PRINTER'S NO. 1497
No. 1213 Session of 1989
INTRODUCED BY SALVATORE, SEPTEMBER 25, 1989
REFERRED TO BANKING AND INSURANCE, SEPTEMBER 25, 1989
AN ACT 1 Regulating credit services; prohibiting certain activities; and 2 providing for certain information to be given to buyers, for 3 the contents of contracts and for enforcement. 4 TABLE OF CONTENTS 5 Section 1. Short title. 6 Section 2. Definitions. 7 Section 3. Prohibited activities. 8 Section 4. Information sheet. 9 Section 5. Contents of information sheet. 10 Section 6. Contract. 11 Section 7. Surety bond. 12 Section 8. Waivers and burden of proof. 13 Section 9. Enforcement. 14 Section 10. Damages. 15 Section 11. Construction of act. 16 Section 12. Effective date. 17 The General Assembly of the Commonwealth of Pennsylvania 18 hereby enacts as follows:
1 Section 1. Short title. 2 This act shall be known and may be cited as the Credit 3 Services Act. 4 Section 2. Definitions. 5 The following words and phrases when used in this act shall 6 have the meanings given to them in this section unless the 7 context clearly indicates otherwise: 8 "Buyer." A natural person who is solicited to purchase or 9 who purchases the services of a credit services organization. 10 "Credit services organization." 11 (1) A person who, with respect to the extension of 12 credit by others, sells, provides or performs, or represents 13 that he or she can or will sell, provide or perform, any of 14 the following services, in return for the payment of money or 15 other valuable consideration: 16 (i) Improving a buyer's credit record, history or 17 rating. 18 (ii) Obtaining an extension of credit for a buyer. 19 (iii) Providing advice or assistance to a buyer with 20 regard to either subparagraph (i) or (ii). 21 (2) The term shall not include any of the following: 22 (i) Any person organized, chartered or holding a 23 license or authorization certificate to make loans or 24 extensions of credit pursuant to the laws of the 25 Commonwealth or the United States who is subject to 26 regulation and supervision by an official or agency of 27 the Commonwealth or the United States. 28 (ii) Any bank or savings and loan institution whose 29 deposits or accounts are eligible for insurance by the 30 Federal Deposit Insurance Corporation or the Federal 19890S1213B1497 - 2 -
1 Savings and Loan Insurance Corporation. 2 (iii) Any nonprofit organization exempt from 3 taxation under section 501(c)(3) of the Internal Revenue 4 Code of 1954 (68A Stat. 3, 26 U.S.C. § 1 et seq.). 5 (iv) Any person licensed as a real estate broker 6 where the person is acting within the course and scope of 7 that license. 8 (v) Any person admitted to practice law in this 9 Commonwealth where the person renders services within the 10 course of such practice. 11 (vi) Any broker-dealer registered with the 12 Securities and Exchange Commission or the Commodity 13 Futures Trading Commission where the broker-dealer is 14 acting within the course and scope of such regulation. 15 (vii) Any consumer reporting agency as defined in 16 the Fair Credit Reporting Act (Public Law 91-508, 15 17 U.S.C. § 1681 et seq.). 18 "Extension of credit." The right to defer payment of debt or 19 to incur debt and defer its payment, offered or granted 20 primarily for personal, family or household purposes. 21 Section 3. Prohibited activities. 22 A credit services organization, and its salespersons, agents 23 and representatives who sell or attempt to sell the services of 24 a credit services organization, shall not do any of the 25 following: 26 (1) Charge or receive any money or other valuable 27 consideration prior to full and complete performance of the 28 services the credit services organization has agreed to 29 perform for or on behalf of the buyer, unless the credit 30 services organization has, in conformity with section 7, 19890S1213B1497 - 3 -
1 either obtained a surety bond issued by a surety company 2 admitted to do business in this Commonwealth or established a 3 trust account at a federally insured bank or savings and loan 4 association located in this Commonwealth. If a credit 5 services organization has obtained a surety bond or 6 established a trust account, the salesperson, agents and 7 representatives who sell the services of such organization 8 shall not be required to obtain the surety bond or establish 9 the trust account provided for by this act. 10 (2) Charge or receive any money or other valuable 11 consideration solely for referral of the buyer to a retail 12 seller who will or may extend credit to the buyer, if the 13 credit which is or will be extended to the buyer is upon 14 substantially the same terms as those available to the 15 general public. 16 (3) Make or counsel or advise any buyer to make any 17 statement which is untrue or misleading and which is known, 18 or which by the exercise of reasonable care should be known, 19 to be untrue or misleading, to a consumer credit reporting 20 agency or to any person who has extended credit to a buyer or 21 to whom a buyer is applying for an extension of credit, with 22 respect to a buyer's creditworthiness, credit standing or 23 credit capacity. 24 (4) Make or use any untrue or misleading representations 25 in the offer or sale of the services of a credit services 26 organization or engage, directly or indirectly, in any act, 27 practice or course of business which operates or would 28 operate as a fraud or deception upon any person in connection 29 with the offer or sale of the services of a credit services 30 organization. 19890S1213B1497 - 4 -
1 (5) Make or use an advertisement which guarantees that 2 the buyer will obtain credit. 3 Section 4. Information sheet. 4 Prior to the execution of a contract or agreement between the 5 buyer and a credit services organization or prior to the receipt 6 by the credit services organization of any money or other 7 valuable consideration, whichever occurs first, the credit 8 services organization shall provide the buyer a statement, in 9 writing, containing all the information required by section 5. 10 The credit services organization shall maintain on file or 11 microfilm for a period of three years an exact copy of the 12 information sheet, personally signed by the buyer, acknowledging 13 receipt of a copy of the information sheet. 14 Section 5. Contents of information sheet. 15 The information sheet shall include all of the following: 16 (1) A complete and accurate statement of the buyer's 17 right to review any file on the buyer maintained by any 18 consumer credit reporting agency and the right of the buyer 19 to receive a copy of that file. The information sheet shall 20 include the statement that a copy of the buyer's file will be 21 furnished by the consumer credit reporting agency, and the 22 approximate price the buyer will be charged by the credit 23 reporting agency for a copy of the file. The information 24 sheet shall also include a statement that information in a 25 consumer's credit file will be provided free of charge by the 26 consumer credit reporting agency to the consumer by telephone 27 after written request within 30 days of the consumer's 28 receiving a denial of credit notice. 29 (2) A complete and accurate statement of the buyer's 30 right to dispute the completeness or accuracy of any item 19890S1213B1497 - 5 -
1 contained in any file on the buyer maintained by any consumer 2 credit reporting agency. 3 (3) A complete and detailed description of the services 4 to be performed by the credit services organization for or on 5 behalf of the buyer and the total amount the buyer will have 6 to pay, or become obligated to pay, for the services. 7 (4) If the credit services organization is required to 8 obtain a surety bond or establish a trust account pursuant to 9 section 3, a statement setting forth both of the following: 10 (i) The buyer's right to proceed against the bond or 11 trust account under the circumstances and in the manner 12 set forth in section 7. 13 (ii) The name and address of the surety company 14 which issued the bond, or the name and address of the 15 depository and the trustee and the account number of the 16 trust account. 17 Section 6. Contract. 18 (a) Contents.--Every contract between the buyer and a credit 19 services organization for the purchase of the services of the 20 credit services organization shall be in writing, shall be 21 dated, shall be signed by the buyer and shall include all of the 22 following: 23 (1) A conspicuous statement in size equal to 10-point 24 bold type or the size type used for the contract provisions, 25 whichever is larger, in immediate proximity to the space 26 reserved for the signature of the buyer, as follows: 27 You, the buyer, may cancel this contract at any time 28 prior to 12 midnight of the fifth day after the date 29 of the transaction. See the attached notice of 30 cancellation form for an explanation of this right. 19890S1213B1497 - 6 -
1 (2) The terms and conditions of payment, including the 2 total of all payments to be made by the buyer, whether to the 3 credit services organization or to some other person. 4 (3) A full and detailed description of the services to 5 be performed by the credit services organization for the 6 buyer, including all guarantees and all promises of full or 7 partial refunds, and the estimated date by which such 8 services are to be performed or estimated length of time for 9 performing such services. 10 (4) The credit services organization's principal 11 business address and the name and address of its agent, other 12 than the Secretary of the Commonwealth, authorized to receive 13 service of process. 14 (b) Copy.--A copy of the fully completed contract and all 15 other documents the credit services organization requires the 16 buyer to sign shall be given to the buyer at the time they are 17 signed. 18 (c) Notice of cancellation.--The contract shall be 19 accompanied by a completed form in duplicate, captioned "Notice 20 of Cancellation," which shall be attached to the contract and 21 easily detachable, and which shall contain, in at least 10-point 22 type, the following statement written in the same language as 23 used in the contract: 24 Notice of Cancellation 25 You may cancel this contract, without any penalty or 26 obligation, within five days from the date the contract is 27 signed. 28 If you cancel, any payment made by you under this 29 contract will be returned within 15 days following receipt by 30 the seller of your cancellation notice. 19890S1213B1497 - 7 -
1 To cancel this contract, mail or deliver a signed and 2 dated copy of this cancellation notice, or any other written 3 notice, to (name of seller) at 4 ......................................................... 5 (address of seller) (place of business) 6 not later than 12 midnight (date). 7 I hereby cancel this transaction. 8 ....... ................................................. 9 (date) (purchaser's signature) 10 (d) Effect of breach.--The seller's breach of a contract 11 under this act or of any obligation arising therefrom shall 12 constitute a violation of this act. 13 Section 7. Surety bond. 14 If a credit services organization is required to obtain a 15 surety bond or establish a trust account pursuant to section 3, 16 the following procedures shall be applicable: 17 (1) If a bond is obtained, a copy of it shall be filed 18 with the Department of State. If a trust account is 19 maintained, notification of the depository, the trustee and 20 the account number shall be filed with the Department of 21 State. 22 (2) The bond or trust account required shall be in favor 23 of the Commonwealth for the benefit of any person who is 24 damaged by any violation of this act. The bond or trust 25 account shall also be in favor of any person damaged by such 26 practices. 27 (3) Any person claiming against the bond or trust 28 account for a violation of this act may maintain an action at 29 law against the credit services organization and against the 30 surety or trustee. The surety or trustee shall be liable only 19890S1213B1497 - 8 -
1 for actual damages and not the punitive damages permitted 2 under section 10. The aggregate liability of the surety or 3 trustee to all persons damaged by a credit services 4 organization's violation of this act shall in no event exceed 5 the amount of the trust account or bond. 6 (4) The bond or the trust account shall be in an amount 7 equal to 5% of the total amount of the fees charged buyers by 8 the credit services organization under the contracts entered 9 into between the credit services organization and such buyers 10 during the previous 12 months, but in no case shall the bond 11 be less than $5,000 nor more than $25,000. The amount 12 required shall be adjusted once a year, no later than the 13 tenth day of the first month of the credit services 14 organization's fiscal year. 15 Section 8. Waivers and burden of proof. 16 (a) Waiver.--Any waiver by a buyer of the provisions of this 17 act shall be deemed contrary to public policy and shall be void 18 and unenforceable. Any attempt by a credit services organization 19 to have a buyer waive rights given by this act shall constitute 20 a violation of this act. 21 (b) Burden of proof.--In any proceeding involving this act, 22 the burden of providing an exemption or an exception from a 23 definition is upon the person claiming it. 24 Section 9. Enforcement. 25 (a) Penalty.--Any person who violates any provision of this 26 act commits a misdemeanor of the third degree. This subsection 27 shall not apply to a seller's breach of a contract subject to 28 this act. 29 (b) Enforcement responsibility.--The duty to institute 30 actions for violation of this act, including equity proceedings 19890S1213B1497 - 9 -
1 to restrain and enjoin such a violation, is hereby vested in the 2 Attorney General and district attorneys. The Attorney General or 3 any district attorney may prosecute misdemeanor actions or 4 institute equity proceedings, or both. 5 (c) Construction of section.--This section shall not be 6 deemed to prohibit the enforcement by any person of any right 7 provided by this or any other law. 8 Section 10. Damages. 9 Any buyer injured by a violation of this act or by the credit 10 services organization's breach of a contract subject to this act 11 may bring any action for recovery of damages. Judgment shall be 12 entered for actual damages, but in no case less than the amount 13 paid by the buyer to the credit services organization, plus 14 reasonable attorney fees and costs. An award, if the trial court 15 deems it proper, may be entered for punitive damages. 16 Section 11. Construction of act. 17 (a) Act not exclusive.--The provisions of this act are not 18 exclusive and do not relieve the parties or the contracts 19 subject thereto from compliance with any other applicable 20 provision of law. 21 (b) Remedies cumulative.--The remedies provided in this act 22 for violation of any section of this act shall be in addition to 23 any other procedures or remedies for any violation or conduct 24 provided for in any other law. 25 Section 12. Effective date. 26 This act shall take effect in six months. L13L12JLW/19890S1213B1497 - 10 -