New § 526. Restrictions on debt relief agencies A "debt relief agency," which is defined by §101(12A) to be anyone who provides bankruptcy assistance for money, specifically including "bankruptcy petition preparers" defined in §110(a)(1), and presumably includes attorneys, but does not include "any person that is an officer, director, employee or agent" of the debt relief agency, nonprofit organizations, creditors, or authors of copyrighted materials, cannot:
- Fail to perform a service it informed the assisted person it would perform. §526(a)(1)
- Make a false or misleading statement. §526(a)(2)
- Counsel an assisted person to make a false or misleading statement in a bankruptcy document that is untrue and misleading or that the agency should have been known upon exercise of reasonable care to be untrue or misleading. §526(a)(2)
- Misrepresent the services the agency will provide or the benefits and risks if a person becomes a debtor. §526(a)(3)
- Advise a person to incur more debt prior to filing. §526(a)(4)
- Advise a person "to pay an attorney or bankruptcy petition preparer fee or charge for services performed as part of preparing for or representing a debtor in a case under this title." §526(a)(4)
A "debt relief agency" is liable to the assisted person for fees charged, actual damages, and attorneys fees, if the agency is found to have:
- Intentionally or negligently failed to comply with §526, §527, or §528. §526(c)(2)(A)
- Provided assistance in a case dismissed or converted because of the agency's intentional or negligent failure to file required documents. §526(c)(2)(B)
- Intentionally or negligently disregarded material requirements of the bankruptcy code or rules. §526(c)(2)(C)
Text appearing below in blue is the same in H.R.333 and S.420. Text in maroon is only in H.R.333. Text in green is only in S.420. |
§ 526. Restrictions on debt relief agencies
(a) A debt relief agency shall not--
(1) fail to perform any service that such agency informed an assisted person or prospective assisted person it would provide in connection with a case or proceeding under this title;
(2) make any statement, or counsel or advise any assisted person or prospective assisted person to make a statement in a document filed in a case or proceeding under this title, that is untrue and misleading, or that upon the exercise of reasonable care, should have been known by such agency to be untrue or misleading;
(3) misrepresent to any assisted person or prospective assisted person, directly or indirectly, affirmatively or by material omission, with respect to--
(i) the services that such agency will provide to such person; or
(ii) the benefits and risks that may result if such person becomes a debtor in a case under this title; or
(4) advise an assisted person or prospective assisted person to incur more debt in contemplation of such person filing a case under this title or to pay an attorney or bankruptcy petition preparer fee or charge for services performed as part of preparing for or representing a debtor in a case under this title.
(b) Any waiver by any assisted person of any protection or right provided under this section shall not be enforceable against the debtor by any Federal or State court or any other person, but may be enforced against a debt relief agency.
(c)
(1) Any contract for bankruptcy assistance between a debt relief agency and an assisted person that does not comply with the material requirements of this section, section 527, or section 528 shall be void and may not be enforced by any Federal or State court or by any other person, other than such assisted person.
(2) Any debt relief agency shall be liable to an assisted person in the amount of any fees or charges in connection with providing bankruptcy assistance to such person that such debt relief agency has received, for actual damages, and for reasonable attorneys' fees and costs if such agency is found, after notice and hearing, to have--
(A) intentionally or negligently failed to comply with any provision of this section, section 527, or section 528 with respect to a case or proceeding under this title for such assisted person;
(B) provided bankruptcy assistance to an assisted person in a case or proceeding under this title that is dismissed or converted to a case under another chapter of this title because of such agency's intentional or negligent failure to file any required document including those specified in section 521; or
(C) intentionally or negligently disregarded the material requirements of this title or the Federal Rules of Bankruptcy Procedure applicable to such agency.
(3) In addition to such other remedies as are provided under State law, whenever the chief law enforcement officer of a State, or an official or agency designated by a State, has reason to believe that any person has violated or is violating this section, the State--
(A) may bring an action to enjoin such violation;
(B) may bring an action on behalf of its residents to recover the actual damages of assisted persons arising from such violation, including any liability under paragraph (2); and
(C) in the case of any successful action under subparagraph (A) or (B), shall be awarded the costs of the action and reasonable attorney fees as determined by the court.
(4) The United States District Court for any district located in the State shall have concurrent jurisdiction of any action under subparagraph (A) or (B) of paragraph (3).
(5) Notwithstanding any other provision of Federal law and in addition to any other remedy provided under Federal or State law, if the court, on its own motion or on motion of the United States trustee or the debtor, finds that a person intentionally violated this section, or engaged in a clear and consistent pattern or practice of violating this section, the court may--
(A) enjoin the violation of such section; or
(B) impose an appropriate civil penalty against such person.
(d) No provision of this section, section 527, or section 528 shall--
(1) annul, alter, affect, or exempt any person subject to such sections from complying with any law of any State except to the extent that such law is inconsistent with those sections, and then only to the extent of the inconsistency; or
(2) be deemed to limit or curtail the authority or ability--
(A) of a State or subdivision or instrumentality thereof, to determine and enforce qualifications for the practice of law under the laws of that State; or
(B) of a Federal court to determine and enforce the qualifications for the practice of law before that court.
This page was last revised:
04/02/01
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