PRIOR PRINTER'S NOS. 925, 1633 PRINTER'S NO. 1802
No. 865 Session of 1991
INTRODUCED BY SALVATORE AND LINCOLN, APRIL 3, 1991
AS AMENDED ON THIRD CONSIDERATION, DECEMBER 9, 1991
AN ACT
1 Regulating credit services; prohibiting certain activities;
2 providing for certain information to be given to buyers, for
3 the contents of contracts and for enforcement; prohibiting
4 advance fees by loan brokers; and providing penalties.
5 TABLE OF CONTENTS
6 Section 1. Short title.
7 Section 2. Definitions.
8 Section 3. Prohibited activities.
9 Section 4. Information sheet.
10 Section 5. Contents of information sheet.
11 Section 6. Contract.
12 Section 7. Surety bond.
13 Section 8. Loan broker; prohibited acts.
14 Section 9. Waivers and burden of proof.
15 Section 10. Enforcement.
16 Section 11. Damages.
17 Section 12. Construction of act.
18 Section 13. Effective date.
1 The General Assembly of the Commonwealth of Pennsylvania
2 hereby enacts as follows:
3 Section 1. Short title.
4 This act shall be known and may be cited as the Credit
5 Services Act.
6 Section 2. Definitions.
7 The following words and phrases when used in this act shall
8 have the meanings given to them in this section unless the
9 context clearly indicates otherwise:
10 "Advance fee." Any funds or consideration assessed or
11 collected prior to closing of a loan by a loan broker.
12 "Borrower." A person obtaining or desiring to obtain a loan
13 of money, a credit card or line of credit for personal, family
14 or household purposes.
15 "Buyer." A natural person who is solicited to purchase or
16 who purchases the services of a credit services organization.
17 "Credit services organization."
18 (1) A person who, with respect to the extension of
19 credit by others, sells, provides or performs, or represents
20 that he or she can or will sell, provide or perform, any of
21 the following services, in return for the payment of money or
22 other valuable consideration:
23 (i) Improving a buyer's credit record, history or
24 rating.
25 (ii) Obtaining an extension of credit for a buyer.
26 (iii) Providing advice or assistance to a buyer with
27 regard to either subparagraph (i) or (ii).
28 (2) The term shall not include any of the following:
29 (i) Any person organized, chartered or holding a
30 license or authorization certificate to make loans or
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1 extensions of credit pursuant to the laws of the
2 Commonwealth or the United States who is subject to
3 regulation and supervision by an official or agency of
4 the Commonwealth or the United States.
5 (ii) Any bank or savings and loan institution whose <--
6 deposits or accounts are eligible for insurance by the
7 Federal Deposit Insurance Corporation or the Federal
8 Savings and Loan Insurance Corporation.
9 (II) ANY BANK, BANK AND TRUST COMPANY, TRUST <--
10 COMPANY, SAVINGS BANK, FEDERAL SAVINGS AND LOAN
11 ASSOCIATION OR SAVINGS BANK LOCATED IN THIS COMMONWEALTH,
12 OR SAVINGS ASSOCIATION OR ANY SUBSIDIARY OR AFFILIATE OF
13 SUCH INSTITUTION, WHOSE DEPOSITS ARE ELIGIBLE FOR
14 INSURANCE BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
15 THE SAVINGS ASSOCIATION INSURANCE FUND OF THE FEDERAL
16 DEPOSIT INSURANCE CORPORATION OR THE PENNSYLVANIA SAVINGS
17 ASSOCIATION INSURANCE CORPORATION.
18 (iii) Any nonprofit organization exempt from
19 taxation under section 501(c)(3) of the Internal Revenue
20 Code of 1954 (68A Stat. 3, 26 U.S.C. § 1 et seq.).
21 (iv) Any person licensed as a real estate broker
22 where the person is acting within the course and scope of
23 that license.
24 (v) Any person admitted to practice law in this
25 Commonwealth where the person renders services within the
26 course of such practice.
27 (vi) Any broker-dealer registered with the
28 Securities and Exchange Commission or the Commodity
29 Futures Trading Commission where the broker-dealer is
30 acting within the course and scope of such regulation.
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1 (vii) Any consumer reporting agency as defined in
2 the Fair Credit Reporting Act (Public Law 91-508, 15
3 U.S.C. § 1681 et seq.).
4 "Extension of credit." The right to defer payment of debt or
5 to incur debt and defer its payment, offered or granted
6 primarily for personal, family or household purposes.
7 "Loan broker." Any person, except a person organized, <--
8 chartered, exempt from licensure under statute, or holding a
9 license or authorization certificate to make loans or provide
10 credit pursuant to the laws of the Commonwealth or the United
11 States who is subject to regulation and supervision by an
12 official or agency of the Commonwealth or the United States,
13 who:
14 (1) For or in expectation of consideration arranges or
15 attempts to arrange or offers to fund a loan of money, a
16 credit card or line of credit for personal, family or
17 household purposes.
18 (2) For or in expectation of consideration assists or
19 advises a borrower in obtaining or attempting to obtain a
20 loan of money, a credit card, a line of credit, or related
21 guarantee, enhancement or collateral of any kind or nature.
22 (3) Acts for or on behalf of a loan broker for the
23 purpose of soliciting borrowers.
24 (4) Holds himself out as a loan broker.
25 "LOAN BROKER." <--
26 (1) A PERSON WHO:
27 (I) FOR OR IN EXPECTATION OF A CONSIDERATION FEE
28 ARRANGES OR ATTEMPTS TO ARRANGE OR OFFERS TO FUND A LOAN
29 OF MONEY, A CREDIT CARD OR LINE OF CREDIT FOR PERSONAL,
30 FAMILY OR HOUSEHOLD PURPOSES.
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1 (II) FOR OR IN EXPECTATION OF A CONSIDERATION FEE
2 ASSISTS OR ADVISES A BORROWER IN OBTAINING OR ATTEMPTING
3 TO OBTAIN A LOAN OF MONEY, A CREDIT CARD, A LINE OF
4 CREDIT, OR RELATED GUARANTEE, ENHANCEMENT OR COLLATERAL
5 OF ANY KIND OR NATURE.
6 (III) ACTS FOR OR ON BEHALF OF A LOAN BROKER FOR THE
7 PURPOSE OF SOLICITING BORROWERS.
8 (IV) HOLDS HIMSELF OUT AS A LOAN BROKER.
9 (2) THE TERM SHALL NOT INCLUDE:
10 (I) ANY PERSON ORGANIZED, CHARTERED, EXEMPT FROM
11 LICENSURE UNDER STATUTE, OR HOLDING A LICENSE OR
12 AUTHORIZATION CERTIFICATE TO MAKE LOANS OR PROVIDE CREDIT
13 PURSUANT TO THE LAWS OF THE COMMONWEALTH OR THE UNITED
14 STATES WHO IS SUBJECT TO REGULATION AND SUPERVISION BY AN
15 OFFICIAL OR AGENCY OF THE COMMONWEALTH OR THE UNITED
16 STATES.
17 (II) ANY BANK, BANK AND TRUST COMPANY, TRUST
18 COMPANY, SAVINGS BANK, FEDERAL SAVINGS AND LOAN
19 ASSOCIATION OR SAVINGS BANK LOCATED IN THIS COMMONWEALTH,
20 OR SAVINGS ASSOCIATION OR ANY SUBSIDIARY OR AFFILIATE OF
21 SUCH INSTITUTION, WHOSE DEPOSITS ARE ELIGIBLE FOR
22 INSURANCE BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
23 THE SAVINGS ASSOCIATION INSURANCE FUND OF THE FEDERAL
24 DEPOSIT INSURANCE CORPORATION OR THE PENNSYLVANIA SAVINGS
25 ASSOCIATION INSURANCE CORPORATION.
26 (III) ANY PERSON LICENSED AS A MORTGAGE BROKER UNDER
27 THE ACT OF DECEMBER 22, 1989 (P.L.687, NO.90), KNOWN AS
28 THE MORTGAGE BANKERS AND BROKERS ACT.
29 (IV) ANY PERSON WHO IS NOT REQUIRED TO OBTAIN A
30 LICENSE AS A MORTGAGE BANKER BY REASON OF THE EXCEPTIONS
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1 CONTAINED IN SECTION 3(B) OF THE MORTGAGE BANKERS AND
2 BROKERS ACT.
3 (V) ANY PERSON LICENSED AS A REAL ESTATE BROKER
4 WHERE THE PERSON IS ACTING WITHIN THE COURSE AND SCOPE OF
5 THAT LICENSE.
6 (VI) ANY PERSON ADMITTED TO PRACTICE LAW IN THIS
7 COMMONWEALTH WHERE THE PERSON RENDERS SERVICES WITHIN THE
8 COURSE OF SUCH PRACTICE.
9 (VII) ANY BROKER-DEALER REGISTERED WITH THE
10 SECURITIES AND EXCHANGE COMMISSION OR THE COMMODITY
11 FUTURES TRADING COMMISSION WHERE THE BROKER-DEALER IS
12 ACTING WITHIN THE COURSE AND SCOPE OF SUCH REGULATION.
13 "Principal." Any officer, director, partner, joint venturer,
14 branch manager or other person with similar managerial or
15 supervisory responsibilities for a loan broker.
16 Section 3. Prohibited activities.
17 A credit services organization, and its salespersons, agents
18 and representatives who sell or attempt to sell the services of
19 a credit services organization, shall not do any of the
20 following:
21 (1) Charge or receive any money or other valuable
22 consideration prior to full and complete performance of the
23 services the credit services organization has agreed to
24 perform for or on behalf of the buyer, unless the credit
25 services organization has, in conformity with section 7,
26 either obtained a surety bond issued by a surety company
27 admitted to do business in this Commonwealth or established a
28 trust account at a federally insured bank or savings and loan <--
29 association located in this Commonwealth. If a credit TRUST <--
30 ACCOUNT AT A BANK, BANK AND TRUST COMPANY, TRUST COMPANY,
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1 SAVINGS BANK, FEDERAL SAVINGS AND LOAN ASSOCIATION OR SAVINGS
2 BANK LOCATED IN THIS COMMONWEALTH, OR SAVINGS ASSOCIATION OR
3 ANY SUBSIDIARY OR AFFILIATE OF SUCH INSTITUTION, WHOSE
4 DEPOSITS ARE ELIGIBLE FOR INSURANCE BY THE FEDERAL DEPOSIT
5 INSURANCE CORPORATION, THE SAVINGS ASSOCIATION INSURANCE FUND
6 OF THE FEDERAL DEPOSIT INSURANCE CORPORATION OR THE
7 PENNSYLVANIA SAVINGS ASSOCIATION INSURANCE CORPORATION. IF A
8 CREDIT services organization has obtained a surety bond or
9 established a trust account, the salesperson, agents and
10 representatives who sell the services of such organization
11 shall not be required to obtain the surety bond or establish
12 the trust account provided for by this act.
13 (2) Charge or receive any money or other valuable
14 consideration solely for referral of the buyer to a retail
15 seller who will or may extend credit to the buyer, if the
16 credit which is or will be extended to the buyer is upon
17 substantially the same terms as those available to the
18 general public.
19 (3) Make or counsel or advise any buyer to make any
20 statement which is untrue or misleading and which is known,
21 or which by the exercise of reasonable care should be known,
22 to be untrue or misleading, to a consumer credit reporting
23 agency or to any person who has extended credit to a buyer or
24 to whom a buyer is applying for an extension of credit, with
25 respect to a buyer's creditworthiness, credit standing or
26 credit capacity.
27 (4) Make or use any untrue or misleading representations
28 in the offer or sale of the services of a credit services
29 organization or engage, directly or indirectly, in any act,
30 practice or course of business which operates or would
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1 operate as a fraud or deception upon any person in connection
2 with the offer or sale of the services of a credit services
3 organization.
4 (5) Make or use an advertisement which guarantees that
5 the buyer will obtain credit.
6 Section 4. Information sheet.
7 Prior to the execution of a contract or agreement between the
8 buyer and a credit services organization or prior to the receipt
9 by the credit services organization of any money or other
10 valuable consideration, whichever occurs first, the credit
11 services organization shall provide the buyer a statement, in
12 writing, containing all the information required by section 5.
13 The credit services organization shall maintain on file or
14 microfilm for a period of three years an exact copy of the
15 information sheet, personally signed by the buyer, acknowledging
16 receipt of a copy of the information sheet.
17 Section 5. Contents of information sheet.
18 The information sheet shall include all of the following:
19 (1) A complete and accurate statement of the buyer's
20 right to review any file on the buyer maintained by any
21 consumer credit reporting agency and the right of the buyer
22 to receive a copy of that file. The information sheet shall
23 include the statement that a copy of the buyer's file will be
24 furnished by the consumer credit reporting agency, and the
25 approximate price the buyer will be charged by the credit
26 reporting agency for a copy of the file. The information
27 sheet shall also include a statement that information in a
28 consumer's credit file will be provided free of charge by the
29 consumer credit reporting agency to the consumer by telephone
30 after written request within 30 days of the consumer's
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1 receiving a denial of credit notice.
2 (2) A complete and accurate statement of the buyer's
3 right to dispute the completeness or accuracy of any item
4 contained in any file on the buyer maintained by any consumer
5 credit reporting agency.
6 (3) A complete and detailed description of the services
7 to be performed by the credit services organization for or on
8 behalf of the buyer and the total amount the buyer will have
9 to pay, or become obligated to pay, for the services.
10 (4) If the credit services organization is required to
11 obtain a surety bond or establish a trust account pursuant to
12 section 3, a statement setting forth both of the following:
13 (i) The buyer's right to proceed against the bond or
14 trust account under the circumstances and in the manner
15 set forth in section 7.
16 (ii) The name and address of the surety company
17 which issued the bond, or the name and address of the
18 depository and the trustee and the account number of the
19 trust account.
20 Section 6. Contract.
21 (a) Contents.--Every contract between the buyer and a credit
22 services organization for the purchase of the services of the
23 credit services organization shall be in writing, shall be
24 dated, shall be signed by the buyer and shall include all of the
25 following:
26 (1) A conspicuous statement in size equal to 10-point
27 bold type or the size type used for the contract provisions,
28 whichever is larger, in immediate proximity to the space
29 reserved for the signature of the buyer, as follows:
30 You, the buyer, may cancel this contract at any time
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1 prior to 12 midnight of the fifth day after the date
2 of the transaction. See the attached notice of
3 cancellation form for an explanation of this right.
4 (2) The terms and conditions of payment, including the
5 total of all payments to be made by the buyer, whether to the
6 credit services organization or to some other person.
7 (3) A full and detailed description of the services to
8 be performed by the credit services organization for the
9 buyer, including all guarantees and all promises of full or
10 partial refunds, and the estimated date by which such
11 services are to be performed or estimated length of time for
12 performing such services.
13 (4) The credit services organization's principal
14 business address and the name and address of its agent, other
15 than the Secretary of the Commonwealth, authorized to receive
16 service of process.
17 (b) Copy.--A copy of the fully completed contract and all
18 other documents the credit services organization requires the
19 buyer to sign shall be given to the buyer at the time they are
20 signed.
21 (c) Notice of cancellation.--The contract shall be
22 accompanied by a completed form in duplicate, captioned "Notice
23 of Cancellation," which shall be attached to the contract and
24 easily detachable, and which shall contain, in at least 10-point
25 type, the following statement written in the same language as
26 used in the contract:
27 Notice of Cancellation
28 You may cancel this contract, without any penalty or
29 obligation, within five days from the date the contract is
30 signed.
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1 If you cancel, any payment made by you under this
2 contract will be returned within 15 days following receipt by
3 the seller of your cancellation notice.
4 To cancel this contract, mail or deliver a signed and
5 dated copy of this cancellation notice, or any other written
6 notice, to (name of seller) at
7 .........................................................
8 (address of seller) (place of business)
9 not later than 12 midnight (date).
10 I hereby cancel this transaction.
11 ....... .................................................
12 (date) (purchaser's signature)
13 (d) Effect of breach.--The seller's breach of a contract
14 under this act or of any obligation arising therefrom shall
15 constitute a violation of this act.
16 Section 7. Surety bond.
17 If a credit services organization is required to obtain a
18 surety bond or establish a trust account pursuant to section 3,
19 the following procedures shall be applicable:
20 (1) If a bond is obtained, a copy of it shall be filed
21 with the Department of State. If a trust account is
22 maintained, notification of the depository, the trustee and
23 the account number shall be filed with the Department of
24 State.
25 (2) The bond or trust account required shall be in favor
26 of the Commonwealth for the benefit of any person who is
27 damaged by any violation of this act. The bond or trust
28 account shall also be in favor of any person damaged by such
29 practices.
30 (3) Any person claiming against the bond or trust
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1 account for a violation of this act may maintain an action at
2 law against the credit services organization and against the
3 surety or trustee. The surety or trustee shall be liable only
4 for actual damages and not the punitive damages permitted
5 under section 10 11. The aggregate liability of the surety or <--
6 trustee to all persons damaged by a credit services
7 organization's violation of this act shall in no event exceed
8 the amount of the trust account or bond.
9 (4) The bond or the trust account shall be in an amount
10 equal to 5% of the total amount of the fees charged buyers by
11 the credit services organization under the contracts entered
12 into between the credit services organization and such buyers
13 during the previous 12 months, but in no case shall the bond
14 be less than $5,000 nor more than $25,000. The amount
15 required shall be adjusted once a year, no later than the
16 tenth day of the first month of the credit services
17 organization's fiscal year.
18 Section 8. Loan broker; prohibited acts. <--
19 (a) Acts enumerated.--No loan broker shall:
20 SECTION 8. RESTRICTIONS ON LOAN BROKERS. <--
21 (A) REGISTRATION REQUIREMENT.--LOAN BROKERS SHALL BE
22 REGISTERED WITH THE DEPARTMENT OF BANKING PURSUANT TO
23 REGULATIONS PROMULGATED BY THE DEPARTMENT. THE LICENSING
24 DIVISION OF THE DEPARTMENT SHALL BE RESPONSIBLE FOR IMPLEMENTING
25 THIS SECTION AND SHALL EMPLOY TWO PERSONS FOR THIS PURPOSE.
26 (B) REGISTRATION FEE.--LOAN BROKERS SEEKING TO BE REGISTERED
27 BY THE DEPARTMENT SHALL PAY TO THE DEPARTMENT AN ANNUAL
28 REGISTRATION FEE OF $300.
29 (C) PROHIBITED ACTS.--NO LOAN BROKER SHALL:
30 (1) Assess or collect an advance fee from a borrower to
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1 provide services as a loan broker.
2 (2) Make or use any false or misleading representations
3 or omit any material fact in the offer or sale of the
4 services of a loan broker or engage directly or indirectly in
5 any act that operates or would operate as fraud or deception
6 upon any person in connection with the offer or sale of
7 services of a loan broker, notwithstanding the absence of
8 reliance by the buyer.
9 (3) Make or use any false or deceptive representation in
10 its business dealings with a State agency or conceal a
11 material fact from a State agency.
12 (b) (D) Responsibility of principal.--Each principal of a <--
13 loan broker may be held responsible for the actions of a loan
14 broker, including its agents or employees in the course of
15 business of the loan broker.
16 Section 9. Waivers and burden of proof.
17 (a) Waiver.--Any waiver by a buyer OR BORROWER of the <--
18 provisions of this act shall be deemed contrary to public policy
19 and shall be void and unenforceable. Any attempt by a credit
20 services organization to have a buyer OR A LOAN BROKER TO HAVE A <--
21 BUYER OR BORROWER waive rights given by this act shall
22 constitute a violation of this act.
23 (b) Burden of proof.--In any proceeding involving this act,
24 the burden of providing PROVING an exemption or an exception <--
25 from a definition is upon the person claiming it.
26 Section 10. Enforcement.
27 (a) Unfair trade practice.--A violation of any provision of
28 this act shall be deemed to be a violation of the act of
29 December 17, 1968 (P.L.1224, No.387), known as the Unfair Trade
30 Practices and Consumer Protection Law.
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1 (b) Criminal offense.--Any person who violates section 8 <--
2 8(C) of this act commits a felony of the third degree. <--
3 Section 11. Damages.
4 Any buyer or borrower injured by a violation of this act or
5 by the credit services organization's OR LOAN BROKER'S breach of <--
6 a contract subject to this act may bring any AN action for <--
7 recovery of damages. Judgment shall be entered for actual
8 damages, but in no case less than the amount paid by the buyer
9 OR BORROWER to the credit services organization OR LOAN BROKER, <--
10 plus reasonable attorney fees and costs. An award, if the trial
11 court deems it proper, may be entered for punitive damages.
12 Section 12. 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 13. Effective date.
22 This act shall take effect as follows:
23 (1) Sections 8 and 9(b) of this act shall take effect <--
24 immediately.
25 (1) THIS SECTION, AND SECTIONS 2, 8 AND 10(B) OF THIS <--
26 ACT SHALL TAKE EFFECT IMMEDIATELY.
27 (2) The remainder of this act shall take effect in six
28 months.
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