delay or
prevent action on the application.
[[Page 6065]]
List of Subjects in 28 CFR Part 58
Administrative practice and procedure, Bankruptcy, Credit and
debts.
Accordingly, for the reasons set forth in the preamble, part 58 of
chapter I of title 28 of the Code of Federal Regulations is proposed to
be amended as follows:
PART 58--[AMENDED]
1. The authority citation for part 58 is revised to read as
follows:
Authority: 5 U.S.C. 301, 552; 11 U.S.C. 109(h), 111, 521(b),
727(a)(11), 1141(d)(3); 1202; 1302;1328(g), 28 U.S.C. 509, 510, 586,
589b.
2. Add Sec. Sec. 58.12, 58.13 and 58.14 to read as follows:
Sec. 58.12 Definitions.
(a) The following definitions apply to sections 58.12 through and
including 58.24 of this part, as well as the applications and other
materials agencies submit in an effort to establish they meet the
requirements necessary to become an approved nonprofit budget and
credit counseling agency.
(b) These terms shall have these meanings:
(1) The term ``accreditation'' means the accreditation that an
accrediting organization bestows upon an agency because the accrediting
organization has determined the agency meets or exceeds all the
accrediting organization's standards;
(2) The term ``accrediting organization'' means either an entity
that provides accreditation to agencies or provides certification to
counselors, provided, however, that an accrediting organization shall:
(i) not be an agency or affiliate of any agency; and
(ii) be deemed acceptable by the United States Trustee;
(3) The term ``adequate counseling'' means the actual receipt by a
client from an approved agency of all counseling services, and all
other applicable services, rights, and protections specified in:
(i) 11 U.S.C. 109(h)(1);
(ii) 11 U.S.C. 111; and
(iii) this rule;
(4) The term ``affiliate of an agency'' includes:
(i) every entity that is an affiliate of the agency, as the term
``affiliate'' is defined in 11 U.S.C. 101(2), except that the word
``agency'' shall be substituted for the word ``debtor'' in 11 U.S.C.
101(2);
(ii) each of an agency's officers and each of an agency's
directors; and
(iii) every relative of an agency's officers and every relative of
an agency's directors;
(5) The term ``agency'' and the term ``budget and credit counseling
agency'' shall each mean a nonprofit organization that is applying
under this rule for United States Trustee approval to be included on a
publicly available list in one or more United States district courts,
as authorized by 11 U.S.C. 111(a)(1), and shall also mean, whenever
appropriate, an approved agency;
(6) The term ``application'' means the application and related
forms, including appendices, approved by the Office of Management and
Budget as form EOUST-CC1, Application for Approval as a Nonprofit
Budget and Credit Counseling Agency, as it shall be amended from time
to time;
(7) The term ``approved agency'' means an agency currently approved
by a United States Trustee under 11 U.S.C. 111 as an approved nonprofit
budget and credit counseling agency eligible to be included on one or
more lists maintained under 11 U.S.C. 111(a)(1);
(8) The term ``approved list'' means the list of agencies currently
approved by a United States Trustee under 11 U.S.C. 111 as currently
published on the United States Trustee Program's Internet site on the
United States Department of Justice's Internet site;
(9) The term ``audited financial statements'' means financial
reports audited by independent certified public accountants in
accordance with generally accepted accounting principles as defined by
the American Institute of Certified Public Accountants;
(10) The term ``certificate'' means the certificate identified in
11 U.S.C. 521(b)(1) that an approved agency shall provide to a client
after the client completes counseling services;
(11) The term ``client'' means an individual who seeks, receives or
has received counseling services from an approved agency;
(12) The term ``counseling services'' means all counseling required
by 11 U.S.C. 109(h) and 111, and this rule including, without
limitation, services that are typically of at least 60 minutes in
duration and that shall at a minimum include:
(i) Performing on behalf of, and providing to, each client a
written analysis of each client's current financial condition, which
analysis shall include a budget analysis, consideration of all
alternatives to resolve a client's credit problems, discussion of the
factors that caused such financial condition, and identification of all
methods by which the client can develop a plan to respond to the
financial problems without incurring negative amortization of debt; and
(ii) Providing each client the opportunity to have the agency
negotiate an alternative payment schedule with regard to each unsecured
consumer debt under terms as set forth in 11 U.S.C. 502(k) or, if the
client accepts this option and the agency is unable to provide this
service, the agency shall refer the client to another approved agency
in the appropriate federal judicial district that provides it;
(13) The term ``counselor certification'' means certification of a
counselor by an accrediting organization because the accrediting
organization has determined the counselor meets or exceeds all the
accrediting organization's standards for counseling services or related
areas, such as personal finance, budgeting, or credit or debt
management;
(14) The term ``criminal background check'' means a report
generated by the Federal Bureau of Investigation disclosing the entire
criminal history record, if any, of the counselor for whom the criminal
background check is sought. Whenever the Federal Bureau of
Investigation does not have access to, or provides, less than the
entire state criminal history record of the counselor, then the term
``criminal background check'' shall also include the entire state
criminal history record, if any, of every state law enforcement agency
where the counselor has resided for any part of the immediately
preceding five years. If a criminal background check is not available
from the Federal Bureau of Investigation and is not authorized by state
law in the residential state of the employee, the agency shall instead
obtain at least every 5 years a sworn statement from each counselor
attesting to whether the counselor has been convicted of a felony, or a
crime involving fraud, dishonesty, or false statements;
(15) The term ``debt repayment plan'' means any written document
suggested, drafted, or reviewed by an approved agency that either
proposes or implements any mechanism by which a client would make
payments to any creditor or creditors if, during the time any such
payments are being made, that creditor or those creditors would forbear
from collecting or otherwise enforcing their claim or claims against
the client; provided, however, that any such written document shall not
constitute a debt repayment plan if the client would incur a negative
amortization of debt under it;
[[Page 6066]]
(16) The term ``Director'' means the person designated or acting as
the Director of the Executive Office for United States Trustees;
(17) The term ``entity'' shall have the meaning given that term in
11 U.S.C. 101(15);
(18) The term ``fair share'' means payments by a creditor to an
approved agency for administering a debt repayment plan;
(19) The terms ``fee'' and ``fee policy'' each mean the aggregate
of all fees, contributions, and payments an approved agency charges
clients for providing counseling services; ``fee policy'' shall also
mean the objective criteria the agency uses in determining whether to
waive or reduce any fee, contribution, or payment;
(20) The term ``final decision'' means the decision issued by the
Director that reviews the United States Trustee's decision either to
deny an agency's application or to remove an agency from the approved
list;
(21) The term ``financial benefit'' means any interest equated with
money or its equivalent, including, but not limited to, stock, bonds,
other investments, income, goods, services, or receivables;
(22) The term ``governmental unit'' shall have the meaning given
that term in 11 U.S.C. 101(27);
(23) The term ``independent contractor'' means a person or entity
who provides any good or service to an approved agency other than as an
employee and as to whom the approved agency does not:
(i) Direct or control the means or methods of delivery of the
service or goods being provided;
(ii) Make financial decisions concerning the business aspects of
the goods or services being provided; and
(iii) Have any common employees;
(24) The term ``languages offered'' means every language other than
English in which an approved agency provides counseling services;
(25) The term ``legal advice'' shall have the meaning given that
term in 11 U.S.C. 110(e)(2);
(26) The term ``limited English proficiency'' means, alternatively:
(i) An inability to speak, read, write, or understand the English
language; or
(ii) The use primarily of a language other than English in a
person's daily affairs;
(27) The term ``locator'' means any entity that assists a
prospective client find an approved agency or agencies for the purpose
of receiving counseling services, unless such entity is the approved
agency proposing to provide counseling services to the prospective
client;
(28) The term ``material change'' means, alternatively, any change:
(i) In the name, structure, principal contact, management,
staffing, physical location, counseling services, fee policy, or method
of delivery of an approved agency; or
(ii) That renders inapplicable, inaccurate, incomplete, or
misleading any statement an agency or approved agency previously made:
(A) In its application or related materials; or
(B) To the United States Trustee;
(29) The term ``median family income'' shall have the meaning given
that term in 11 U.S.C. 101(39A);
(30) The term ``method of delivery'' means one or more of the 3
methods by which an approved agency can provide some component of
counseling services to its clients, including:
(i) ``in person'' delivery, which applies when a client primarily
receives counseling services at a physical location with a credit
counselor physically present in that location, and with the credit
counselor providing oral and/or written communication to the client at
the facility;
(ii) ``telephone'' delivery, which applies when a client primarily
receives counseling services by telephone; and
(iii) ``Internet'' delivery, which applies when a client primarily
receives counseling services through an Internet website;
(31) The term ``nonprofit'' means, alternatively:
(i) An entity validly organized as a not-for-profit entity under
applicable state or federal law, if that entity operates as a not-for-
profit entity in full compliance with all applicable state and federal
law; or
(ii) A qualifying governmental unit;
(32) The term ``notice'' in 28 CFR 58.24 means the written
communication from the United States Trustee to an agency that its
application to become an approved agency has been denied or to an
approved agency that it is being removed from the approved list;
(33) The term ``qualifying government unit'' means any governmental
unit that, were it not a governmental unit, would qualify for tax-
exempt status under 26 U.S.C. 501(c)(3), or would qualify as a
nonprofit entity under applicable state law;
(34) The term ``referral fees'' means money or any other valuable
consideration paid or transferred between an approved agency and
another entity in return for that entity, directly or indirectly,
identifying, referring, securing, or in any other way encouraging any
client or potential client to receive counseling services from the
approved agency; provided, however, that ``referral fees'' shall not
include fees paid to:
(i) The agency under a fair share agreement; or
(ii) Any locator;
(35) The term ``relative'' shall have the meaning given that term
in 11 U.S.C. 101(45);
(36) The term ``request for review'' means the written
communication from an agency to the Director seeking review of the
United States Trustee's decision either to deny the agency's
application or to remove the agency from the approved list;
(37) The term ``state'' means state, commonwealth, district, or
territory of the United States;
(38) The term ``tax waiver'' means a document sufficient to permit
the Internal Revenue Service to release directly to the United States
Trustee information about an agency;
(39) The term ``trust account'' means an account with a federally
insured depository institution that is separated and segregated from
operating accounts, which an approved agency shall maintain in its
fiduciary capacity for the purpose of receiving and holding client
funds entrusted to the approved agency; and
(40) The term ``United States Trustee'' means, alternatively:
(i) The Executive Office for United States Trustees;
(ii) A United States Trustee appointed under 28 U.S.C. 581;
(iii) A person acting as a United States Trustee;
(iv) An employee of a United States Trustee; or
(v) Any other entity authorized by the Attorney General to act on
behalf of the United States under this rule.
Sec. 58.13 Procedures all agencies shall follow when applying to
become approved agencies.
(a) An agency applying to become an approved agency shall obtain an
application, including appendices, from the United States Trustee.
(b) The agency shall complete the application, including its
appendices, and attach the required supporting documents requested in
the application.
(c) The agency shall submit the original of the completed
application, including completed appendices and the required supporting
documents, and one additional copy of those, to the United States
Trustee at the address specified on the application form.
(d) The application shall be signed by an agency representative who
is authorized under applicable law to sign on behalf of the applying
agency.
[[Page 6067]]
(e) The signed application, completed appendices, and required
supporting documents shall be accompanied by a writing, signed by the
signatory of the application and executed on behalf of the signatory
and the agency, certifying the application does not:
(1) Falsify, conceal, or cover up by any trick, scheme or device a
material fact;
(2) Make any materially false, fictitious, or fraudulent statement
or representation; or
(3) Make or use any false writing or document knowing the same to
contain any materially false, fictitious, or fraudulent statement or
entry.
(f) The United States Trustee shall not consider an application
that:
(1) Is incomplete;
(2) Fails to include the completed appendices or all of the
required supporting documents; or
(3) Is not accompanied by the certification identified in the
preceding subsection.
(g) The United States Trustee shall not consider an application on
behalf of an agency if:
(1) It is submitted by any entity other than the agency; or
(2) Either the application or the accompanying certification is
executed by any entity other than an agency representative who is
authorized under applicable law to sign on behalf of the agency.
(h) By the act of submitting an application, an agency consents to
the release and disclosure of its name and contact information on the
approved list should its application be approved.
Sec. 58.14 Automatic expiration of agencies' status as approved
agencies.
(a) Except as provided in 28 CFR 58.15(c), if an approved agency
was not an approved agency immediately prior to the date it last
obtained approval to be an approved agency, such an approved agency
shall cease to be an approved agency 6 months from the date on which it
was approved unless the United States Trustee approves an additional 1-
year period.
(b) Except as provided in 28 CFR 58.15(c), if an approved agency
was an approved agency immediately prior to the date it last obtained
approval to be an approved agency, such an agency shall cease to be an
approved agency 1 year from the date on which it was last approved to
be an approved agency unless the United States Trustee approves an
additional 1-year period.
3. Sections 58.15 through 58.17 are revised to read as follows.
Sec. 58.15 Procedures all approved agencies shall follow when
applying for approval to act as an approved agency for an additional 1-
year period.
(a) To be considered for approval to act as an approved agency for
an additional 1-year term, an approved agency shall reapply by
complying with all the requirements specified for agencies under 11
U.S.C. 109(h)(1) and 111, and under this rule.
(b) Such an agency shall apply no later than 45 days prior to the
expiration of its six-month probationary period or annual period in
order to be considered for approval for an additional 1-year period,
unless a written extension is granted by the United States Trustee.
(c) An approved agency that has complied with all prerequisites for
applying to act as an approved agency for an additional 1-year period
may continue to operate as an approved agency while its application is
under review by the United States Trustee, so long as either the
application for an additional 1-year period was timely submitted, or an
agency receives a written extension from the United States Trustee.
Sec. 58.16 Renewal for an additional 1-year period.
If an approved agency's application for an additional 1-year period
is approved, such renewal period shall begin to run from the later of:
(a) The day after the expiration date of the immediately preceding
approval period; or
(b) The actual date of approval of such renewal by the United
States Trustee.
Sec. 58.17 Mandatory duty of approved agencies to notify United
States Trustees of material changes.
(a) An approved agency shall immediately notify the United States
Trustee in writing of any material change.
(b) An approved agency shall immediately notify the United States
Trustee in writing of any failure by the approved agency to comply with
any standard or requirement specified in 11 U.S.C. 109(h) or 111, this
rule, or the terms under which the United States Trustee approved it to
act as an approved agency.
(c) An approved agency shall immediately notify the United States
Trustee in writing of any of the following events:
(1) Notification by the Internal Revenue Service or by a state or
local taxing authority that the approved agency has been selected for
audit or examination regarding its tax-exempt status, or any
notification of a compliance check by the Internal Revenue Service or
by a state or local taxing authority;
(2) Revocation or termination of the approved agency's tax-exempt
status by any governmental unit or by any judicial officer;
(3) Cessation of business by the approved agency or by any office
of the agency, or withdrawal from any federal judicial district(s)
where the approved agency is approved;
(4) Any investigation of, or any administrative or judicial action
brought against, the approved agency by any governmental unit;
(5) Termination or cancellation of any surety bond or fidelity
insurance;
(6) Any administrative or judicial action brought by any entity
that seeks recovery against a surety bond or fidelity insurance;
(7) Any action by a governmental unit or a court to suspend or
revoke the approved agency's articles of incorporation, or any license
held by the approved agency, or any authorization necessary to engage
in business;
(8) A suspension, or action to suspend, any accreditation held by
the approved agency, or any withdrawal by the approved agency of any
application for accreditation, or any denial of any application of the
approved agency for accreditation;
(9) A change in the approved agency's nonprofit status under any
applicable law; and
(10) Any change in the banks or financial institutions used by the
agency.
(d) An agency shall notify the United States Trustee in writing if
any of the changes identified in paragraphs (a) through (c) of this
section occur while its application to become an approved agency is
pending before the United States Trustee.
(e) An approved agency whose name or other information appears
incorrectly on the approved list shall immediately submit a written
request to the United States Trustee asking that the information be
corrected.
4. Sections 58.18 through 58.24 are added to read as follows:
Sec. 58.18 Mandatory duty of approved agencies to obtain prior
permission from the United States Trustee before taking certain
actions.
(a) By accepting the designation to act as an approved agency, an
agency agrees to obtain approval from the United States Trustee, prior
to making any of the following changes:
(1) Cancellation or change in amount of the surety bond or employee
fidelity bond or insurance;
(2) The engagement of an independent contractor to provide
counseling
[[Page 6068]]
services or to have access to, possession of, or control over client
funds;
(3) Any increase in the fees, contributions, or payments received
from clients for counseling services or a change in the agency's fee
policy;
(4) Expansion into additional federal judicial districts;
(5) Any changes to the method of delivery the approved agency
employs to provide counseling services; or
(6) Any changes in the approved agency's counseling services.
(b) An agency applying to become an approved agency shall also
obtain approval from the United States Trustee before taking any action
specified in paragraph (a) of this section. It shall do so by
submitting an amended application. The agency's amended application
shall be accompanied by a contemporaneously executed writing, signed by
the signatory of the application, that makes the certifications
specified in 28 CFR 58.13(e).
(c) An approved agency shall not transfer or assign its United
States Trustee approval to act as an approved agency.
Sec. 58.19 Criteria agencies shall satisfy to become and remain
approved agencies.
(a) To become an approved agency, an agency must affirmatively
establish, to the satisfaction of the United States Trustee, that the
agency at the time of approval:
(1) Satisfies every requirement of this rule; and
(2) Provides adequate counseling to its clients.
(b) To remain an approved agency, an approved agency shall
affirmatively establish, to the satisfaction of the United States
Trustee, that the approved agency:
(1) Has satisfied every requirement of this rule;
(2) Has provided adequate counseling to its clients; and
(3) Would continue to satisfy both paragraphs (b)(1) and (2) of
this section in the future.
Sec. 58.20 Minimum qualifications agencies shall meet to become and
remain approved agencies.
To meet the minimum qualifications set forth in 28 CFR 58.19, and
in addition to the other requirements set forth in this rule, agencies
and approved agencies shall comply with paragraphs (a) through (p) of
this section on a continuing basis:
(a) Compliance with all laws. An agency shall comply with all
applicable laws and regulations of the United States and each state in
which the agency provides counseling services including, without
limitation, all laws governing licensing and registration.
(b) Prohibition on Legal Advice. An agency shall not provide legal
advice.
(c) Structure and organization. An agency shall:
(1) Be lawfully organized and operated as a nonprofit entity; and
(2) Have a board of directors the majority of which:
(i) are not relatives;
(ii) are not employed by such agency; and
(ii) will not directly or indirectly benefit financially from the
outcome of the counseling services provided by such agency.
(d) Ethical standards. An agency shall:
(1) Not engage in any conduct or transaction, other than counseling
services, that generates a direct or indirect financial benefit for any
member of the board of directors or trustees, officer, supervisor, or
any relative thereof;
(2) Ensure no member of the board of directors or trustees,
officer, or supervisor receives any commissions, incentives, bonuses,
or benefits (monetary or non-monetary) of any kind that are directly or
indirectly based on the financial or legal decisions any client or
potential client makes after requesting counseling services;
(3) Ensure no member of the board of directors or trustees, officer
or supervisor is a relative of an employee of the United States
Trustee, a trustee appointed under 11 U.S.C. 586(a)(1) or (b) for any
Federal judicial district where the agency is providing or is applying
to provide counseling services, a federal judge in any Federal judicial
district where the agency is providing or is applying to provide
counseling services, a Federal court employee in any Federal judicial
district where the agency is providing or is applying to provide
counseling services, or a certified public accountant that audits the
agency's trust account;
(4) Not enter into any referral agreement or receive any financial
benefit that involves the agency paying to or receiving from any entity
or person referral fees for the referral of clients to or by the
agency, except payments:
(i) Under a fair share agreement; or
(ii) To any locator;
(5) Not enter into agreements involving counseling services that
create a conflict of interest; and
(6) Not provide counseling services to a client with whom the
agency has a lender-borrower relationship.
(e) Use of credit counselors. An agency shall have a credit
counselor provide the counseling services to each of the agency's
clients. The credit counselor shall interact with the client regarding
the accuracy of the information obtained from the client and the
alternatives available to the client for dealing with his or her
current financial situation, including the plan developed to address
such financial situation.
(f) Credit counselor training, certification and experience. An
agency shall:
(1) Use only counselors who possess adequate experience providing
credit counseling, which shall mean that each counselor either:
(i) Holds a counselor certification and who have complied with all
continuing education requirements necessary to maintain their counselor
certification; or
(ii) Has successfully completed a course of study and worked a
minimum of 6 months in a related area such as personal finance,
budgeting, or credit or debt management. A course of study shall
include training in counseling skills, personal finance, budgeting, or
credit or debt management. A counselor shall also receive annual
continuing education in the areas of counseling skills, personal
finance, budgeting, or credit or debt management;
(2) Demonstrate adequate experience, background, and quality in
providing credit counseling, which shall mean that, at a minimum, the
agency shall either:
(i) Have experience in providing credit counseling for the 2 years
immediately preceding the relevant application date; or
(ii) For each office providing counseling services, employ at least
one supervisor who has met the qualifications in paragraph (f)(2)(i) of
this section for no less than 2 of the 5 years preceding the relevant
application date; and
(3) If offering any component of counseling services by a telephone
or Internet method of delivery, use only counselors who, in addition to
all other requirements, demonstrate sufficient experience and
proficiency in providing such counseling services by those methods of
delivery, including proficiency in employing verification procedures to
ensure the person receiving the counseling services is the client, and
to determine whether the client has completely received counseling
services.
(g) No variation in services. An agency shall ensure that the type
and quality of services do not vary based on a client's decision
whether to obtain a certificate in lieu of other options that may or
may not be suggested by the agency.
[[Page 6069]]
(h) Use of the telephone and the Internet to deliver a component of
client services. An agency shall:
(1) Not provide any client diminished counseling services because
the client receives any portion of those counseling services by
telephone or Internet;
(2) Confirm the identity of the client before receiving counseling
services by telephone or Internet by:
(i) Obtaining one or more unique personal identifiers from the
client and assigning an individual access code, user ID, or password at
the time of enrollment; and
(ii) Requiring the client to provide the appropriate access code,
user ID, or password, and also one or more of the unique personal
identifiers during the course of delivery of the counseling services.
(i) Services to hearing and hearing-impaired clients and potential
clients. An agency shall furnish toll-free telephone numbers for both
hearing and hearing-impaired clients and potential clients whenever
telephone communication is required. The agency shall provide telephone
amplification, sign language services, or other communication methods
for hearing-impaired clients or potential clients.
(j) Language services to clients and potential clients. An agency
shall communicate, in writing and orally, with clients and potential
clients in the languages of the major population groups served by the
agency. The agency shall provide or arrange for bilingual personnel,
interpreters, or the use of communication technology, as needed, in
such languages. The agency shall inform any client or potential client
with limited English proficiency of the languages offered in providing
counseling services. Whenever an agency cannot provide counseling
services to a client or a potential client due to a person's limited
English proficiency, the agency shall employ its best efforts to
expeditiously direct such person to one or more approved agencies that
can provide counseling services in the language of the client or
potential client's choice.
(k) Services to clients and potential clients with special needs.
An agency that provides any portion of its counseling in person shall
comply with all federal, state and local laws governing facility
accessibility. An agency shall also provide or arrange for
communication assistance for clients or potential clients with special
needs who have difficulty making their service needs known.
(l) Mandatory disclosures to clients and potential clients. Prior
to providing any information to or obtaining any information from a
client or potential client, and prior to rendering any counseling
service, an agency shall disclose:
(1) The agency's fee policy;
(2) The agency's policies enabling clients to obtain counseling
services for free or at reduced rates based upon the client's lack of
ability to pay;
(3) The agency's funding sources;
(4) The counselors' qualifications;
(5) The potential impacts on credit reports of all alternatives the
agency may discuss with the client;
(6) The agency's policy prohibiting it from paying or receiving
referral fees for the referral of clients to or by the agency, except:
(i) Under a fair share agreement; or
(ii) To any locator;
(7) The agency's obligation to provide a certificate to the client
promptly upon the completion of counseling services;
(8) The client's right to negotiate an alternative payment schedule
with regard to each unsecured consumer debt under terms as set forth in
11 U.S.C. 502(k);
(9) The fact that the agency might disclose client information to
the United States Trustee in connection with the United States
Trustee's oversight of the agency, or during the investigation of
complaints, during on-site visits, or during quality of service
reviews;
(10) The fact that the United States Trustee has reviewed only the
agency's counseling services, and the fact that the United States
Trustee has neither reviewed nor approved any other services the agency
provides to clients; and
(11) The fact that a client will receive a certificate only if the
client completes counseling services.
(m) Complaint Procedures. An agency shall employ complaint
procedures that adequately respond to clients' concerns.
(n) Background checks. An agency shall:
(1) Conduct a criminal background check at least every 5 years for
each person providing credit counseling, and
(2) Not employ anyone as a counselor who has been convicted of any
felony, or any crime involving fraud, dishonesty, or false statements,
unless the United States Trustee determines circumstances warrant a
waiver of this prohibition against employment.
(o) Agency records. An agency shall prepare and retain records that
enable the United States Trustee to evaluate whether the agency is
providing adequate counseling and acting in compliance with all
applicable laws and this rule. All records, including documents bearing
original signatures, shall be maintained in either hard copy form or
electronically in a format widely available commercially. Records that
the agency shall prepare and retain for a minimum of two years, and
permit review by the United States Trustee upon request, shall include:
(1) Upon the filing of an application for probationary approval,
all information requested by the United States Trustee as an estimate,
projected to the end of the probationary period, in the form requested
by the United States Trustee;
(2) After probationary or annual approval, and for so long as the
agency remains on the approved list, semi-annual reports of historical
data (for the periods ending June 30 and December 31 of each year), of
the type and in the form requested by the United States Trustee; these
reports shall be submitted within 30 days of the end of the applicable
periods specified in this paragraph;
(3) Annual audited financial statements, including the audited
balance sheet, statement of income and retained earnings, and statement
of changes in financial condition;
(4) Books, accounts, and records to provide a clear and readily
understandable record of all business conducted by the agency,
including without limitation, copies of all correspondence with or on
behalf of the client, including the contract between the agency and the
client and any amendments thereto;
(5) Records concerning the delivery of services to clients and
potential clients with limited English proficiency and special needs,
and to hearing-impaired clients and potential clients, including
records:
(i) Of the number of such clients;
(ii) Of which languages are offered;
(iii) Detailing the agency's best efforts to provide services to
such clients and potential clients; and
(iv) Supporting any justification if the agency did not provide
services to such clients or potential clients;
(6) Records concerning the delivery of counseling services to
clients for free or at reduced rates based upon the client's lack of
ability to pay, including records of the number of such clients and the
extent to which the agency voluntarily waived all or part of its fees
under 28 CFR 58.21(c);
(7) Records of complaints and the agency's responses thereto;
(8) Records that enable the agency to verify the authenticity of
certificates their clients file in bankruptcy cases; and
(9) Records that enable the agency to issue replacement
certificates.
[[Page 6070]]
(p) Additional minimum requirements. An agency shall:
(1) Provide records to the United States Trustee upon request;
(2) Cooperate with the United States Trustee by allowing scheduled
and unscheduled on-site visits, complaint investigations, or other
reviews of the agency's qualifications to be an approved agency;
(3) Cooperate with the United States Trustee by promptly responding
to questions or inquiries from the United States Trustee;
(4) Assist the United States Trustee in identifying and
investigating suspected fraud and abuse by any party participating in
the credit counseling or bankruptcy process;
(5) Not exclude any client or creditor from a debt repayment plan
because the creditor declines to make a fair share contribution to the
agency;
(6) Take no action that would limit, inhibit, or prevent a client
from bringing an action or claim for damages against an agency under
any applicable law, including but not limited to 11 U.S.C. 111(g)(2);
(7) Refer clients and prospective clients for counseling services
only to agencies that have been approved by a United States Trustee to
provide such services;
(8) Comply with the United States Trustee's directions on approved
advertising, including without limitation those set forth in appendix A
to the application;
(9) Not disclose or provide to a credit reporting agency any
information concerning whether a client has received or sought
instruction concerning credit counseling or personal financial
management from an agency;
(10) Not expose the client to commercial advertising as part of or
during the client's receipt of any counseling services, and never
market or sell financial products or services during the counseling
session; provided, however, this provision does not prohibit an agency
from generally discussing all available financial products and
services;
(11) Not sell information about any client or potential client to
any third party without the client or potential client's prior written
permission; and
(12) If the agency is tax-exempt, submit a completed and signed tax
waiver permitting and directing the Internal Revenue Service to provide
the United States Trustee with access to the Internal Revenue Service's
files relating to the agency.
Sec. 58.21 Additional minimum requirements to become and remain
approved agencies relating to fees.
(a) If a fee for, or relating to, credit counseling services is
charged by an agency, such fee shall be reasonable:
(1) A fee of $50 or less for credit counseling services is presumed
to be reasonable and an agency need not obtain prior approval of the
United States Trustee to charge such a fee;
(2) A fee exceeding $50 for credit counseling services is not
presumed to be reasonable and an agency must obtain prior approval from
the United States Trustee to charge such a fee. The agency bears the
burden of establishing that its proposed fee is reasonable. At a
minimum, the agency must demonstrate that its cost for delivering such
services justify the fee; and
(3) The United States Trustee shall review the amount of the fee
set forth in paragraphs (a)(1) and (2) of this section periodically,
but not less than every 4 years, to determine the reasonableness of the
fee. Fee amounts and any revisions thereto shall be determined by
current costs, using a method of analysis consistent with widely
accepted accounting principles and practices, and calculated in
accordance with the provisions of federal law as applicable. Fee
amounts and any revisions thereto shall be published in the Federal
Register.
(b) An agency shall waive the fee whenever a client demonstrates a
lack of ability to pay the fee. A client shall be deemed to have
demonstrated a lack of ability to pay the fee if the client's household
current income is less than 150% of the income of the official poverty
line (as defined by the Office of Management and Budget, and revised
annually in accordance with section 673(2) of the Omnibus Budget
Reconciliation Act of 1981) as identified in the Poverty Guidelines
updated periodically in the Federal Register by the United States
Department of Health and Human Services applicable to a family or
household of the size involved in the fee decision.
(c) Notwithstanding the requirements of paragraph (b) of this
section, an agency may also waive fees based upon other considerations,
including, but not limited to:
(1) The client's net worth;
(2) The percentage of the client's income from government
assistance programs;
(3) Whether the client is receiving pro bono legal services in
connection with a filed or anticipated bankruptcy case; or
(4) If the combined current monthly income, as defined in 11 U.S.C.
101(10A), of the client and his or her spouse, when multiplied times
12, is equal to or less than the amounts set forth in 11 U.S.C.
707(b)(7).
(d) An agency shall not link a client or potential client's
purchase of counseling services to the purchase of any other service
offered by the agency.
Sec. 58.22 Additional minimum requirements to become and remain
approved agencies relating to certificates.
(a) An approved agency shall deliver a certificate only to the
client who took and completed the counseling services, except that an
approved agency shall instead deliver a certificate to the attorney of
a client who took and completed counseling services if the client
specifically requests that in writing.
(b) An approved agency shall attach to the certificate:
(1) The client's debt repayment plan (if any); and
(2) If the counselor determines a viable alternative to bankruptcy
is available to the client to resolve his or her credit problems, the
client's budget analysis.
(c) An approved agency shall deliver a certificate to a client no
later than one business day after the client completed counseling
services.
(d) If an approved agency provides other financial counseling in
addition to counseling services, and such other financial counseling
satisfies the requirements for counseling services specified in 11
U.S.C. 109(h) and 111, and this rule, a person completing such other
financial counseling is a client and the approved agency shall deliver
a certificate to the client no later than one business day after the
client's request. The approved agency shall not charge the client any
additional fee except any separate fee charged for the issuance of the
certificate, in accordance with paragraph (g) of this section.
(e) An approved agency shall issue certificates only in the form
approved by the United States Trustee, and shall generate the form
using the Certificate Generating System maintained by the United States
Trustee.
(f) An approved agency shall have sufficient computer capabilities
to issue certificates from the United States Trustee's Certificate
Generating System.
(g) An approved agency shall not charge a separate fee for the
issuance of a certificate or replacement certificate, unless:
(1) The approved agency has disclosed such fee in writing before
any counseling services are provided and before any payment is made by
the client;
[[Page 6071]]
(2) The approved agency obtains the written consent of the client
before the client commences receiving counseling services; and
(3) Such fee is reasonable and otherwise complies with the waiver
requirements of 28 CFR 58.21.
(h) An approved agency shall issue a certificate to each client who
completes counseling services. Spouses receiving counseling services
jointly shall each receive a certificate.
(i) An approved agency shall issue a replacement certificate to a
client who requests one.
(j) An approved agency shall not file certificates with the court.
(k) Only an authorized officer, supervisor or employee of an
approved agency shall issue a certificate, and an approved agency shall
not transfer or delegate authority to issue certificates to any other
entity.
(l) An approved agency shall implement internal controls sufficient
to prevent unauthorized issuance of certificates.
(m) An approved agency shall ensure the signature affixed to a
certificate is that of an officer, supervisor or employee authorized to
issue the certificate, in accordance with paragraph (k) of this
section, which signature shall be either:
(1) An original signature; or
(2) In a format approved for electronic filing with the court (most
typically in the form /s/ name of counselor); however, whenever a
certificate is prepared for filing electronically with the court, a
certificate with the counselor's original signature shall also be
provided to the client.
(n) An approved agency shall affix to the certificate the exact
name under which the approved agency is incorporated or organized.
(o) An approved agency shall identify on the certificate:
(1) The specific Federal judicial district requested by the client;
(2) Whether counseling services were provided in person, by
telephone or via the Internet;
(3) The date on which counseling services were completed by the
client; and
(4) The name of the counselor that provided the counseling
services.
(p) An approved agency shall affix the client's full, accurate name
to the certificate. If the counseling services are obtained by a client
through a duly authorized representative, the certificate shall also
set forth the name of the legal representative and legal capacity of
that representative.
(q) If an individual enters into a debt repayment plan after
completing credit counseling, upon the client's request after the
completion or termination of the debt repayment plan, the approved
agency shall:
(1) Provide such additional credit counseling as is necessary at
such time to comply with the requirements specified in 11 U.S.C. 109(h)
and 111, and this rule, including reviewing the client's current
financial condition and counseling the client regarding the
alternatives to resolve the client's credit problems;
(2) Deliver a certificate to the client no later than one business
day after the client completed such additional counseling; and
(3) Not charge the client any additional fee except any separate
fee charged for the issuance of the certificate, in accordance with
paragraph (g) of this section.
Sec. 58.23 Additional financial requirements and bonding and
insurance requirements for agencies offering debt repayment plans.
If an agency offers debt repayment plans, an agency shall possess
adequate financial resources to provide continuing support services for
budgeting plans over the life of any repayment plan, and provide for
the safekeeping of client funds, which shall include:
(a) Depositing all client funds into a deposit account, held in
trust, at a federally insured depository institution. Each such trust
account shall be established in a fiduciary capacity and shall be in
full compliance with federal law such that each client's funds shall be
protected by federal deposit insurance up to the maximum amount
allowable by federal law.
(b) Keeping and maintaining books, accounts, and records to provide
a clear and readily understandable record of all business conducted by
the agency, including without limitation, all of the following:
(1) Separate files for each client's account that include copies of
all correspondence with or on behalf of the client, including:
(i) All agreements with all entities, including the contract
between the agency and the client and any amendments thereto;
(ii) The analysis of the client's budget;
(iii) Correspondence between the agency and the client's creditors;
(iv) The notice given to creditors of any debt repayment plan; and
(v) All written statements of account provided to the client and
subsidiary ledgers concerning any debt repayment plan;
(2) A trust account general ledger reflecting all deposits to and
disbursements from all trust accounts, which shall be kept current at
all times;
(3) A reconciliation of the trust accounts, prepared at least once
a month; and
(4) An operating account general ledger reflecting all of the
agency's financial transactions involving the agency's operating
account, which shall be kept current at least on a monthly basis.
(c) Allowing an independent certified public accounting firm to
audit the trust accounts annually in accordance with generally accepted
accounting principles as defined by the American Institute of Certified
Public Accountants and any Statement of Work prepared by the United
States Trustee, which audit shall include:
(1) A report of all trust account activity including:
(i) The balance of each trust account at the beginning and end of
the period;
(ii) The total of all receipts from clients and disbursements to
creditors during the reporting period;
(iii) The total of all disbursements to the agency; and
(iv) The reconciliation of each trust account;
(2) A report of all exceptions (e.g., discrepancies,
irregularities, and errors) found, regardless of materiality; and
(3) An evaluation of the agency's trust account internal controls
and its computer operations to determine whether it provides a
reasonable assurance that the trust funds are safeguarded against loss
from unauthorized use or disposition.
(d) Obtaining a surety bond payable to the United States, as
follows:
(1) Subject to the minimum amount of $5,000, the amount of such
surety bond shall be the lesser of:
(i) 2% of the agency's disbursements made during the previous 12
months from all trust accounts attributable to the federal judicial
districts (or, if not feasible to determine, the states) in which the
agency seeks approval from the United States Trustee; or
(ii) Equal to the average daily balance maintained for the 6 months
immediately prior to submission of the application in all trust
accounts attributable to the federal judicial districts (or, if not
feasible to determine, the states) in which the agency seeks approval
from the United States Trustee;
(2) The agency may receive an offset or credit against the surety
bond amount determined under paragraph (d)(1) of this section if:
(i) The agency has previously obtained a surety bond, or similar
cash, securities, insurance (other than employee fidelity insurance),
or letter of
[[Page 6072]]
credit in compliance with the licensing requirements of the state in
which the agency seeks approval from the United States Trustee;
(ii) Such surety bond, or similar cash, securities, insurance
(other than employee fidelity insurance), or letter of credit provides
protection for the clients of the agency;
(iii) Such surety bond, or similar cash, securities, insurance
(other than employee fidelity insurance), or letter of credit, is
written in favor of the state or the appropriate state agency; and
(iv) The amount of the offset or credit shall be the lesser of:
(A) The principal amount of such surety bond, or similar cash,
securities, insurance (other than employee fidelity insurance), or
letter of credit; or
(B) The surety bond amount determined under paragraph (d)(1) of
this section;
(3) If an agency has contracted with an independent contractor to
administer any part of its debt repayment plans:
(i) Except as provided in paragraphs (d)(3)(ii) and (iii) of this
section, the independent contractor shall:
(A) Be an approved agency; or
(B) If the independent contractor is not an approved agency, then
the independent contractor shall:
(1) Be specifically covered under the agency's surety bond required
under paragraph (d)(1) of this section; or
(2) Have a surety bond that meets the requirements of paragraph
(d)(1) of this section; and
(C) Agree in writing to allow the United States Trustee to audit
the independent contractor's trust accounts for the debt repayment
plans administered on behalf of the agency and to review the
independent contractor's internal controls and administrative
procedures;
(ii) If the independent contractor holds funds for transmission for
5 days or less, then the amount of the required surety bond under
paragraph (d)(3)(i)(B) of this section shall be $500,000;
(iii) If the independent contractor performs only electronic fund
transfers on the agency's behalf, then the independent contractor need
not satisfy the requirements of paragraph (d)(3)(i) of this section
during such time as the independent contractor is authorized by the
National Automated Clearing House Association to participate in the
Automated Clearing House system.
(e) Obtaining either adequate employee bonding or fidelity
insurance, as follows:
(1) Subject to the minimum amount set forth below, the amount of
such bonding or fidelity insurance shall be 50% of the surety bond
amount calculated under paragraph (d)(1) of this section, prior to any
offset or credit that the agency may receive under paragraph (d)(2) of
this section; provided, however, that at a minimum, the employee bond
or fidelity insurance must be $5,000;
(2) An agency may receive an offset or credit against the employee
bond or fidelity insurance amount determined under paragraph (e)(1) of
this section if:
(i) The agency has previously obtained an employee bond or fidelity
insurance in compliance with the requirements of a state in which the
agency seeks approval from the United States Trustee; and
(ii) The deductible does not exceed a reasonable amount considering
the financial resources of the agency; and
(iii) The amount of the offset or credit shall be the lesser of:
(A) The principal amount of such employee bond or fidelity
insurance; or
(B) The employee bond or fidelity insurance amount determined under
paragraph (e)(1) of this section.
Sec. 58.24 Procedures for obtaining final agency action on United
States Trustees' decisions to deny agencies' applications and to remove
approved agencies from the approved list.
(a) The United States Trustee shall remove an approved agency from
the approved list whenever an approved agency requests its removal in
writing.
(b) The United States Trustee may issue a decision to remove an
approved agency from the approved list, and thereby terminate the
approved agency's authorization to provide counseling services, at any
time.
(c) The United States Trustee may issue a decision to deny an
agency's application or remove an agency from the approved list
whenever the United States Trustee determines that the agency has
failed to comply with the standards or requirements specified in 11
U.S.C.Sec. 109(h) or 111, this rule, or the terms under which the
United States Trustee designated it to act as an approved agency,
including but not limited to finding any of the following:
(1) The agency is not employing adequate procedures for safekeeping
or paying client funds, which results in a loss to a client;
(2) The agency's surety bond has been canceled;
(3) Any entity has revoked the agency's nonprofit status, even if
that revocation is subject to further administrative or judicial
litigation, review or appeal;
(4) Any entity has suspended or revoked the agency's license to do
business in any jurisdiction; or
(5) Any United States district court has removed the agency under
11 U.S.C. 111(e).
(d) If the Internal Revenue Service revokes an agency's tax exempt
status, the United States Trustee shall promptly commence an
investigation to determine whether any of the factors set forth in
paragraphs (c)(1) through (5) of this section exist.
(e) The United States Trustee shall provide to the agency in
writing a notice of any decision either to:
(1) Deny the agency's application; or
(2) Remove the agency from the approved list.
(f) The notice shall state the reason(s) for the decision and shall
reference any documents or communications relied upon in reaching the
denial or removal decision. To the extent authorized by law, the United
States Trustee shall provide to the agency copies of any such documents
that were not supplied to the United States Trustee by the agency. The
notice shall be sent to the agency by overnight courier, for delivery
the next business day.
(g) Except as provided in paragraph (i) of this section, the notice
shall advise the agency that the denial or removal decision shall
become final agency action, and unreviewable, unless the agency submits
in writing a request for review by the Director no later than 20
calendar days from the date of the notice to the agency.
(h) Except as provided in paragraph (i) of this section, the
decision to deny an agency's application or remove an agency from the
approved list shall take effect upon:
(1) The expiration of the agency's time to seek review from the
Director, if the agency fails to timely seek review of a denial or
removal decision; or
(2) The issuance by the Director of a final written decision, if
the agency timely seeks such review.
(i) The United States Trustee may provide that a decision to remove
an agency from the approved list is effective immediately and deny the
agency the right to provide counseling services whenever the United
States Trustee finds any of the factors set forth in paragraphs (c)(1)
through (5) of this section.
(j) An agency's request for review shall be in writing and shall
fully describe why the agency disagrees with the denial or removal
decision, and shall be accompanied by all documents and materials the
agency wants the Director to consider in reviewing the denial or
removal decision. The agency shall send the original and one copy of
the request for review, including all accompanying documents and
[[Page 6073]]
materials, to the Office of the Director by overnight courier, for
delivery the next business day. In order to be timely, a request for
review shall be received at the Office of the Director no later than 20
calendar days from the date of the notice to the agency.
(k) The United States Trustee shall have 30 calendar days from the
date of the agency's request for review to submit to the Director a
written response regarding the matters raised in the agency's request
for review. The United States Trustee shall provide a copy of this
response to the agency by overnight courier, for delivery the next
business day.
(l) The Director may seek additional information from any party in
the manner and to the extent the Director deems appropriate.
(m) In reviewing the decision to deny an agency's application or
remove an agency from the approved list, the Director shall determine:
(1) Whether the denial or removal decision is supported by the
record; and
(2) Whether the denial or removal decision constitutes an
appropriate exercise of discretion.
(n) Except as provided in paragraph (o) of this section, the
Director shall issue a written final decision no later than 60 calendar
days from the receipt of the agency's request for review, unless the
agency agrees to a longer period of time or the Director extends the
deadline. The Director's final decision on the agency's request for
review shall constitute final agency action.
(o) Whenever the United States Trustee provides under paragraph (i)
of this section that a decision to remove an agency from the approved
list is effective immediately, the Director shall issue a written
decision no later than 15 calender days from the receipt of the
agency's request for review, unless the agency agrees to a longer
period of time, which decision shall:
(1) Be limited to deciding whether the determination that the
removal decision should take effect immediately was supported by the
record and an appropriate exercise of discretion;
(2) Constitute final agency action only on the issue of whether the
removal decision should take effect immediately; and
(3) Not constitute final agency action on the ultimate issue of
whether the agency should be removed from the approved list; after
issuing the decision, the Director shall issue a written final decision
by the deadline set forth in paragraph (n) of this section.
(p) In reaching a decision under paragraphs (n) and (o) of this
section, the Director may specify a person to act as a reviewing
official. The reviewing official's duties shall be specified by the
Director on a case-by-case basis, and may include reviewing the record,
obtaining additional information from the participants, providing the
Director with written recommendations, and such other duties as the
Director shall prescribe in a particular case.
(q) An agency that files a request for review shall bear its own
costs and expenses, including counsel fees.
(r) When a decision to remove an agency from the approved list
takes effect, the agency shall:
(1) Immediately cease providing counseling services to clients and
shall not agree to provide counseling services to prospective clients;
(2) No later than 3 business days after the date of removal, issue
all certificates to all clients who completed counseling services prior
to the agency's removal from the approved list; and
(3) No later than 3 business days after the date of removal, return
all fees to clients and prospective clients who had paid for counseling
services, but had not completely received them.
(s) An agency must exhaust all administrative remedies before
seeking redress in any court of competent jurisdiction.
Dated: January 18, 2008.
Clifford J. White III,
Director, Executive Office for United States Trustees.
[FR Doc. E8-1451 Filed 1-31-08; 8:45 am]
BILLING CODE 4410-40-P