In some jurisdictions, budget planning is a misdemeanor. Further, some statutes provide that a budget planner, at the request of a debtor, who receives money from the debtor and distributes it among specified creditors, is exercising an unconstitutional police power. However, the mere possibility that one engaged in a lawful business may also engage in unlawful practices is no justification for prohibiting the entire business[i].
For instance, the Act of 1955, P.L. 755, 18 PS § 4897, provides as follows:
“(a) ‘Budget Planning’ means the making of a contract, express or implied with a particular debtor whereby the debtor agrees to pay a certain amount of money periodically to the person engaged in the budget planning business, who shall, for a consideration, distribute the same among certain specified creditors in accordance with a plan agreed upon.
(b) Whoever engages in the business of budget planning is guilty of a misdemeanor, and upon conviction thereof, shall be sentenced to pay a fine of not more than five hundred dollars ( $500), or undergo imprisonment of not more than one (1) year, or both; Provided That the provisions of this act shall not apply to those situations involving budget planning as herein defined incurred incidentally in the practice of law in the Commonwealth”[ii].
Although the practice of budget planning or debt adjusting is considered a lawful business in the absence of a valid statute prohibiting it, a state legislature may prohibit it. This is due to the fact that while some debt adjusters perform a commendable service, many others commit fraud and abuses and add little to the efficient functioning of the economy, serving mainly to increase the burden of debt upon the typical user of consumer credit who invokes their aid, without substantially furthering his or her attempts to liquidate his or her pre-existing obligations.
[i] Skrupa v. Sanborn, 210 F. Supp. 200 (D. Kan. 1961)
[ii] Commonwealth v. Stone, 191 Pa. Super. 117, 119 (Pa. Super. Ct. 1959)