Online advertising, including lead generation, occupies a special place in connecting consumers with financial products and services. Beginning in November, however, the ability of some consumers to learn about debt services (debt settlement and debt management plans) will be restricted by Google, according to a recent posting and update to Google's Advertising Policies for the U.S. Updates to the search engine's Financial products and services policy will restrict the advertisement of debt settlement, debt management services, and credit repair services: Ads for credit repair services will no longer be allowed to serve. Ads for debt settlement or debt management services will be allowed to serve if they meet the below requirements:
Google allows ads promoting debt services only if the advertiser and provider of these services is an approved non-profit budget and credit counseling agency, as defined by 11 U.S. Code § 111. Advertisers must also be certified with Google.
Certification requirements are not yet published, but generally the search engine requires financial services products, landing pages, and ads to meet all local legal requirements. "This policy will apply globally to all accounts that advertise these services directly, to lead generators, and to those who connect consumers with third-party services," according to the posting.
Section 111(b) of title 11, United States Code, governs the approval by United States Trustees of credit counseling agencies for inclusion under 11 U.S.C. § 111(a)(1) on publicly available agency lists in one or more United States district courts. Section 111 of title 11 provides that, in applicable jurisdictions, a United States Trustee may approve an application to become an approved credit counseling agency only after the United States Trustee has thoroughly reviewed the applicant's (a) qualifications and (b) services. 11 U.S.C. § 111(b)(1).
After completing that review, a United States Trustee may approve a credit counseling agency only if the agency establishes that it fully satisfies all requisite standards. 11 U.S.C. § 111(b). Among other things, an applicant must establish it will (a) provide qualified counselors, (b) maintain adequate provision for safekeeping and payment of client funds, (c) provide adequate counseling with respect to client credit problems, and (d) deal responsibly and effectively with other matters relating to the quality, effectiveness, and financial security of the services it provides. 11 U.S.C. § 111(c)(1).
The U.S. trustee program in the Department of Justice, and information on the application process for credit counseling agencies in any jurisdictions other than Alabama and North Carolina, can be found on the Department of Justice Executive Office for United States Trustee website at https://www.justice.gov/ust/credit-counseling-debtor-education-information. By law, the U.S. Trustee Program does not operate in Alabama and North Carolina; in these states, bankruptcy administrators approve pre-bankruptcy credit counseling organizations and pre-discharge debtor education course providers.
11 U.S.C. § 111 requires a credit counseling agency to be organized as a nonprofit entity, but does not require tax-exempt status. Organization as a nonprofit entity is a matter of state law, and nonprofit organizations do not necessarily qualify for Internal Revenue Code 501(c)(3) tax-exempt status, which is a matter of federal tax law. While tax-exempt status is not required under the statute to operate as a nonprofit entity, when determining whether an agency constitutes a nonprofit entity, the UST takes into consideration whether an agency has been approved or rejected for 501(c)(3) status, and requires an agency to notify EOUST if 501(c)(3) status is revoked.
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), Public Law 109–8, 119 Stat. 23, 37, 38 (April 20, 2005), codified at 11 U.S.C. 109(h) and 111, effective October 17, 2005, requires debtors to receive credit counseling before they can be eligible for bankruptcy relief, so that they will make an informed choice about bankruptcy, its alternatives, and its consequences. In addition, individual debtors under chapters 7, 13, and in some instances chapter 11 must receive from an approved provider debtor education before they may receive a discharge of their debts. Education providers may be for-profit or nonprofit entities.
Most states regulate debt services, although the laws vary from one state to another. Many states, however, allow for-profit and nonprofit entities to provide debt management plans and debt settlement services to consumers. Many state laws require debt management plan and debt settlement services providers to be licensed and regulate the providers for compliance with statutory requirements, including bonding, fee caps, disclosures, and other consumer protection policies, procedures, and safeguards. Some states have utilized the Uniform Debt-Management Services Act, adopted by the Uniform Law Commission, as the outline for their statutory provisions, which includes licensing standards, bonding, and supervisory examination. In addition, in 2010, the Federal Trade Commission amended the Telemarketing Sales Rule (TSR) to add specific provisions regulating debt relief services of for-profit debt relief services, including credit counseling and debt settlement. The TSR is enforced by the FTC and the Consumer Financial Protection Bureau, state attorneys general, and, in limited situations, consumers.
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Jonathan L. Pompan, a partner in the Washington, DC office of Venable LLP, co-chairs the firm's Consumer Financial Services Practice Group. His practice focuses on providing comprehensive legal advice and regulatory advocacy to a broad spectrum of clients, such as nonbank financial products and services providers, nonprofit organizations, and trade and professional associations, before the CFPB, the FTC, state attorneys general, and regulatory agencies.
This article is not intended to provide legal advice or opinion and should not be relied on as such. Legal advice can only be provided in response to a specific fact situation.