PRINTER'S NO. 2186
No. 1716 Session of 1985
INTRODUCED BY RICHARDSON, COHEN, CARN, TRUMAN, OLIVER AND FATTAH, OCTOBER 2, 1985
REFERRED TO COMMITTEE ON CONSUMER AFFAIRS, OCTOBER 2, 1985
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. Statement. 9 Section 5. Contents of statement. 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 (1) or (2). 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 19850H1716B2186 - 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 the 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 "Extension or credit." The right to defer payment of debt or 16 to incur debt and defer its payment, offered or granted 17 primarily for personal, family or household purposes. 18 Section 3. Prohibited activities. 19 A credit services organization, and its salespersons, agents 20 and representatives who sell or attempt to sell the services of 21 a credit services organization, shall not do any of the 22 following: 23 (1) Charge or receive any money or other valuable 24 consideration prior to full and complete performance of the 25 services the credit services organization has agreed to 26 perform for or on behalf of the buyer, unless the credit 27 services organization has, in conformity with section 7, 28 either obtained a surety bond issued by a surety company 29 admitted to do business in this Commonwealth or established a 30 trust account at a federally insured bank or savings and loan 19850H1716B2186 - 3 -
1 association located in this Commonwealth. If a credit 2 services organization is in compliance with this act, the 3 salesperson, agents and representatives who sell the services 4 of such organization shall not be required to obtain the 5 surety bond or establish the trust account provided for by 6 this act. 7 (2) Charge or receive any money or other valuable 8 consideration solely for referral of the buyer to a retail 9 seller who will or may extend credit to the buyer, if the 10 credit which is or will be extended to the buyer is upon 11 substantially the same terms as those available to the 12 general public. 13 (3) Make, or counsel or advise any buyer to make, any 14 statement which is untrue or misleading and which is known, 15 or which by the exercise of reasonable care should be known, 16 to be untrue or misleading, to a consumer credit reporting 17 agency or to any person who has extended credit to a buyer or 18 to whom a buyer is applying for an extension of credit, with 19 respect to a buyer's creditworthiness, credit standing or 20 credit capacity. 21 (4) Make or use any untrue or misleading representations 22 in the offer or sale of the services of a credit services 23 organization or engage, directly or indirectly, in any act, 24 practice, or course of business which operates or would 25 operate as a fraud or deception upon any person in connection 26 with the offer or sale of the services of a credit services 27 organization. 28 Section 4. Statement. 29 Prior to the execution of a contract or agreement between the 30 buyer and a credit services organization or prior to the receipt 19850H1716B2186 - 4 -
1 by the credit services organization of any money or other 2 valuable consideration, whichever occurs first, the credit 3 services organization shall provide the buyer a statement in 4 writing, containing all the information required by section 5. 5 The credit services organization shall maintain on file or 6 microfilm for a period of two years an exact copy of the 7 statement, personally signed by the buyer, acknowledging receipt 8 of a copy of the statement. 9 Section 5. Contents of statement. 10 The information statement shall include all of the following: 11 (1) A complete and accurate statement of the buyer's 12 right to review any file on the buyer maintained by any 13 consumer credit reporting agency and the right of the buyer 14 to receive a copy of that file. The statement shall include 15 the statement that a copy of the buyer's file will be 16 furnished free of charge by the consumer credit reporting 17 agency, if requested, within 30 days of the buyer receiving 18 notice of a denial of credit, and the approximate price the 19 buyer will be charged by the credit reporting agency for a 20 copy of the file. 21 (2) A complete and accurate statement of the buyer's 22 right to dispute the completeness or accuracy of any item 23 contained in any file on the buyer maintained by any consumer 24 credit reporting agency. 25 (3) A complete and detailed description of the services 26 to be performed by the credit services organization for or on 27 behalf of the buyer and the total amount the buyer will have 28 to pay, or become obligated to pay, for the services. 29 (4) If the credit services organization is required to 30 obtain a surety bond or establish a trust account pursuant to 19850H1716B2186 - 5 -
1 section 3, a statement setting forth both of the following: 2 (i) The buyer's right to proceed against the bond or 3 trust account under the circumstances and in the manner 4 set forth in section 7. 5 (ii) The name and address of the surety company 6 which issued the bond, or the name and address of the 7 depository and the trustee and the account number of the 8 trust account. 9 Section 6. Contract. 10 (a) Contents.--Every contract between the buyer and a credit 11 services organization for the purchase of the services of the 12 credit services organization shall be in writing, shall be 13 dated, signed by the buyer, and include all of the following: 14 (1) A conspicuous statement in size equal to at least 15 10-point bold type, in immediate proximity to the space 16 reserved for the signature of the buyer, as follows: 17 You, the buyer, may cancel this contract at any time 18 prior to 12 midnight of the fifth day after the date 19 of the transaction. See the attached notice of 20 cancellation form for an explanation of this right. 21 (2) The terms and conditions of payment, including the 22 total of all payments to be made by the buyer, whether to the 23 credit services organization or to some other person. 24 (3) A full and detailed description of the services to 25 be performed by the credit services organization for the 26 buyer, including all guarantees and all promises of full or 27 partial refunds, and the estimated date by which such 28 services are to be performed or estimated length of time for 29 performing such services. 30 (4) The credit services organization's principal 19850H1716B2186 - 6 -
1 business address and the name and address of its agent, other 2 than the Secretary of the Commonwealth, authorized to receive 3 service of process. 4 (b) Copy.--A copy of the fully completed contract and all 5 other documents the credit services organization requires the 6 buyer to sign shall be given to the buyer at the time they are 7 signed. 8 (c) Notice of cancellation.--The contract shall be 9 accompanied by a completed form in duplicate, captioned "Notice 10 of Cancellation," which shall be attached to the contract and 11 easily detachable, and which shall contain, in at least 10-point 12 type, the following statement written in the same language as 13 used in the contract: 14 Notice of Cancellation 15 You may cancel this contract, without any penalty or 16 obligation, within five days from the date the contract is 17 signed. 18 If you cancel, any payment made by you under this 19 contract will be returned within 15 days following receipt by 20 the seller of your cancellation notice. 21 To cancel this contract, mail or deliver a singed and 22 dated copy of this cancellation notice, or any other written 23 notice, to _____________________________ at 24 (name of 25 seller) 26 ___________________________________________________________ 27 (address of seller) (place of business) 28 not later than 12 midnight ___________________. 29 (date) 30 I hereby cancel this transaction. 19850H1716B2186 - 7 -
1 _______ _______________________________________________ 2 (date) (purchaser's signature) 3 (d) Effect of breach.--The seller's breach of a contract 4 under this act or of any obligation arising therefrom shall 5 constitute a violation of this act. 6 Section 7. Surety bond. 7 If a credit services organization is required to obtain a 8 surety bond or establish a trust account pursuant to section 3, 9 the following procedures shall be applicable: 10 (1) If a bond is obtained, a copy of it shall be filed 11 with the Department of State. If a trust account is 12 maintained, notification of the depository, the trustee and 13 the account number shall be filed with the Department of 14 State. 15 (2) The bond or trust account required shall be in favor 16 of the Commonwealth for the benefit of any person who is 17 damaged by any violation of this act. The bond or trust 18 account shall also be in favor of any person damaged by such 19 practices. 20 (3) Any person claiming against the bond or trust 21 account for a violation of this act may maintain an action at 22 law against the credit services organization and against the 23 surety or trustee. The surety or trustee shall be liable only 24 for actual damages and not the punitive damages permitted 25 under section 10. The aggregate liability of the surety or 26 trustee to all persons damaged by a credit services 27 organization's violation of this act shall in no event exceed 28 the amount of the trust account or bond. 29 (4) The bond or the trust account shall be in an amount 30 equal to 5% of the total amount of the fees charged buyers by 19850H1716B2186 - 8 -
1 the credit services organization under the contracts entered 2 into between the credit services organization and such buyers 3 during the previous 12 months, but in no case shall the bond 4 be less than $5,000 or more than $25,000. The amount required 5 shall be adjusted once a year, no later than the tenth day of 6 the first month of the credit services organization's fiscal 7 year. 8 Section 8. Waivers and burden of proof. 9 (a) Waiver.--Any waiver by a buyer of the provisions of this 10 act shall be deemed contrary to public policy and shall be void 11 and unenforceable. Any attempt by a credit services organization 12 to have a buyer waive rights given by this act shall constitute 13 a violation of this act. 14 (b) Burden of proof.--In any proceeding involving this act, 15 the burden of providing an exemption or an exception from a 16 definition is upon the person claiming it. 17 Section 9. Enforcement. 18 (a) Penalty.--Any person who violates any provision of this 19 act commits a misdemeanor of the third degree. This subsection 20 shall not apply to a seller's breach of a contract subject to 21 this act. 22 (b) Enforcement responsibility.--The duty to institute 23 actions for violation of this act, including equity proceedings 24 to restrain and enjoin such a violation, is hereby vested in the 25 Attorney General and district attorneys. The Attorney General or 26 any district attorney may prosecute misdemeanor actions or 27 institute equity proceedings, or both. 28 (c) Construction of section.--This section shall not be 29 deemed to prohibit the enforcement by any person of any right 30 provided by this or any other law. 19850H1716B2186 - 9 -
1 Section 10. Damages. 2 Any buyer injured by a violation of this act or by the credit 3 services organization's breach of a contract subject to this act 4 may bring any action for recovery of damages. Judgment shall be 5 entered for actual damages, but in no case less than the amount 6 paid by the buyer to the credit services organization, plus 7 reasonable attorney fees and costs. An award, if the trial court 8 deems it proper, may be entered for punitive damages. 9 Section 11. Construction of act. 10 (a) Act not exclusive.--The provisions of this act are not 11 exclusive and do not relieve the parties or the contracts 12 subject thereto from compliance with any other applicable 13 provision of law. 14 (b) Remedies cumulative.--The remedies provided in this act 15 for violation of any section of this act shall be in addition to 16 any other procedures or remedies for any violation or conduct 17 provided for in any other law. 18 Section 12. Effective date. 19 This act shall take effect in six months. H16L12DGS/19850H1716B2186 - 10 -