Which place’s debt rules apply—and who can help?

SettleADebt.com — S_KS, PASS-03

Kansas consumer-money custody, trust, administration, and return

Fresh public-source access date: October 25, 2026, Pacific time Actual model: GPT-5.6 Sol Pro, the available authorized quality-first fallback Review character: Continuation in the original Chat by the same project workflow; not an independent review Scope: Consumer funds, trust accounts, fund administration, records, examinations, cancellation/return, cessation, and the limited money-transmission and federal dedicated-account gateways needed to classify those flows.

PASS-01 and PASS-02 remain preserved. This pass does not regenerate their licensing, fee, attorney-exemption, federal timing, historical-fee, or worked-example analyses. In particular:

• No fee is treated as earned merely because a fee category or ceiling exists.
• The corrected electronic-payment agreement predicate remains unchanged.
• Prior example E05 begins with $1,200 currently held principal; previously accounted remittances and $135 of prior fees are not deducted again.
• The unresolved noncustodial agreement architecture, criminal “registered/licensed” mismatch, voluntary-contribution aggregation period, reasonable counseling fee, percentage-fee pathway, current NMLS checklist, and named-provider status remain open except where this pass necessarily addresses a fund-flow boundary.

Executive determination

Kansas’s statutory trust system is designed most clearly for a direct custodial debt-management model in which the consumer pays money to the licensed credit-services organization and the licensee sends that money to participating creditors. The written agreement must schedule payments to the licensee for creditor disbursement and list the creditor payments the licensee will make. Funds received for that purpose must be placed in a consumer-benefit trust account within four calendar days. The licensee must keep a separate ledger for every consumer, remit funds under the statutory timing constraints, use trust money only for that consumer’s creditors or return it to that consumer, and keep the trust account separate from operating accounts. Kansas Legislature+1

Upon written rescission, Kansas requires return of all funds then held in trust for that consumer within ten calendar days after the licensee receives the rescission. The statute does not direct the return of money already validly and finally remitted to creditors, does not create new fee earning at cancellation, and does not itself decide whether a previously paid fee was earned or refundable. Unauthorized-payment restitution under K.S.A. 50-1126(e) is a separate rule. Kansas Legislature+1

Kansas does not expressly authorize a provider to take its fees from creditor-payment principal in the trust account. K.S.A. 50-1122(b)(5) permits trust-account disbursements only to that consumer’s creditors or back to the consumer. Consumer fees, government filing charges, bond costs, and consumer principal are distinct categories; a provider cannot use a fee ceiling as authority to net a fee from trust principal. Kansas Legislature+1

A consumer-owned account administered by an independent third party under the federal TSR is a different architecture. The conditional federal rule makes the customer the owner, requires an insured institution and an independent non-referral-paid administrator, and provides a seven-business-day return after withdrawal from the debt-relief service. Those federal conditions do not establish that the account is the Kansas statutory trust account, satisfy K.S.A. 50-1120(c)(5)–(6), or authorize a Kansas fee. eCFR

Kansas’s current public trust-account form adds operational details: it calls for every associated trust-account number and every person or position with access, says a current form must remain on file, says it should be uploaded to NMLS, authorizes regulator access to bank information, and requires ten days’ prior notice before the referenced account is closed or terminated. The form is operational material, not a replacement for the statute, a bank’s acceptance, or a complete current NMLS checklist. Kansas Bank Commissioner

A. Substantive findings

1. Covered fund flows and account architecture

1.1 Direct custodial debt-management flow

A direct custodial model is the clearest statutory case:

1. The consumer pays funds to the licensee for distribution to creditors.
2. The agreement schedules those consumer-to-licensee payments.
3. The agreement identifies the payments the licensee will make to participating creditors.
4. The licensee deposits the creditor-payment funds into its statutory trust account.
5. The licensee remits the money to creditors and maintains a separate consumer ledger.

Receiving or offering to receive consumer money for distribution among creditors is independently included in Kansas’s definition of debt-management services. The trust account is defined as an account established by the applicant or licensee in a federally insured financial institution for consumer-paid funds, with a designation indicating that the money is not the provider’s, its owners’, officers’, or employees’ money and is unavailable to the provider’s creditors. Kansas Legislature

The current text of K.S.A. 50-1117(j) contains a syntactic break around the phrase introducing the required account designation. That drafting defect should not be repaired by inventing an account title. The surrounding operative elements are readable, but the statute does not prescribe a literal caption such as “FBO,” “escrow,” or any particular bank product name.

1.2 K.S.A. 50-1120(c)(5)–(6) remains structurally custodial

The mandatory written-agreement clauses require:

• A schedule of payments the consumer must make to the licensee for disbursement to creditors.
• A list of participating creditors to which payments will be made by the licensee, including amounts and dates.

The current text supplies no alternative contract branch for a consumer-owned account from which the consumer alone pays creditors. Kansas Legislature

PASS-01 correctly established that a noncustodial settlement or negotiation service can still fall within the broad Kansas definition. PASS-03 did not locate a current public formal OSBC order or controlling decision that reconciles that definitional coverage with the custodial agreement clauses. Therefore:

• It is not established that a consumer-owned account automatically satisfies K.S.A. 50-1120(c)(5)–(6).
• It is not established that a zero-dollar payment schedule, consumer power of attorney, ACH instruction right, or administrator arrangement cures the issue.
• It is not established that every covered negotiation service must take custody.
• The precise compliant architecture for a purely noncustodial Kansas program remains held under prior claims S_KS-P1-C018 and S_KS-P1-C043.

1.3 Indirect custody and control

An account’s marketing name, nominal administrator, remote headquarters, or third-party processor does not determine custody. Material facts include:

• Legal account holder and beneficial-interest language.
• Who establishes the account.
• Authorized signers and persons with online access.
• Who can originate ACH transfers, approve checks, change payees, freeze funds, or close the account.
• Whether an affiliate’s authority is contractual, agency-based, discretionary, or purely ministerial.
• When receipt by the administrator legally counts as receipt by the provider or creditor.
• Who bears loss if an administrator fails to transmit.
• Whether the administrator is a licensed money transmitter, authorized delegate, qualifying payee agent, exempt intermediary, or none of those.

The CSO Act does not expressly define “indirect control” of a consumer account. The OSBC trust form’s demand for every person or position with account access shows that access is operationally material, but it does not create a standalone statutory test. Kansas Bank Commissioner

1.4 Consumer-owned designated accounts

A federal dedicated account under 16 C.F.R. §310.4(a)(5)(ii) is expressly customer-owned. By contrast, the Kansas trust account is established by the CSO applicant or licensee and is integrated into an agreement calling for payments to and disbursements by the licensee. The two can therefore not be treated as interchangeable merely because both are sometimes called “dedicated,” “special purpose,” “FBO,” or “trust” accounts. Kansas Legislature+2

A consumer-owned account may be genuinely noncustodial where the provider cannot direct, debit, block, or otherwise control the money and the consumer pays creditors directly. It may instead be functionally custodial where the provider or affiliate exercises material payment authority. Actual documents and authority facts are required.

1.5 Creditor-paid flows

Compensation paid by a creditor and not assessed to the consumer remains separate from consumer trust principal under the prior fee analysis. That does not permit a provider to route consumer principal through a creditor-payment label or to net provider compensation from the statutory trust account. No creditor-paid amount is modeled as consumer money in this pass.

Account and model matrix

2. Institution, account designation, segregation, deadlines, fees, interest, and shortages

2.1 Institution and account designation

Kansas requires the statutory account to be:

• Established by the applicant or licensee.
• At a federally insured financial institution.
• Used for consumer-paid money.
• Designated to indicate that the funds are not provider, owner, officer, or employee funds.
• Designated as unavailable to creditors of the applicant or licensee. Kansas Legislature

The reviewed CSO provisions do not establish:

• That the account must be located in Kansas.
• That every dollar receives federal deposit-insurance coverage.
• Pass-through deposit-insurance status for each consumer.
• Federal bankruptcy exclusion or priority.
• Eligibility of a particular bank, credit union, fintech program, or omnibus account.
• Bank acceptance of the arrangement.
• An approved account-title formula.
• Any ACH-network authorization.

The CSO statute says “federally insured financial institution.” The OSBC operational form uses both “financial institution” and “named bank.” Neither establishes that every type of federally insured institution or every account product is acceptable. The separate KMTA definition of a federally insured depository institution is not imported into the CSO Act by assumption.

2.2 Four-calendar-day deposit rule

Any money paid to the licensee by or on behalf of the consumer for creditor disbursement must be deposited into the consumer-benefit trust account within four calendar days after receipt. No reviewed text supplies a weekend, holiday, ACH-settlement, returned-item, or remote-processing extension. Kansas Legislature

This requirement applies to the portion actually paid for creditor disbursement. It does not transform a separately authorized fee into creditor principal, and it does not authorize netting a fee from a combined or ambiguous receipt before depositing the principal portion.

2.3 Creditor-distribution deadline

K.S.A. 50-1122(b)(2) says funds must be disbursed to creditors:

• Within 20 calendar days after receipt; or
• By the latest date before delay would cause the consumer a fee, charge, or penalty.

K.S.A. 50-1121(a) separately prohibits delaying payment for the purpose of increasing consumer interest, costs, fees, or charges. Kansas Legislature+1

The statute does not literally say “whichever occurs first.” Operationally, however:

• Twenty calendar days is the fixed outside limit.
• Where a consumer penalty would arise sooner, the second clause and anti-delay rule require action before that earlier consequence.

No public formal Kansas interpretation was located resolving every date-conflict or bank-settlement scenario. Accordingly, ledger examples use the earlier protective constraint but do not invent calendar dates, cut-off times, posting conventions, grace periods, or creditor-receipt rules.

2.4 Permitted trust-account destinations

A licensee may disburse a consumer’s trust-account money only:

1. To that consumer’s creditors; or
2. Back to that consumer. Kansas Legislature

No third destination is stated. Consequently, PASS-03 found no statutory path for:

• Provider fee withdrawals from the trust.
• Affiliate service fees from the trust.
• Processor fees from the trust.
• Government filing or examination charges from the trust.
• Bond premiums from the trust.
• Cross-consumer transfers.
• Loans from one consumer subledger to another.
• Operating-account sweeps.

A lawfully authorized consumer fee can be collected through a legally valid separate payment flow, subject to all prior Kansas and conditional federal requirements. The existence of a fee category or cap does not make the fee earned and does not permit deduction from creditor-payment principal.

2.5 Segregation and commingling

The trust account cannot be commingled with the licensee’s operating accounts. Separate records must also be maintained for every consumer. Kansas Legislature

The statute does not expressly require a separate bank account for every consumer. A pooled account supported by individual subledgers is therefore textually possible, but that is an inference from what the statute requires—not approval of a particular omnibus, FBO, virtual-ledger, or fintech structure.

2.6 Misdirected payments

The licensee must:

• Correct a payment misdirected because of its error.
• Reimburse the consumer for actual creditor fees or charges resulting from that misdirection. Kansas Legislature

The statute does not prescribe the accounting source for the reimbursement or a separate reimbursement deadline. Economically, charging the reimbursement against the consumer’s own creditor principal would not make the consumer whole. The examples therefore treat error reimbursement as a provider obligation outside the consumer’s trust balance. Any unreversed wrong payment, temporary shortage, duplicate payment, or chargeback requires actual transaction facts.

2.7 Interest, reserves, shortages, and reversals

No current CSO statute, K.A.R. 17-25-1 text, trust-consent form, current administrative-interpretation compilation, or current guidance compilation reviewed in this pass supplied a CSO-specific rule establishing:

• Whether a Kansas statutory trust must or may earn interest.
• Who owns interest if earned.
• A minimum reserve or cushion.
• A required reserve-account location.
• A daily or monthly reconciliation frequency.
• A shortage-cure deadline.
• Treatment of ACH returns, chargebacks, reversed wires, unclaimed checks, stale checks, stop payments, or returned creditor remittances.
• A required overdraft or zero-balance policy.
• A consumer-by-consumer method for allocating pooled interest or bank charges.

These matters remain held. The absence of a located public provision is not authority to retain interest, shift losses to consumers, operate with shortages, or use a reserve.

3. Consumer ledgers, statements, regulator access, records, and account changes

3.1 Per-consumer ledger

The licensee must maintain a separate account record for each consumer receiving debt-management services. This is a bookkeeping requirement distinct from the bank-account structure. Kansas Legislature

At minimum, a compliant ledger must be capable of supporting the required quarterly consumer report and the broader record-retention duties. That means the record set must be able to identify:

• Total money received from the consumer.
• Total sent to each creditor.
• Current creditor balances or payoff amounts.
• Fees paid to the licensee.
• Current amount held for the consumer, or zero. Kansas Legislature

3.2 Consumer statements

At least once every three months—not necessarily on calendar-quarter dates—the licensee must provide each agreement consumer a report showing:

• Total received to date.
• Total paid to each creditor to date.
• Payoff amount or estimated balance for each debt.
• Consumer-paid fees.
• Current trust amount or a statement that none is held. Kansas Legislature

This report is not the same as continuous online bank access. PASS-03 found no public Kansas CSO provision requiring the consumer to receive direct bank credentials, real-time transaction access, daily statements, or a bank-issued subaccount statement.

3.3 General records and retention

The licensee must retain:

• A complete general ledger covering assets, liabilities, capital, income, and expenses for five years.
• Complete records for each debt-management agreement during its term and for five years after cancellation or completion.
• Agreement documents and extensions, payments, disbursements, charges, correspondence, and other consumer information.

If records are outside Kansas, the licensee must provide them to the Commissioner within three calendar days or, at the Commissioner’s discretion, pay reasonable and necessary expenses for an out-of-state examination. Kansas Legislature

The reviewed text does not prescribe an exclusive electronic format, immutable audit-log standard, bank-file format, backup interval, or reconciliation worksheet.

3.4 Annual and event reporting

Each licensee must file an annual report by April 1 covering the preceding calendar year. The report is confidential and may be published only in composite form. Within 15 calendar days, the licensee must report specified events, including:

• Bankruptcy or reorganization.
• Relevant governmental licensing or disciplinary proceedings.
• Certain felony convictions.
• Name or legal-entity-status changes.
• Addition or loss of owners, officers, partners, or directors. Kansas Legislature

These duties do not by themselves determine disposition of trust funds after an event.

3.5 OSBC Trust Account Authorization and Consent

The current public form is Form CSO-5, revision 09/2025. It states operationally that:

• Every CSO applicant or registrant must keep a current form on file.
• The form “should” be uploaded to NMLS.
• The referenced account must not be closed or terminated without ten days’ prior notice to the Commissioner or designee.
• The signer irrevocably authorizes the named bank to provide account information to the regulator.
• The form identifies the CSO legal name, financial institution, institution address, associated trust-account number or numbers, and every person or position with access.
• The form requires an authorized signature and notarization. Kansas Bank Commissioner

Important limits:

• The form retains older “applicant/registrant” terminology.
• “Should be uploaded” is not phrased as “shall.”
• Prior notice is not stated to be regulatory approval.
• The form does not establish an effective closure date, a consumer distribution plan, or whether closure is permissible while balances remain.
• It does not prove that the institution accepted the account as compliant.
• It does not prove pass-through insurance or bankruptcy treatment.
• It does not establish the complete current Kansas NMLS filing package.

3.6 Surrender report

The Kansas CSO YTD Report Upon Surrender, revision 04/2026, instructs a licensee to file within 15 days after requesting surrender. It seeks:

• New Kansas agreements entered during the year-to-date period.
• Consumer money remitted to and held by the organization in an established trust account for creditor disbursement.
• Itemized consumer fees.
• Completed agreements.
• Agreements still existing as of surrender or lapse.
• Total assets. Kansas Bank Commissioner+1

The form demonstrates that the agency expects a surrendering or lapsing licensee to report existing agreements and trust-flow volume. It does not establish:

• That surrender is immediately effective.
• That active agreements terminate automatically.
• That trust duties disappear upon surrender or lapse.
• A specific consumer-notice method.
• A trust-return recipient or deadline.
• Permission to close the trust account.
• A regulator-approved wind-down plan.

3.7 Examination and regulator control

The Commissioner may examine or investigate a CSO’s operations, books, and records; obtain reasonable access to offices and all relevant records; use out-of-state officials; charge examination costs; subpoena evidence; and, specifically, seize and distribute the licensee’s trust-account funds to protect consumers and the public interest. Examination reports are confidential subject to specified disciplinary, liquidation, criminal, and regulator-sharing exceptions. Kansas Legislature+1

Insolvency and insufficient records to permit a satisfactory compliance audit are express grounds for denial, suspension, revocation, or refusal to renew. Kansas Legislature

This pass does not determine bond recovery, liquidation priority, receivership procedure, or private remedies.

4. Cancellation, creditor rejection, provider termination, surrender, and insolvency

4.1 Consumer rescission

The agreement must notify the consumer that the consumer may rescind at any time by giving written notice to the licensee. When the licensee receives that rescission, all money then held in trust for the consumer must be refunded to the consumer within ten calendar days. Kansas Legislature+1

The trigger and calculation are therefore:

• Trigger: Licensee receipt of written rescission.
• Return base: Funds currently held on the consumer’s behalf.
• Recipient: Consumer.
• Deadline: Ten calendar days after receipt.
• New cancellation fee: Prohibited under the fee section.
• New fee earning merely because of cancellation: Not established.

4.2 Completed remittances versus currently held money

A creditor remittance that was validly completed before rescission is no longer “held in the trust account” on the consumer’s behalf. It is not subtracted again from the current-held balance and is not automatically clawed back by K.S.A. 50-1122(c).

By contrast, an ACH transfer, check, or wire that is pending, reversible, rejected, stale, or returned may still affect the true current-held amount. No transaction outcome should be assumed without settlement evidence.

4.3 Previously paid fees

K.S.A. 50-1122(c) addresses trust principal held at rescission. It does not say that every previously paid, lawfully earned fee must be returned. Conversely, it does not make a previously paid fee earned.

Separate questions include:

• Whether the fee was authorized by K.S.A. 50-1126.
• Whether the state agreement predicate was satisfied.
• Whether any independently applicable federal performance trigger was satisfied.
• Whether the fee was already paid from a separate lawful source.
• Whether contract, restitution, or remedial law requires repayment.

An unauthorized fee, charge, fund, or payment must be returned under K.S.A. 50-1126(e), absent the statutory accidental-and-bona-fide-error qualification, and the agreement becomes void. That is distinct from the ten-day trust-principal return. Kansas Legislature

4.4 Rejected creditor plan or failed enrollment

Where the licensee already holds consumer principal but a creditor rejects the plan:

• Trust money may go only to that consumer’s creditors or back to the consumer.
• The provider may not recharacterize the stranded principal as its fee.
• The ordinary creditor-remittance requirements remain relevant.
• The reviewed statute supplies no separate express “creditor rejected the plan” return deadline absent rescission.

If the consumer then submits written rescission, the ten-calendar-day return rule applies to the money currently held. Without rescission, the proper disposition must still be one of the two authorized destinations, but PASS-03 does not invent a deadline not stated in the reviewed text.

4.5 Provider termination or agreement termination

The reviewed provisions do not supply a distinct provider-initiated termination return clock. A provider cannot use that silence to convert trust principal into revenue. Actual contract language, notices, remaining creditor instructions, transaction status, and any regulatory wind-down order are required.

Full contract enforceability, breach, restitution, and remedies remain outside this component.

4.6 Surrender, lapse, and account closure

The surrender form requires reporting within 15 days from the surrender request and specifically asks how many Kansas agreements remain in existence at surrender or lapse. The trust-consent form separately requires ten days’ prior notice before closing or terminating the referenced account. Neither form states that license surrender, lapse, or an account-closure notice extinguishes outstanding trust duties. Kansas Bank Commissioner+1

4.7 Insolvency

Bankruptcy or reorganization must be reported within 15 calendar days. Insolvency is a licensing-action ground, and the Commissioner may seize and distribute trust funds. Kansas Legislature+2

The reviewed authority does not establish:

• Federal bankruptcy-estate exclusion.
• Priority among consumers, banks, processors, creditors, and bond claimants.
• A pro-rata allocation method for a short account.
• Setoff rights.
• The interaction with deposit-insurance receivership.
• Bond exhaustion rules.
• A private consumer claims process.

Those remain for the later insolvency, bond, and remedies passes.

5. Limited Kansas money-transmission gateway

This gateway matters where a separate administrator, processor, affiliate, or platform receives Kansas consumer money and forwards it to a creditor or another recipient.

5.1 Definition and license requirement

The current Kansas Money Transmission Act defines money transmission to include receiving money for transmission from a person located in Kansas. “Receiving money for transmission” means receiving money or monetary value in the United States for transmission within or outside the United States by electronic or other means. A person may not engage in or hold itself out as providing money transmission unless licensed, acting within the authority of a licensed transmitter as an authorized delegate, or within an exemption. Kansas Legislature+2

That language makes an independent administrator that actually receives Kansas consumer money for later creditor transmission a potential KMTA actor. It does not establish that every software provider, bank interface, ACH vendor, or account-information service receives money.

5.2 Material exemptions

Current K.S.A. 9-556 includes, among others:

• A payment-system operator, but only to the extent it provides processing, clearing, or settlement between exempt persons or licensees.
• A payee-appointed agent where a written payee-agent agreement exists, the payee holds the agent out, and receipt by the agent extinguishes the payer’s obligation without payer loss risk.
• An intermediary where the underlying entity is licensed or exempt, is identified to the sender as the provider, and bears sole responsibility to make the sender whole.
• A federally insured depository financial institution.
• An employee acting under supervision, but not an independent contractor.
• A third-party service provider or agent of the governmental entity specified in paragraph (a)(6), subject to a written-functions agreement and governmental assumption of risk and legal responsibility.
• Practice of law, bookkeeping, accounting, real-estate sales, or brokerage.
• A person exempted by Commissioner rule or order.

The Commissioner may require documentation supporting an exemption. Kansas Legislature

A CSO license, nonprofit status, attorney connection, processor contract, bank relationship, or “agent” label is not itself one of the reviewed automatic KMTA exemptions.

5.3 Payee-agent and intermediary distinctions

A consumer’s appointment of an administrator is not the payee-agent exemption. That exemption requires appointment by the payee, public holding-out by the payee, and legal extinguishment of the consumer’s obligation upon the agent’s receipt, with no consumer loss risk if the agent fails to remit.

Similarly, an intermediary exemption requires an identified licensed or exempt underlying transmitter that bears sole responsibility for the outstanding transmission obligation. A receipt bearing a platform name does not alone establish those conditions. Kansas Legislature

5.4 Authorized delegates

A licensed money transmitter may use an authorized delegate only under a signed written contract establishing the relationship and scope, compliance duties, handling rules, records, examination consent, and a trust in net transmission money for the licensed transmitter’s benefit. The delegate cannot use a subdelegate.

When the transmitter’s license is suspended, revoked, surrendered, or expires:

• Delegates must immediately stop acting under that authority.
• The licensee must document notice to applicable delegates within five business days. Kansas Legislature

This KMTA delegate trust is not the same trust as the Kansas CSO consumer-benefit trust.

5.5 Unlicensed-principal exposure

A person transmitting money on behalf of an unlicensed and nonexempt person is deemed to have provided money transmission and is jointly and severally liable with that person. Kansas Legislature

Thus, a processor cannot assume that its customer’s claimed CSO status resolves the processor’s own KMTA position.

5.6 KMTA refund provision

K.S.A. 9-582 conditionally requires a licensed money transmitter to refund money within ten days after receiving the sender’s written request, subject to listed exceptions. The section excludes certain Regulation E remittance transfers and money received under a written licensee-payee payment-processing agreement for the payee’s goods or services. Other exceptions include money already forwarded or committed within ten days, an agreement scheduling later transmission, and specified crime or legal-violation concerns. Kansas Legislature

This is a money-transmission rule, not the CSO rescission rule. It must not be used to:

• Replace Kansas’s ten-calendar-day CSO trust return.
• Establish that a CSO or its administrator is a money transmitter.
• Determine a CSO agreement’s cancellation effect.
• Authorize a provider fee.

5.7 Direct CSO–KMTA overlap remains held

The modern KMTA definition is broad enough that a direct custodial CSO’s receipt of consumer money for onward creditor payment could be textually relevant. At the same time, the CSO Act expressly creates and regulates the custodial DMP pathway. The reviewed K.S.A. 9-556 text contains no express “licensed credit services organization” exemption.

PASS-03 did not locate a current public formal OSBC order, administrative interpretation, or controlling case resolving whether a properly licensed custodial Kansas CSO also requires separate KMTA authority for its own statutory trust activity. Therefore:

• No separate MT-license requirement is asserted for the direct CSO in this pass.
• No implicit CSO exemption is asserted.
• The independent administrator or affiliate must be analyzed separately.
• The exact overlap is an express remaining regulatory-interpretation gap.

6. Conditional federal dedicated-account overlay

Where the TSR applies, 16 C.F.R. §310.4(a)(5)(ii) permits a customer account used for creditor payments and debt-relief fees only if:

• It is at an insured financial institution.
• The customer owns the money and receives accrued interest, if any.
• The administrator is not owned, controlled by, or affiliated with the debt-relief service.
• The administrator neither gives nor accepts referral compensation involving the service.
• The customer may withdraw from the debt-relief service without penalty and must receive all account money, except fees earned in compliance with all §310.4(a)(5)(i)(A)–(C) conditions, within seven business days after the request. eCFR

The following distinctions control:

No universal TSR coverage, actual fee earning, valid settlement, creditor payment, or administrator independence is inferred.

B. Source table

C. Claim table

D. Bounded ledger examples

Common assumptions

Unless an example says otherwise:

• Amounts are U.S. dollars.
• All calculations use whole dollars; no rounding is required.
• No interest has accrued.
• No bank fees, reserve, ACH return, chargeback, pending check, stale check, reversal, duplicate payment, or unposted item exists.
• A “completed remittance” is assumed finally posted to the stated creditor.
• Provider fee deduction from Kansas trust principal is zero because no such withdrawal authority was established.
• No fee earning is inferred.
• The examples are accounting demonstrations, not evidence of an actual account or permission for an actual provider.

Ledger L1 — Normal custodial receipt and remittance

Inputs

• Consumer creditor-payment receipt: $1,000
• Creditor A completed remittance: $600
• Creditor B completed remittance: $250
• Provider fee drawn from trust: $0

Deposit duty

• Amount paid for creditor disbursement: $1,000
• Amount required to be deposited within four calendar days: $1,000

Ledger

Plain text

Starting trust receipt                         $1,000
Less completed Creditor A remittance             600
Less completed Creditor B remittance             250
Less provider fee withdrawal from trust             0
                                                -----
Current consumer trust balance                  $150

Result

• Current held principal: $150
• Permitted destinations: that consumer’s creditor or back to that consumer.
• The $150 is not provider revenue.
• Each creditor remittance must satisfy the applicable statutory timing constraint. Kansas Legislature

Ledger L2 — Written rescission using the preserved $1,200 current-held balance

This is the corrected continuation of the factual base in prior example E05. It does not recompute the prior fee example.

Inputs

• Principal currently held at the time of rescission: $1,200
• Prior completed creditor remittances: already reflected before the $1,200 starting balance
• Prior $135 fees: already accounted for outside the current-held figure
• New completed remittances after the stated starting point: $0
• New fee deduction at cancellation: $0
• Interest: $0

Ledger

Plain text

Current held trust principal                  $1,200
Less new completed creditor remittances             0
Less new cancellation fee                           0
Less previously accounted $135 fee                  0  (not deducted twice)
                                              ------
Refund to consumer                           $1,200

Result

• Return recipient: consumer.
• Return amount: $1,200.
• Deadline: within ten calendar days after the licensee receives written rescission.
• Whether any previously paid fee is separately refundable is outside this trust-principal equation. Kansas Legislature+1

Ledger L3 — Completed creditor payment before rescission

Inputs

• Original deposited principal: $900
• Completed creditor remittance before rescission: $500
• Current pending transactions: none
• New fee at rescission: $0

Ledger

Plain text

Original trust principal                       $900
Less finally completed creditor remittance      500
                                                ---
Current amount held at rescission               $400
Less new fee                                      0
                                                ---
Return to consumer                              $400

Result: $400, within ten calendar days after receipt of rescission.

The completed $500 is not subtracted again from the $400 and is not returned under K.S.A. 50-1122(c).

Pending-item branch: If the $500 had merely been sent but remained returnable, rejected, or unsettled, the exact current-held amount could not be fixed without transaction evidence. No final-posting outcome is invented. Kansas Legislature

Ledger L4 — Misdirected payment and actual creditor charge

Inputs

• Starting trust principal: $700
• Wrong transfer: $300
• Wrong transfer fully reversed to trust: $300
• Corrected transfer to intended creditor: $300
• Other completed creditor payment: $200
• Actual creditor charge caused by misdirection: $25
• Provider reimbursement assumption: paid from provider operating money, outside trust

Trust ledger

Plain text

Starting trust principal                       $700
Wrong transfer                                 (300)
Full reversal of wrong transfer                 300
Correct payment to intended creditor           (300)
Other completed creditor payment               (200)
                                                ---
Current consumer trust balance                  $200

Separate provider-error ledger

Plain text

Actual creditor charge caused by error           $25
Provider reimbursement obligation                $25
Amount charged against consumer trust              0

Result

• Consumer trust balance: $200
• Separate reimbursement: $25
• The provider’s error reimbursement is not modeled as reducing the consumer’s own principal.

No-reversal branch: If the wrong $300 transfer were not recovered, the statute requires correction but the reviewed text does not provide a specific shortage-cure method or deadline. The balance and funding source would remain unresolved. Kansas Legislature

Ledger L5 — Creditor rejects plan before remittance

Inputs

• Current consumer trust balance: $500
• Creditor remittance completed: $0
• Creditor rejected proposed plan
• Fee deduction from trust: $0
• Consumer has not yet rescinded

Branch A — No rescission yet

Plain text

Current consumer trust balance                  $500
Completed creditor remittance                      0
Permissible provider fee deduction                 0
                                                ---
Amount still requiring lawful disposition       $500

Result: The money may go only to the consumer’s creditor or back to the consumer. It cannot be converted to a provider fee. The reviewed statute does not state a separate rejected-plan refund deadline absent rescission, so the exact return date is held.

Branch B — Consumer then provides written rescission

Plain text

Amount currently held at rescission             $500
Less new fee                                       0
                                                ---
Return to consumer                              $500

Result: $500 within ten calendar days after the licensee receives rescission. Kansas Legislature

Ledger L6 — Pooled trust with consumer subledgers

Inputs

• Bank trust-account balance: $2,100
• Consumer A ledger: $1,200
• Consumer B ledger: $600
• Consumer C ledger: $300
• Pending items: none

Reconciliation

Plain text

Consumer A                                      $1,200
Consumer B                                         600
Consumer C                                         300
                                                -----
Sum of consumer subledgers                      $2,100

Bank trust-account balance                      $2,100
Less subledger total                            (2,100)
                                                -----
Difference                                          $0

Result: Numeric reconciliation difference is $0.

This equality is necessary accounting consistency, not proof that the bank account is properly titled, federally insured as required, free from unauthorized transactions, or regulator-approved.

Shortage branch

If the bank balance were $2,000 while the three ledgers still totaled $2,100:

Plain text

Bank balance                                    $2,000
Subledger obligations                           2,100
                                                -----
Shortage                                         $100

The reviewed CSO text does not specify a shortage-cure deadline, reserve draw, allocation method, or consumer priority. The $100 cannot be silently allocated among consumers. Kansas Legislature+1

Ledger L7 — Conditional federal dedicated-account withdrawal

This is not a Kansas statutory trust example.

Assumptions

• The TSR applies.
• Every dedicated-account requirement is satisfied.
• Customer owns the account funds.
• Account administrator is independent and receives no prohibited referral compensation.
• Starting customer-owned account balance: $1,500
• Completed creditor payment: $600
• Fee established as earned under every §310.4(a)(5)(i)(A)–(C) condition: $0
• Accrued interest: $0
• Customer requests withdrawal from the debt-relief service.

Ledger

Plain text

Starting customer-owned account               $1,500
Less completed creditor payment                  600
Less established earned fee                        0
Plus accrued interest                               0
                                                -----
Funds due after service-withdrawal request       $900

Conditional federal result: $900 within seven business days after the customer’s request.

This does not establish:

• That the account is a Kansas trust account.
• That Kansas’s ten-calendar-day rescission rule is displaced.
• That the customer closed the bank account or revoked ACH authority.
• That a provider may charge a Kansas percentage fee.

If a claimed earned fee amount E were unresolved, the formula would be 900 − E, but no numeric E may be inserted until both Kansas authority and all federal earning predicates are established. eCFR

Ledger L8 — Independent administrator classification hold

Inputs

• Kansas consumer sends administrator: $800
• Administrator is expected to forward money to a creditor
• Administrator’s license, delegate, payee-agent, intermediary, and loss-allocation facts: unknown

Numeric ledger

Plain text

Money received by administrator                  $800
Verified completed creditor remittance          unknown
Verified earned fee                             unknown
Verified refundable balance                     unknown

Legal branches

1. Authorized delegate: Requires a licensed transmitter and a compliant written delegation contract.
2. Payee agent: Requires payee appointment, payee holding-out, and extinguishment of the consumer’s obligation without consumer loss risk.
3. Intermediary: Requires an identified licensed or exempt principal bearing sole responsibility.
4. None of the above: Potential unlicensed money-transmission issue.
5. Pure technical processor: Requires evidence that the entity never receives or controls money and, where claimed, actually meets the payment-system-operator limitation.

Result: No return amount, deadline, or exemption can be established from the $800 number alone. Numeric equality is not legal classification. Kansas Legislature+3

E. Component coverage and gap table

F. Researcher self-check

Actually read or inspected in PASS-03

• Current K.S.A. 50-1117 trust definition.
• Complete relevant agreement clauses in K.S.A. 50-1120.
• Relevant prohibitions in K.S.A. 50-1121.
• Complete K.S.A. 50-1122.
• Complete K.S.A. 50-1123.
• Relevant annual and event reporting provisions in K.S.A. 50-1124.
• Complete K.S.A. 50-1125.
• Relevant principal and unauthorized-payment provisions in K.S.A. 50-1126.
• Insolvency and audit-record licensing grounds in K.S.A. 50-1127.
• Relevant examination, confidentiality, seizure, and production powers in K.S.A. 50-1128.
• The corresponding pages of the 22-page official OSBC 2026 CSO compilation, with PDF-index and printed-page systems kept distinct.
• The complete one-page OSBC Trust Account Authorization and Consent form, both parsed and visually inspected.
• The complete one-page OSBC YTD Report Upon Surrender, both parsed and visually inspected.
• The current OSBC applications/forms CSO section.
• The conditional federal dedicated-account passage in 16 C.F.R. §310.4(a)(5).
• Current selected KMTA definitions, exemptions, licensing, delegate, liability, forwarding, and refund provisions.
• Corresponding relevant pages of the official 47-page OSBC 2026 KMTA compilation.
• The complete outline pages and bounded keyword searches of the current public OSBC administrative-interpretation and guidance compilations.
• Focused official-domain discovery searches for K.S.A. 50-1122, K.S.A. 50-1120(c)(5), CSO trust-account orders, and noncustodial architecture.

Preserved without wholesale rerun

• PASS-01’s functional classification, licensing, fee categories, attorney exemption, and ten prior examples.
• PASS-02’s electronic-payment agreement predicate, federal credit-repair precision, debt-relief timing precision, source-pinpoint corrections, and historical-source qualifications.
• The specific procedural and version limitations previously recorded for Hays, Williamson, and Nazar.
• The prior direct-rules-endpoint 405 result.
• Prior fee arithmetic and the preserved $1,200-currently-held premise in E05.

Not read, not obtained, or not established

• Every section of Article 11 or the entire KMTA.
• A complete post-2017 CSO amendment-history audit.
• A full public enforcement-order docket or all-case citator.
• An OSBC order resolving the direct CSO/KMTA overlap.
• An OSBC order resolving K.S.A. 50-1120(c)(5)–(6) for consumer-owned accounts.
• A current complete Kansas-specific NMLS CSO checklist.
• A named provider’s CSO or money-transmitter license.
• Any actual consumer trust account, bank statement, subledger, bank agreement, ACH authorization, administrator contract, or processor agreement.
• Actual pass-through FDIC or NCUA insurance.
• Federal bankruptcy characterization or priority.
• Interest allocation, reserve, shortage-cure, reconciliation-frequency, reversal, or chargeback instructions.
• A consumer return deadline specific to creditor rejection, failed enrollment, provider termination, surrender, lapse, or insolvency absent written rescission.
• Full bond, insolvency, liquidation, remedies, restitution, agreement, collection, litigation, limitations, garnishment, secured-sector, local, tribal, arbitration, or choice-of-law analysis.
• Any application, filing, contact, opinion request, account action, provider lookup, private data, website change, publication, Chrome control, other Chat, or CAPTCHA workaround.

Method limits

• Search silence was not treated as proof that no order, interpretation, or case exists.
• The statute website’s displayed update timestamps were not treated as legal effective dates.
• The OSBC forms were not elevated to statutes or regulations.
• The word “trust” was not treated as proof of deposit-insurance pass-through, bankruptcy priority, consumer account ownership, or bank approval.
• A third-party administrator label was not treated as proof of noncustody.
• Federal dedicated-account compliance was not substituted for Kansas trust compliance.
• No prior remittance or fee was deducted twice.
• No fee ceiling was treated as fee earning or authority to retain consumer principal.
• No component, state, parent dossier, A066, operational, or publication-readiness acceptance is supplied.

PASS-03 conclusion: Kansas establishes a detailed custodial-DMP trust system—licensee-established account, four-calendar-day deposit, consumer-specific ledgers, constrained creditor remittance, exclusive creditor-or-consumer destinations, operating-account segregation, quarterly reporting, five-year records, regulator access, and a ten-calendar-day written-rescission return of funds currently held. It does not publicly resolve the full noncustodial dedicated-account architecture, provider-fee withdrawal from trust principal, interest and shortage administration, failed-plan return timing, direct CSO/KMTA overlap, or insolvency priority.

END S_KS PASS-03.