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
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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,
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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.
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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
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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.
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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.
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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
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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
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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.
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