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Tuesday, July 21, 2009

This can save you money in debt settlement

I love arguing with friends...

So today.."Since I have nothing better to do" I spoke with a lobbyist friend of mine and an attorney..
We debated something that could have an impact on Debt Settlement companies wishing to do business in California. The Check Sellers, Bill Payers and Proraters Law. Personally I know some individuals and companies who wish this would just go away, but....It's not.

The definition of proraters, found in Financial Code section 12002.1, states: A prorater is 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.

Debt Settlement is also called debt consolidation or debt negotiation by consumers because it's what they type into the search engine when they feel the need to take action about overwhelming bills.

Debt Settlement companies argue that since they do not directly control the clients funds that they do not qualify as a prorater.

Both of my friends (Lobbyist & Attorney) agree that debt settlement companies are considered proraters due to the interpretation of the law by the Department Of Corporations.

The bill AB350 if passed will not take effect until 2012

AB350 is the proposed Debt Settlement Service Act for the purpose of licensing debt settlement service providers.
this may bore some people but, if you want to avoid being scammed you should pay attention.


The Check Sellers, Bill Payers and Proraters Law (the Law) is contained in Division 3 of the California Financial Code, commencing with Section 12000. The regulations are contained in Subchapter 10 of Chapter 3, Title 10 of the California Code of Regulations, commencing with Section 1770 (10 C.C.R. § 1770, et seq.).

The Law, originally named the Check Sellers and Cashers Law, was enacted in 1947. As enacted, it provided for the licensing and regulatory review of companies and individuals who sold checks, cashed checks, or paid bills on behalf of others. In 1983, the law was amended to no longer require the licensure of check cashers by the Department. Now check cashers are required by law to obtain a permit from the Department of Justice.

Currently, there are four different types of businesses licensed under the Check Sellers, Bill Payers and Proraters Law.

  1. Check Sellers.

    A check seller sells checks, money orders, or drafts to be used by others for the payment of obligations and the transfer of money. Most checks and money orders are sold by agents who split the check fee with the licensee. The checks are sold through a network of agents such as small markets and check cashing businesses. A check or money order is usually purchased to pay rent, utilities, or some other obligation that must be sent through the mail. In addition, checks are purchased to send money back to a foreign country.

  2. Bill Payers.

    A bill payer receives money as an agent of an obligor to pay bills. For this service, it receives a fee from the obligor.

  3. General Proraters.

    A general prorater contracts with delinquent debtors and intercedes with creditors to settle debts on behalf of the debtor.

  4. Special Proraters.

    A special prorater pays its customers' bills as part of its management of its customers' affairs, and is generally a business agent or a manager.

The license requirements are set forth in Section 12000, et seq. of the law. The law requires that applicants for Check Sellers licenses maintain a minimum net worth of $500,000 and a $500,000 license bond.

Bill Payers and General Proraters must maintain a minimum of $10,000 net worth and a surety bond of $25,000. For those licensees who use agents, the requirements are considerably higher.

In addition to the financial and bonding requirements, applicants must demonstrate that they have experience in this type of business, and that they do not have a criminal history or a history of noncompliance with regulatory requirements.

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