2006 Kentucky Revised Statutes - .040   Persons engaged in debt adjusting -- Powers and prohibitions -- Requirements for registration, audits, and insurance.

380.040 Persons engaged in debt adjusting -- Powers and prohibitions -- Requirements for registration, audits, and insurance. (1) Subject to subsection (3) of this section, a person, whether or not located in this state, engaged in debt adjusting shall do both of the following: (a)  Unless specifically instructed otherwise by a debtor, disburse to the appropriate creditors all funds received from the debtor, less any contributions or fees not prohibited by subsection (2) of this section, within thirty (30) days of receipt of the funds from the debtor; and (b)  Maintain a separate trust account for the receipt of any funds from debtors and the disbursement of the funds to creditors on behalf of the debtors. (2) If contributions or fees for engaging in debt adjusting are accepted, directly or indirectly, a person engaged in debt adjusting shall not do any of the following: (a)  Accept a contribution or fee exceeding seventy-five dollars ($75) from a debtor residing in this state for an initial set up; (b)  Accept a consultation contribution or fee exceeding fifty dollars ($50) per calendar year from a debtor residing in this state; or (c)  Accept a periodic contribution or fee from a debtor who resides in this state that exceeds the greater of eight and one-half percent (8.5%) of the amount paid by the debtor each month for distribution to the debtor's creditors or thirty dollars ($30). (3) Subsections (1) and (2) of this section shall not prohibit a person engaged in debt adjusting for a debtor who resides in this state from charging the debtor a bad check charge of twenty dollars ($20) or the amount passed on from the debt adjuster's bank, whichever is greater, in addition to contributions or fees not prohibited by subsection (2) of this section. (4) Fees or contributions permitted in subsections (1), (2), and (3) of this section may be adjusted on an annual basis by the amount equivalent to any increase in the consumer price index, published by the United States Department of Labor, Bureau of Labor Statistics. (5) Any person that engages in debt adjusting shall file an initial registration form, accompanied by an initial registration fee of two hundred fifty dollars ($250), and the registration shall be renewed each year thereafter for a fee of two hundred fifty dollars ($250) to cover the actual cost of filing the registration, in accordance with administrative regulations promulgated by the Attorney General. (6) Any person that engages in debt adjusting shall arrange for and undergo an annual audit of the person's business, including any trust funds deposited and distributed to creditors on behalf of debtors, which shall be conducted by an independent, third- party certified public accountant. Both of the following shall apply to an audit performed under this subsection: (a)  The person shall file the results of the audit and the auditor's opinion with the Consumer Protection Division of the Office of the Attorney General within thirty (30) days of the anniversary date of filing the initial registration; and Page 1 of 2 (b) The Attorney General shall make available a summary of the results of the audit and the auditor's opinion upon written request of any person and payment of a fee not to exceed the cost of copying the summary and opinion. (7) A person engaged in debt adjusting shall obtain and at all times maintain insurance coverage for errors and omissions, employee dishonesty, depositor's forgery, and computer fraud in the amount of ten percent (10%) of the monthly average for the immediately preceding six (6) months of the aggregate amount of all deposits made with the person by all debtors. The insurance coverage shall comply with all of the following: (a)  The minimum limit of the insurance coverage shall not be less than one hundred thousand dollars ($100,000), and the maximum limit of the insurance coverage shall not be more than two hundred fifty thousand dollars ($250,000); (b)  The insurance coverage shall not include a deductible in excess of ten percent (10%) of the face amount of the policy coverage; (c)  The insurance coverage shall be issued by an insurer and rated at least A-, or its equivalent, by a nationally recognized rating organization; and (d)  The insurance coverage shall provide that the Consumer Protection Division of the Office of the Attorney General shall be named as an additional interested party. (8) Any person engaged in debt adjusting shall comply with the provisions of this section. Effective: June 20, 2005 History: Created 2005 Ky. Acts ch. 38, sec. 2, effective June 20, 2005. Page 2 of 2