DEPARTMENT OF INSURANCE AND FINANCIAL SERVICES  
DEBT MANAGEMENT  
(By authority conferred on the director of the department of insurance and financial  
services by section 22 of the debt management act, 1975 PA 148, MCL 451.432)  
R 451.1221 Definitions.  
Rule 1. As used in these rules:  
(a) "Act" means the debt management act, 1975 PA 148, MCL 451.411 to 451.437.  
(b) “Certified counselor” means that term as defined in section 2(b) of the act, MCL  
451.412.  
(c) “Department” means the department of insurance and financial services.  
(d) "Firm" means a debt management licensee or exempt person.  
(e) "Monthly amortizable amount" means the payment made in equal monthly  
amounts, extinguishing the fees and charges stated in the contract, less the $50.00 initial  
fee. No more than 1 monthly fee may be taken in any calendar month.  
(f) "Rate" means the percentage of a firm's fees or charges in relation to the debt to  
be liquidated during the life of the contract.  
History: 1979 AC; 2020 AACS.  
R 451.1222 Application for license or  
application.  
exemption  
order;  
renewal  
Rule 2. (1) The application for license or exemption order must be on the form  
prescribed by the department.  
(2) The application must be accompanied by the financial statements  
of the  
applicant for its last fiscal year and as of a date not more than 45 days prior to the  
filing.  
(3) Financial statements, for the purposes of this rule, must include a balance sheet  
and income statement prepared in accordance with generally accepted accounting  
principles.  
(4) Payment of fees must be made by a check payable to the "State of  
Michigan."  
(5) The original application must be accompanied by a business history form for  
each officer and director if an association or corporation, for each partner if  
a
partnership, for each member if a limited liability company, and for each proprietor,  
counselor, and officer manager. A credit report on the firm must also be submitted.  
(6) A firm that has operated without interruption during the past year under a  
license or exemption order pursuant to section 4(2) of the act, MCL 451.414, may file a  
renewal application on the form prescribed by the department.  
(7) The application must request a license or exemption order for each location from  
which the business of debt management is conducted.  
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(8) In the event of a change of business form, a new application must be filed prior  
to the effective date of the change. The application must include payment of a new fee as  
on renewal application.  
(9) The department shall not accept for filing an application with a name that  
would cause confusion with the name of an existing firm or governmental agency or  
cause confusion about services to be received from a licensee.  
History: 1979 AC; 1985 AACS; 2020 AACS.  
R 451.1223 Amended application.  
Rule 3. (1) A proposed change of name of a firm must be filed with the department  
for approval prior to effecting the change. The department shall not accept a name change  
that would be confusing with the name of an existing firm or governmental agency, or  
cause confusion about services to be received from a licensee. An amended  
application must be filed contemporaneously with the name change.  
(2) A firm shall file an amended application with the department within 5 days of  
the occurrence of any of the following:  
(a) If a firm is a corporation, a change in its officers or directors.  
(b) If a firm is a partnership, a change in its partners.  
(c) If a firm is a sole proprietorship, a change in ownership.  
(d) If a firm is limited liability company, a change in its members.  
(e) Conviction of an officer, director, partner, member, or sole proprietor of the firm  
of a felony or misdemeanor involving moral turpitude.  
(f) Insolvency, filing in bankruptcy, receivership, or assignment for the benefit of  
creditors of the licensee.  
(3) If a firm transfers its debt management business to another office at a different  
address, its license applies to its new office only if the following requirements are met:  
(a) The department amends its application to reflect the effective date of the  
transfer.  
(b) The firm ceases to conduct debt management business at the old address on the  
date indicated, and has notified its clients of the change of address not less than 5 days  
prior to the change.  
(c) The surety company has notified the department that the bond furnished  
pursuant to the act applies in full force and effect to the new office after the date of the  
transfer.  
(d) The firm has submitted its license certificate or order to the department for  
reissuance to cover the new office, and the license or order has been so reissued.  
(4) The firm shall promptly file an amended application upon the occurrence of any  
material event affecting the accuracy of the information contained in the current  
application.  
(5) If the partnership agreement of a firm provides for the substitution,  
withdrawal, or addition of partners of the partnership without winding up the  
partnership business, it is not necessary to obtain a new license or exemption order  
because of substitutions, withdrawals, or additions if evidence satisfactory to the  
department is furnished as to the following:  
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(a) That the surety bond furnished pursuant to the act shall continue in full force and  
effect.  
(b) The financial responsibility, experience, character, and general fitness of new  
partners. The licensee shall furnish an executed business history form for each new  
partner.  
(c) That the withdrawal or substitution of new partners will not render the  
partnership insolvent.  
(d) That at least 2/3 in number and interest of those who were partners when the  
license was applied for and issued are continuing as partners of the partnership, or that 1  
of the original partners remains in a 2-person partnership and a new partner is added  
simultaneously with the departure of original partner.  
(6) A change in the ownership of a sole proprietorship firm terminates the license  
and requires the filing of a new application and the issuance of a new license before  
continuance of the debt management business.  
(7) If the firm seeks to open an additional branch office, it shall amend its current  
application to reflect the address of the additional office and the name of the office  
manager. The licensee or exempted person shall file the appropriate forms with the  
department and pay the statutory fee.  
History: 1979 AC; 2020 AACS.  
R 451.1224 Rescinded.  
History: 1979 AC; 1985 AACS.  
R 451.1225 Notice of termination of bond.  
Rule 5. If a surety company gives 30 days' notice of termination of a bond, the firm,  
if continuing in the debt management business, shall furnish a satisfactory new bond  
before the expiration of the 30 days. Failure to maintain a bond is cause for issuance of a  
summary suspension order.  
History: 1979 AC; 2020 AACS.  
R 451.1226 Debt management contract; budget analysis format; creditors  
agreement form.  
Rule 6. (1) The applicant shall file a copy of its proposed debt management  
contract for debtors at the time of filing its application for review and acceptance by the  
department.  
(2) The applicant shall file a copy of its proposed budget analysis format with  
the department.  
(3) A true copy of the budget analysis must be provided to each debtor before a  
contract is signed.  
(4) The applicant shall file a copy of its proposed creditor's agreement form with the  
department.  
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History: 1979 AC; 2020 AACS.  
R 451.1227 Books and records.  
Rule 7. The firm shall make and keep current the following books and records  
relating to its business:  
(a) Journals or other records of original entry containing an itemized daily record of  
all payments and receipts for, or on behalf of, debtors of the firm, all receipts and  
disbursements of cash, and all other debits and credits.  
(b) Ledgers or other records reflecting all assets, liabilities, income, expense, and  
capital accounts. The books and records included in this subdivision are not current  
unless the firm updates and posts to the books and records at least monthly.  
(c) Ledger accounts or other records, itemizing separately as to each debtor all  
receipts from the debtor, payments to the firm, and disbursements on behalf of the debtor,  
the creditor's representative contacted, the response obtained or whether there has been a  
response within 14 days after the mailing of the creditor consent form, any revised or  
special conditions or arrangements conditioning the consent, and the date the required  
consents were secured.  
(d) A complaint file containing copies of all written complaints made to the firm by  
debtors.  
(e) Personnel files for all employees, listing the employee’s name, current home  
address, home phone number, social security number, and a record of all compensation.  
History: 1979 AC; 2020 AACS; 2024 MR 12, Eff. July 1, 2024.  
R 451.1228 Financial reports; audit.  
Rule 8. (1) The department may at any time require the filing of special financial or  
other operational reports if it finds that such filing is in the public interest and for the  
protection of debtors.  
(2) If a firm services more than 100 debtors, an audit is required of the firm  
annually. The audit must be done pursuant to an approved audit plan submitted by an  
independent accountant and accepted by the department in writing.  
History: 1979 AC; 2020 AACS.  
R 451.1229 Rescinded.  
History: 1979 AC; 2020 AACS.  
R 451.1230 Cancellation of contract.  
Rule 10. Upon written notice of cancellation of a contract, the firm shall  
promptly refund to the debtor all the amounts due the debtor. Failure to make prompt  
repayment shall constitute an unethical business practice, and may constitute grounds  
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for summary suspension. The firm shall not be required to stop payment of checks to  
creditors pursuant to this cancellation, and may retain in the account funds relating  
to lost checks for subsequent reissue to the same creditor.  
History: 1979 AC.  
R 451.1231 Rescinded.  
History: 1979 AC; 2020 AACS.  
R 451.1232 Rescinded.  
History: 1979 AC; 2020 AACS.  
R 451.1233 Renewal applications.  
Rule 13. Renewal applications must be filed with the department by December 1 of  
each year. Failure to file by that date will result in the expiration of the license or order.  
History: 1979 AC; 2020 AACS.  
R 451.1234 Dishonest or unethical business conduct.  
Rule 14. Dishonest or unethical business conduct, as provided in section 9 of the act,  
MCL 451.419, includes, but is not limited to, the following:  
(a) Failure to promptly refund a debtor's money upon written cancellation of a  
contract.  
(b) Borrowing money from a debtor.  
(c) Giving preference to creditors for the convenience or benefit of the firm rather  
than the primary benefit of the debtor.  
(d) Receiving money from the debtor, except as provided in the contract with the  
debtor, which contract has been accepted as to form and content by the department.  
(e) Failing to promptly record on the books of the firm any transaction involving  
funds of the debtor.  
(f) Paying funds of a debtor to a fictitious creditor.  
(g) Accepting a rebate, kickback, or other remuneration for payment of a debtor's  
obligations, except under a plan approved by the department and fully disclosed to the  
debtor.  
(h) Using debtors' funds as compensating balances for loans.  
(i) Making erasures or changes on the portion of the client account card used for  
recording payments received from the debtor, on checks issued to creditors, on fees  
taken, or on the dates of such entries. If a correction is needed, the error must have 1 line  
drawn through it and be initialed by an individual authorized by the licensee who did not  
make the correction or change. All entries must be made with ink, be typewritten, or be  
made by other machine entry.  
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History: 1979 AC; 2020 AACS.  
R 451.1235 Posting statutory provision, address, and phone number; filing  
fee schedule and amendments thereto.  
Rule 15. (1) The firm shall prominently post at each business location and website  
the provisions of sections 13(1) and (2), 14(1), and 18 of the act, MCL 451.423, 451.424,  
and 451.428, as well as the address and phone number of the department.  
(2) The firm shall annually file with the department its fee schedule or a schedule  
of its range of fees, and shall file amendments to that schedule 5 days prior to any change  
in fees charged to the debtor.  
History: 1979 AC; 2020 AACS.  
R 451.1236 Employment qualifications.  
Rule 16. Except as approved by the administrator, a firm shall not knowingly  
employ as an office manager or counselor a person who has done any of the following:  
(a) Been convicted of a crime involving moral turpitude, which includes forgery,  
embezzlement, obtaining money under false pretenses, larceny, extortion, conspiracy to  
defraud, or any other like offense.  
(b) Violated or failed to comply with a provision of the act, or a rule or order  
promulgated or issued pursuant to the act.  
(c) Had a license to engage in the business of debt management revoked or  
suspended in this state or another state for any reason other than failure to pay  
licensing fees.  
(d) Defaulted in the payment of money collected for others, including the discharge  
of debts, because of bankruptcy proceedings. The director of the department may, at  
his or her discretion, waive this restriction if provided with evidence of justifiable cause  
for the bankruptcy, plus convincing evidence of the fitness of the bankrupt party to  
carry out his or her functions under the act.  
History: 1979 AC; 2020 AACS.  
R 451.1237 Procedures; review.  
Rule 17. (1) Each firm shall prepare and maintain written policies and procedures  
for compliance with the act.  
(2) Each firm shall provide each certified counselor of the firm with the written  
policies and procedures.  
History: 1979 AC; 2020 AACS; 2024 MR 12, Eff. July 1, 2024.  
R 451.1238 License.  
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Rule 18. (1) A license must be issued for each main office and branch office  
rendering debt management service.  
(2) Whenever a licensee or exempt person discontinues the business of debt  
management, whether totally or at a specific location, the license certificate, or  
exemption order, must be mailed to the department within 5 days. An explanation of the  
reason for discontinuance, a statement of any amounts remaining in the client trust  
account, and the plan and timetable for disbursement must accompany the  
license certificate, or exemption order, unless all accounts are transferred, without  
interruption in service, to another of the firm's branches.  
(3) A license must not be terminated for a firm unless it is revoked or unless all  
payments due creditors or debtors have been made, and the department issues an order  
terminating the license.  
History: 1979 AC; 2020 AACS.  
R 451.1239 Budget analysis.  
Rule 19. (1) A copy of the budget analysis required under section 12 of the act,  
MCL 451.422, must be retained in the debtor's file for a period of 6 years after the last  
transaction.  
(2) The budget analysis must be signed by a certified counselor of the firm who  
participated in the preparation of the analysis.  
(3) The budget analysis must identify the type and amount of each debtor’s  
obligation by providing an adequate general description. Adequate general descriptions  
include “credit card,” “unsecured loan,” “vehicle loan,” “mortgage loan,” or other terms  
similarly identifying the type of debtor’s obligation. The terms “other,” “miscellaneous,”  
or “generic” are not adequate general descriptions.  
History: 1979 AC; 2020 AACS; 2024 MR 12, Eff. July 1, 2024.  
R 451.1240 Certification of compliance.  
Rule 20. (1) Every contract must set forth, in bold type, the  
set-up  
and  
cancellation fee provisions and amounts, and advise the prospective client to note these  
carefully before signing the contract.  
(2) The department may approve the accumulation of debtor's funds in payment of  
obligations which are required to be paid in large lump sums, such as income and  
property taxes, insurance premiums, and house payments. All such accumulations,  
however, must be designated for a specific purpose and must not be used to pay for  
fees and charges, including the close out fee of the firm.  
History: 1979 AC; 2020 AACS.  
R 451.1241 Reconciliation.  
Rule 21. (1) The trust account reconciliation must contain provisions for recording  
and identifying the balance in each debtor's account, the balance from the bank  
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statement, the check number and amount of each outstanding check, the date and  
amount of deposits not yet credited by the bank, the reconciled bank balance, the  
balance from the checkbook, and a detailed breakdown of any differences.  
(2) Remedial action, as provided in section 15(5) of the act, MCL 451.425, must be  
either an immediate replacement of funds, or an immediate cessation of business until  
sufficient funds are placed in the account.  
History: 1979 AC; 2020 AACS.  
R 451.1242 Statement of disbursements.  
Rule 22. The statement prepared in compliance with section 16(1)(e) of the act,  
MCL 451.426, must be prepared as of a date no earlier than the date of the first full  
distribution to creditors under the contract.  
History: 1979 AC; 2020 AACS.  
R 451.1243 Separate remuneration prohibition; waiver or modification.  
Rule 23. All requests for waiver or modification of the separate remuneration  
prohibition of section 19(h) of the act, MCL 451.429, must be made in writing to the,  
setting forth in detail the need for such waiver or modification; the persons or entities  
from which the benefit will be solicited or sought; the amount or percentage of  
contribution solicited from donors in the capacity of creditor for a debtor; any  
relationship, affiliation, or connection creating an actual or potential conflict of interest  
between the parties involved; and any reciprocal arrangements made or to be made.  
The department shall examine the proposal promptly and shall, within 15 days, notify  
the licensee or exempted person of its decision, or of the necessity for additional  
information. All such decisions must be in writing and must give the effective date of the  
declaratory ruling.  
History: 1979 AC; 2020 AACS.  
R 451.1244 Rescinded.  
History: 1979 AC; 2020 AACS.  
R 451.1245 Charges for other services.  
Rule 25. (1) A firm or affiliate thereof shall not charge a debtor for any services  
or goods, or make other charges, unless the firm or affiliate has filed with the  
department a plan setting forth the basis of charges, and the department has determined  
that such charges in the future do not result in an excessive fee in violation of section 18  
of the act, MCL 451.428.  
(2) If a firm or affiliate thereof proposes to alter its plan of charges, the amended  
plan must be filed with the department and approved prior to use.  
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History: 1979 AC; 2020 AACS.  
R 451.1246 Rescission.  
Rule 26. Rules 1201 to 1217 of the rules entitled "Debt Management," being R  
451.1201 to R 451.1217 of the Michigan Administrative Code and appearing on  
pages 5792 to 5795 of the 1970-71 Annual Supplements to the Code, are rescinded.  
History: 1979 AC.  
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;