STATE OF NEW JERSEY

Is a license required? Yes. 17:16G-2.b states that ” It shall be unlawful for any nonprofit social service agency or nonprofit consumer credit counseling agency to act as a debt adjuster without first obtaining a license from the Commissioner of the Department of Banking pursuant to this act.”
State specific loan modification law? Yes. New Jersey Debt Adjustment and Credit Counseling Act, N.J.S.A. 17:16G(Attached as Schedule A). 17:16G-1.c states that ““Debt adjuster” means a person who either (a) acts or offers to act for a consideration as an intermediary between a debtor and his creditors for the purpose of settling, compounding, or otherwise altering the terms of payment of any debts of the debtor, or (b) who, to that end, receives money or other property from the debtor, or on behalf of the debtor, for payment to, or distribution among, the creditors of the debtor.”
Advantages of becoming a licensed Mortgage Broker? None, nor it is possible. Loan modification services must be licensed as debt adjusters in New Jersey.
Penalties for operating in the state without a license:  NJ ADC 3:25-3.1 allows for a fine of $1,000 for the first offense and up to $5,000 for each subsequent offense as well as other criminal penalties.
Is an advanced fee permitted?   There is no prohibition on up front fees, however 17:16G-6 states that “a. A licensee may charge a fee to cover the cost of providing debt adjustment and credit counseling. b. The fee for debt adjustment shall not exceed 1% of the gross monthly income of the person to whom the service is rendered, but in no case more than $15.00 in any one month, except as may be otherwise provided by rule or regulation promulgated by the commissioner. This fee may be waived in the discretion of the licensee.”
Is a written agreement required? There is no specific requirement for a written agreement.
Other noteworthy information?
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SCHEDULE A

New Jersey Debt Adjustment and Credit Counseling Act

17:16G-1. Definitions

As used in this act,

a. “Nonprofit social service agency” or “nonprofit consumer credit counseling agency” means any corporation duly organized under Title 15 of the Revised Statutes or Title 15A of the New Jersey Statutes, no part of the assets, income or profit of which is distributable to, or enures to the benefit of its members, directors or officers, except to the extent permitted under this act, and which is engaged in debt adjustment.

b. “Credit counseling” means any guidance or educational program or advice offered by a nonprofit social service agency or nonprofit consumer credit counseling agency for the purpose of fostering the responsible use of credit and debt management.

c. (1) “Debt adjuster” means a person who either (a) acts or offers to act for a consideration as an intermediary between a debtor and his creditors for the purpose of settling, compounding, or otherwise altering the terms of payment of any debts of the debtor, or (b) who, to that end, receives money or other property from the debtor, or on behalf of the debtor, for payment to, or distribution among, the creditors of the debtor.

(2) The following persons shall not be deemed debt adjusters: (a) an attorney-at-law of this State who is not principally engaged as a debt adjuster; (b) a person who is a regular, full-time employee of a debtor, and who acts as an adjuster of his employer’s debts; (c) a person acting pursuant to any order or judgment of court, or pursuant to authority conferred by any law of this State or the United States; (d) a person who is a creditor of the debtor, or an agent of one or more creditors of the debtor, and whose services in adjusting the debtor’s debts are rendered without cost to the debtor; or (e) a person who, at the request of a debtor, arranges for or makes a loan to the debtor, and who, at the authorization of the debtor, acts as an adjuster of the debtor’s debts in the disbursement of the proceeds of the loan, without compensation for the services rendered in adjusting those debts.

d. “Debtor” means an individual or two or more individuals who are jointly and severally, or jointly or severally indebted.

SENATE LABOR, INDUSTRY AND PROFESSIONS COMMITTEE STATEMENT

2000 Main Volume

Senate, No. 195–L.1986, c. 184

This bill amends the law which provides for the licensing and regulation of nonprofit social service agencies and nonprofit consumer credit counseling agencies which engage in credit counseling and debt adjustment.

The term “debt adjuster” is broadened to include anyone who acts as an intermediary between a debtor and creditors. Those “debt adjusters” deemed not to be such under N.J.S. 2C:21-19 are also so deemed under the definition of debt adjuster in this bill. Those exempt are, among others, lawyers who are not principally engaged as debt adjusters and persons who are full-time employees of the debtor, who act pursuant to an order or judgment of the court, or who act on behalf of creditors.

Nonprofit social service or consumer credit counseling agencies are required under the bill to possess the necessary financial resources to sustain their operations.

Under current law, these agencies may charge fees for debt adjustment. The limit on these fees remains unchanged under the bill. However, fees for credit counseling, which are not permitted under current law, would be allowed, with the maximum fee being established by the Commissioner of Banking.

Finally, the Commissioner of Banking is granted the power to enjoin any person from continuing to engage in practices that are in violation of the act.

This bill was pre-filed for introduction in the 1986 session pending technical review. As reported, the bill includes the changes required by technical review which has been performed.

17:16G-2. Persons authorized to act as debt adjuster; license for nonprofit social service or consumer credit counseling agencies

a. No person other than a nonprofit social service agency or a nonprofit consumer credit counseling agency shall act as a debt adjuster.

b. It shall be unlawful for any nonprofit social service agency or nonprofit consumer credit counseling agency to act as a debt adjuster without first obtaining a license from the Commissioner of the Department of Banking pursuant to this act.

c. A licensee is authorized to offer credit counseling.

17:16G-3. Applications for license

Application for said license shall be made on forms prescribed by the commissioner, who shall be empowered to require information deemed necessary to demonstrate that the applicant is qualified to be licensed and possesses the necessary financial resources to sustain its operation.

17:16G-4. Duties of commissioner; fees

The commissioner shall promulgate procedures and standards for the issuance or denial of licenses, shall promulgate grounds for and procedures under which licenses may be revoked, suspended, or reinstated, and shall establish fees necessary to meet administrative costs under this act.

17:16G-5. Bond; financial records audit; annual report

a. Any nonprofit social service agency or nonprofit consumer credit counseling agency licensed under this act shall be bonded to the satisfaction of the commissioner for each location pursuant to regulation. In setting the bonding requirements for each location, the commissioner shall consider the number of debtors provided credit counseling and debt adjustment services at that location, and the balance of funds in the trust account required to be maintained pursuant to section 3 of P.L.2005, c. 287 (C.17:16G-9).

b. The commissioner may require a licensee to file an annual report containing that information required by the commissioner by regulation concerning activities conducted as a licensee in the preceding calendar year. The report shall be submitted under oath and in the form and within the time specified by the commissioner by regulation.

c. The commissioner may require a high cost home loan counselor to file an annual report containing that information required by the commissioner by regulation concerning activities conducted pursuant to subsection g. of section 5 of P.L.2003, c. 64 (C.46:10B-26) as a registrant in the preceding calendar year. The report shall be submitted under oath and in the form and within the time specified by the commissioner by regulation.

d. Each licensee shall file with the commissioner on or before April 1 of each year a copy of its annual report, containing the information required by the commissioner by regulation pursuant to P.L.1979, c. 16 (C.17:16G-1 et seq.) and section 3 of P.L.2005, c. 287 (C.17:16G-9) . A licensee or high cost home loan counselor that fails to make and file its annual report in the form and within the time provided in this section shall be subject to a penalty of not more than $100 for each day’s failure, and the commissioner may revoke or suspend its authority to do business in this State. The penalty may be collected in a summary proceeding pursuant to the “Penalty Enforcement Law of 1999,” P.L.1999, c. 274 (C.2A:58-10 et seq.). A warrant may issue in lieu of a summons.

e. Each licensee shall have its financial records relating to debt adjustment audited annually by a certified public accountant or a public accountant, which audit shall be filed with the commissioner. Such an audit shall certify that the salaries and expenses paid by the licensee are reasonable compared to those incurred by comparable organizations providing similar services.

f. After reviewing the annual report and audit, the Commissioner of Banking and Insurance may cause an examination of the licensee to be made, the actual expenses of such an examination shall be paid by the licensee, and the commissioner may maintain any action against any licensee to recover the fees and expenses herein provided for.

g. The licensee shall make a copy of the annual report and audit available for public inspection at each of the licensee’s locations.

17:16G-6. Fees for services

a. A licensee may charge a fee to cover the cost of providing debt adjustment and credit counseling.

b. The fee for debt adjustment shall not exceed 1% of the gross monthly income of the person to whom the service is rendered, but in no case more than $15.00 in any one month, except as may be otherwise provided by rule or regulation promulgated by the commissioner. This fee may be waived in the discretion of the licensee.

c. The commissioner is authorized to establish the maximum fee that may be charged for credit counseling.

17:16G-7. Board of directors of agency

Every nonprofit social service agency or nonprofit consumer credit counseling agency licensed under this act shall establish a board of directors whose function shall be to establish the policies of such agency. No more than 40% of the members of the board of directors shall have as their principal employer any corporation, association or institution which offers credit to the general public.

17:16G-8. Violations; penalties; injunctions; civil actions for damages

Any person who violates any provisions of this act shall be subject to a penalty of $1,000 for the first offense and not more than $5,000 for the second and each subsequent offense to be collected by and in the name of the commissioner in a summary proceeding under the “Penalty Enforcement Law of 1999,” P.L.1999, c. 274 (C.2A:58-10 et seq.).

If the commissioner has reason to believe that any person or licensee has engaged in or is engaging in any practice or transaction prohibited by P.L.1979, c. 16 (C.17:16G-1 et seq.), the commissioner may, in addition to any remedies available, bring a summary action in the name of and on behalf of the State against the person or licensee and any other person concerned or in any way participating in or about to participate in those practices or transactions, to enjoin the person or licensee from continuing those practices or engaging in or doing any act in furtherance of those practices or in violation of that act. In addition to any other remedies or penalties available for a violation of P.L.1979, c. 16 (C.17:16G-1 et seq.), any debtor injured by a violation of P.L.1979, c. 16 (C.17:16G-1 et seq.) may bring a civil action for recovery of damages.

17:16G-9. Duties of debt adjuster

Every licensee acting as a debt adjuster shall:

a. disburse to the appropriate creditors all funds received from a debtor, less any fees permitted by section 6 of P.L.1979, c. 16 (C.17:16G-6), within 10 days of receipt of those funds;

b. maintain a separate trust account in a qualified bank as defined in paragraph (12) of section 1 of P.L.1948, c. 67 (C.17:9A-1), in the name of the debt adjuster for the benefit of the debtors serviced by the debt adjuster; and

c. maintain an appropriate ledger book for the trust account required by subsection b. of this section, having at least one single page for each debtor, with appropriate entries of all deposits into and disbursements from each debtor’s account, including copies of all records showing disbursements to creditors and receipts from debtors, which ledger book and records shall be maintained in accordance with generally accepted accounting principles for not less than six years following the close of each debtor’s account.


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