The Check Sellers, Bill Payers and Proraters Law (Proraters Law) prohibits, among other things, a person, without first obtaining a license from the Commissioner of Financial Protection and Innovation, from acting as a person who, for compensation, engages in whole or in part in the business of receiving money or evidences thereof for the purpose of distributing the money or evidences thereof among creditors in payment or partial payment of the obligations of the debtor. The Proraters Law exempts from the requirements of the law imposed on proraters a nonprofit community service organization that meets certain criteria, including that the nonprofit community service organization has as its principal functions consumer credit education, counseling on consumer credit problems and family budgets, arranging or administering debt management plans, and arranging or administering debt settlement plans. The Proraters Law also provides as a criteria for exemption that the nonprofit community service organization receives from a debtor no more than certain amounts to offset the organization's actual and necessary expenses for those services, including a one-time sum not to exceed $50 for education and counseling combined in connection with debt management or debt settlement services and, for debt management plans, a sum not to exceed 8% of the money disbursed monthly or $35 per month, whichever is less. The Proraters Law provides as a criteria for exemption that the nonprofit community service organization maintains at all times a surety bond in the amount of $25,000 issued by an insurer licensed in this state.
This bill would instead provide as a criteria for exemption from the Proraters Law that the nonprofit community service organization receives from a debtor no more than a one-time sum not to exceed $100 for education and counseling combined in connection with debt management or debt settlement services and, for debt management plans, a sum not to exceed 15% of the money disbursed monthly or $75 per month, whichever is less. The bill would also revise and recast the requirement for exemption from the Proraters Law that a nonprofit community service organization has as one of its principal functions counseling on consumer credit problems and family budgets to specify that the counseling is via in-person, telephone, and virtual communication. The bill would also increase the surety bond requirement described above from $25,000 to $100,000. By narrowing the scope of nonprofit community service organizations that are exempt from the Proraters Law, a willful violation of which is punishable as a misdemeanor, the bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.

Statutes affected:
SB985: 12104 FIN
01/29/24 - Introduced: 12104 FIN
08/09/24 - Enrolled: 12104 FIN
08/19/24 - Chaptered: 12104 FIN
SB 985: 12104 FIN