PRIOR PRINTER'S NO. 2186 PRINTER'S NO. 3718
No. 1716 Session of 1985
INTRODUCED BY RICHARDSON, COHEN, CARN, TRUMAN, OLIVER AND FATTAH, OCTOBER 1, 1985
AS REPORTED FROM COMMITTEE ON CONSUMER AFFAIRS, HOUSE OF REPRESENTATIVES, AS AMENDED, JUNE 18, 1986
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
1 hereby enacts as follows: 2 Section 1. Short title. 3 This act shall be known and may be cited as the Credit 4 Services Act. 5 Section 2. Definitions. 6 The following words and phrases when used in this act shall 7 have the meanings given to them in this section unless the 8 context clearly indicates otherwise: 9 "Buyer." A natural person who is solicited to purchase or 10 who purchases the services of a credit services organization. 11 "Credit services organization." 12 (1) A person who, with respect to the extension of 13 credit by others, sells, provides or performs, or represents 14 that he or she can or will sell, provide or perform, any of 15 the following services, in return for the payment of money or 16 other valuable consideration: 17 (i) Improving a buyer's credit record, history or 18 rating. 19 (ii) Obtaining an extension of credit for a buyer. 20 (iii) Providing advice or assistance to a buyer with 21 regard to either subparagraph (1) or (2). 22 (2) The term shall not include any of the following: 23 (i) Any person organized, chartered, or holding a 24 license or authorization certificate to make loans or 25 extensions of credit pursuant to the laws of the 26 Commonwealth or the United States who is subject to 27 regulation and supervision by an official or agency of 28 the Commonwealth or the United States. 29 (ii) Any bank or savings and loan institution whose 30 deposits or accounts are eligible for insurance by the 19850H1716B3718 - 2 -
1 Federal Deposit Insurance Corporation or the Federal 2 Savings and Loan Insurance Corporation. 3 (iii) Any nonprofit organization exempt from 4 taxation under section 501(c)(3) of the Internal Revenue 5 Code of 1954 (68A Stat. 3, 26 U.S.C. § 1 et seq.). 6 (iv) Any person licensed as a real estate broker 7 where the person is acting within the course and scope of 8 that license. 9 (v) Any person admitted to practice law in the 10 Commonwealth where the person renders services within the 11 course of such practice. 12 (vi) Any broker-dealer registered with the 13 Securities and Exchange Commission or the Commodity 14 Futures Trading Commission where the broker-dealer is 15 acting within the course and scope of such regulation. 16 "Extension or credit." The right to defer payment of debt or 17 to incur debt and defer its payment, offered or granted 18 primarily for personal, family or household purposes. 19 Section 3. Prohibited activities. 20 A credit services organization, and its salespersons, agents 21 and representatives who sell or attempt to sell the services of 22 a credit services organization, shall not do any of the 23 following: 24 (1) Charge or receive any money or other valuable 25 consideration prior to full and complete performance of the 26 services the credit services organization has agreed to 27 perform for or on behalf of the buyer, unless the credit 28 services organization has, in conformity with section 7, 29 either obtained a surety bond issued by a surety company 30 admitted to do business in this Commonwealth or established a 19850H1716B3718 - 3 -
1 trust account at a federally insured bank or savings and loan 2 association located in this Commonwealth. If a credit 3 services organization is in compliance with this act, the 4 salesperson, agents and representatives who sell the services 5 of such organization shall not be required to obtain the 6 surety bond or establish the trust account provided for by 7 this act. 8 (2) Charge or receive any money or other valuable 9 consideration solely for referral of the buyer to a retail 10 seller who will or may extend credit to the buyer, if the 11 credit which is or will be extended to the buyer is upon 12 substantially the same terms as those available to the 13 general public. 14 (3) Make, or counsel or advise any buyer to make, any 15 statement which is untrue or misleading and which is known, 16 or which by the exercise of reasonable care should be known, 17 to be untrue or misleading, to a consumer credit reporting 18 agency or to any person who has extended credit to a buyer or 19 to whom a buyer is applying for an extension of credit, with 20 respect to a buyer's creditworthiness, credit standing or 21 credit capacity. 22 (4) Make or use any untrue or misleading representations 23 in the offer or sale of the services of a credit services 24 organization or engage, directly or indirectly, in any act, 25 practice, or course of business which operates or would 26 operate as a fraud or deception upon any person in connection 27 with the offer or sale of the services of a credit services 28 organization. 29 (5) MAKE OR USE ANY ADVERTISEMENT THAT GUARANTEES THAT <-- 30 THE BUYER WILL OBTAIN CREDIT. 19850H1716B3718 - 4 -
1 Section 4. Statement. 2 Prior to the execution of a contract or agreement between the 3 buyer and a credit services organization or prior to the receipt 4 by the credit services organization of any money or other 5 valuable consideration, whichever occurs first, the credit 6 services organization shall provide the buyer a statement in 7 writing, containing all the information required by section 5. 8 The credit services organization shall maintain on file or 9 microfilm for a period of two years an exact copy of the 10 statement, personally signed by the buyer, acknowledging receipt 11 of a copy of the statement. 12 Section 5. Contents of statement. 13 The information statement shall include all of the following: 14 (1) A complete and accurate statement of the buyer's 15 right to review any file on the buyer maintained by any 16 consumer credit reporting agency and the right of the buyer 17 to receive a copy of that file. The statement shall include 18 the statement that a copy of the buyer's file will be 19 furnished free of charge by the consumer credit reporting 20 agency, if requested, within 30 days of the buyer receiving 21 notice of a denial of credit, and the approximate price the 22 buyer will be charged by the credit reporting agency for a 23 copy of the file. 24 (2) A complete and accurate statement of the buyer's 25 right to dispute the completeness or accuracy of any item 26 contained in any file on the buyer maintained by any consumer 27 credit reporting agency. 28 (3) A complete and detailed description of the services 29 to be performed by the credit services organization for or on 30 behalf of the buyer and the total amount the buyer will have 19850H1716B3718 - 5 -
1 to pay, or become obligated to pay, for the services. 2 (4) If the credit services organization is required to 3 obtain a surety bond or establish a trust account pursuant to 4 section 3, a statement setting forth both of the following: 5 (i) The buyer's right to proceed against the bond or 6 trust account under the circumstances and in the manner 7 set forth in section 7. 8 (ii) The name and address of the surety company 9 which issued the bond, or the name and address of the 10 depository and the trustee and the account number of the 11 trust account. 12 Section 6. Contract. 13 (a) Contents.--Every contract between the buyer and a credit 14 services organization for the purchase of the services of the 15 credit services organization shall be in writing, shall be 16 dated, signed by the buyer, and include all of the following: 17 (1) A conspicuous statement in size equal to at least 18 10-point bold type, in immediate proximity to the space 19 reserved for the signature of the buyer, as follows: 20 You, the buyer, may cancel this contract at any time 21 prior to 12 midnight of the fifth day after the date 22 of the transaction. See the attached notice of 23 cancellation form for an explanation of this right. 24 (2) The terms and conditions of payment, including the 25 total of all payments to be made by the buyer, whether to the 26 credit services organization or to some other person. 27 (3) A full and detailed description of the services to 28 be performed by the credit services organization for the 29 buyer, including all guarantees and all promises of full or 30 partial refunds, and the estimated date by which such 19850H1716B3718 - 6 -
1 services are to be performed or estimated length of time for 2 performing such services. 3 (4) The credit services organization's principal 4 business address and the name and address of its agent, other 5 than the Secretary of the Commonwealth, authorized to receive 6 service of process. 7 (b) Copy.--A copy of the fully completed contract and all 8 other documents the credit services organization requires the 9 buyer to sign shall be given to the buyer at the time they are 10 signed. 11 (c) Notice of cancellation.--The contract shall be 12 accompanied by a completed form in duplicate, captioned "Notice 13 of Cancellation," which shall be attached to the contract and 14 easily detachable, and which shall contain, in at least 10-point 15 type, the following statement written in the same language as 16 used in the contract: 17 Notice of Cancellation 18 You may cancel this contract, without any penalty or 19 obligation, within five days from the date the contract is 20 signed. 21 If you cancel, any payment made by you under this 22 contract will be returned within 15 days following receipt by 23 the seller of your cancellation notice. 24 To cancel this contract, mail or deliver a signed and 25 dated copy of this cancellation notice, or any other written 26 notice, to _____________________________ at 27 (name of 28 seller) 29 ___________________________________________________________ 30 (address of seller) (place of business) 19850H1716B3718 - 7 -
1 not later than 12 midnight ___________________. 2 (date) 3 I hereby cancel this transaction. 4 _______ _______________________________________________ 5 (date) (purchaser's signature) 6 (d) Effect of breach.--The seller's breach of a contract 7 under this act or of any obligation arising therefrom shall 8 constitute a violation of this act. 9 Section 7. Surety bond. 10 If a credit services organization is required to obtain a 11 surety bond or establish a trust account pursuant to section 3, 12 the following procedures shall be applicable: 13 (1) If a bond is obtained, a copy of it shall be filed 14 with the Department of State. If a trust account is 15 maintained, notification of the depository, the trustee and 16 the account number shall be filed with the Department of 17 State. 18 (2) The bond or trust account required shall be in favor 19 of the Commonwealth for the benefit of any person who is 20 damaged by any violation of this act. The bond or trust 21 account shall also be in favor of any person damaged by such 22 practices. 23 (3) Any person claiming against the bond or trust 24 account for a violation of this act may maintain an action at 25 law against the credit services organization and against the 26 surety or trustee. The surety or trustee shall be liable only 27 for actual damages and not the punitive damages permitted 28 under section 10. The aggregate liability of the surety or 29 trustee to all persons damaged by a credit services 30 organization's violation of this act shall in no event exceed 19850H1716B3718 - 8 -
1 the amount of the trust account or bond. 2 (4) The bond or the trust account shall be in an amount 3 equal to 5% of the total amount of the fees charged buyers by 4 the credit services organization under the contracts entered 5 into between the credit services organization and such buyers 6 during the previous 12 months, but in no case shall the bond 7 be less than $5,000 or more than $25,000. The amount required 8 shall be adjusted once a year, no later than the tenth day of 9 the first month of the credit services organization's fiscal 10 year. 11 Section 8. Waivers and burden of proof. 12 (a) Waiver.--Any waiver by a buyer of the provisions of this 13 act shall be deemed contrary to public policy and shall be void 14 and unenforceable. Any attempt by a credit services organization 15 to have a buyer waive rights given by this act shall constitute 16 a violation of this act. 17 (b) Burden of proof.--In any proceeding involving this act, 18 the burden of providing an exemption or an exception from a 19 definition is upon the person claiming it. 20 Section 9. Enforcement. 21 (a) Penalty.--Any person who violates any provision of this 22 act commits a misdemeanor of the third degree. This subsection 23 shall not apply to a seller's breach of a contract subject to 24 this act. 25 (b) Enforcement responsibility.--The duty to institute 26 actions for violation of this act, including equity proceedings 27 to restrain and enjoin such a violation, is hereby vested in the 28 Attorney General and district attorneys. The Attorney General or 29 any district attorney may prosecute misdemeanor actions or 30 institute equity proceedings, or both. 19850H1716B3718 - 9 -
1 (c) Construction of section.--This section shall not be 2 deemed to prohibit the enforcement by any person of any right 3 provided by this or any other law. 4 Section 10. Damages. 5 Any buyer injured by a violation of this act or by the credit 6 services organization's breach of a contract subject to this act 7 may bring any action for recovery of damages. Judgment shall be 8 entered for actual damages, but in no case less than the amount 9 paid by the buyer to the credit services organization, plus 10 reasonable attorney fees and costs. An award, if the trial court 11 deems it proper, may be entered for punitive damages. 12 Section 11. Construction of act. 13 (a) Act not exclusive.--The provisions of this act are not 14 exclusive and do not relieve the parties or the contracts 15 subject thereto from compliance with any other applicable 16 provision of law. 17 (b) Remedies cumulative.--The remedies provided in this act 18 for violation of any section of this act shall be in addition to 19 any other procedures or remedies for any violation or conduct 20 provided for in any other law. 21 Section 12. Effective date. 22 This act shall take effect in six months. H16L12DGS/19850H1716B3718 - 10 -