Title 44. Trade and Commerce
Chapter 11. Regulations Concerning
Particular Businesses
Article 7. Credit Services
§ 44-1701. Definitions
In this article, unless the context otherwise requires:
1. "Buyer" means any natural person who is solicited to
purchase or who purchases the services of a credit services organization.
2. "Credit services organization" means a person who,
with respect to the extension of credit by others, sells, provides, performs or
represents that he can or will sell, provide or perform any of the following
services in return for the payment of monies or other valuable consideration:
(a) Improving a buyer's
credit record, history or rating.
(b) Obtaining an
extension of credit for a buyer.
(c) Providing advice or
assistance to a buyer with regard to either subdivision (a) or (b) of this
paragraph.
3. "Extension of credit" means the right to defer
payment of debt or to incur debt and defer its payment, which is offered or
granted primarily for personal, family or household purposes.
§ 44-1702. Exemptions
This article does not apply to:
1. A person who is organized, chartered or holding a license or
authorization certificate to make loans or extensions of credit pursuant to the
laws of this state or the United States and who is subject to regulation and
supervision by an official or agency of this state or the United States.
2. A bank or savings and loan institution whose deposits or
accounts are eligible for insurance by the federal deposit insurance
corporation or the federal savings and loan insurance corporation.
3. A person licensed as a real estate broker by this state if the
person is acting within the course and scope of that license.
4. A person licensed to practice law in this state if the person
renders services within the course and scope of his practice as an attorney at
law.
5. A broker-dealer registered
with the securities and exchange commission or the commodity futures trading
commission if the broker-dealer is acting within the course and scope of such
regulation.
6. Any nonprofit organization exempt from taxation under § 501(c)(3) of the Internal Revenue Code.
§ 44-1702.01. Repealed by Laws 1977, Ch. 126, § 1
§ 44-1703. Credit services organizations; prohibited
activities
A credit services organization and its salespersons, agents and
representatives who sell or attempt to sell the services of a credit services
organization shall not do any of the following:
1. Charge or receive monies or other valuable consideration before
full and complete performance of the services the credit services organization
has agreed to perform for or on behalf of the buyer, unless the credit services
organization, in conformity with § 44-1708, has obtained a surety bond issued by a surety
company authorized to do business in this state. If a credit services
organization is in compliance with this paragraph, the salesperson, agents and
representatives who sell the services of the organization are not required to
obtain the surety bond provided for in § 44-1708.
2. Charge or receive
monies or other valuable consideration solely for referral of the buyer to a
retail seller who will or may extend credit to the buyer, if the credit which
is or will be extended to the buyer is on substantially the same terms as those
available to the general public.
3. Make or counsel or advise a buyer to make any statement which
is untrue or misleading and which is known, or which by the exercise of
reasonable care should be known, to be untrue or misleading to a consumer
credit reporting agency or to any person who has extended credit to a buyer or
to whom a buyer is applying for an extension of credit, with respect to a
buyer's creditworthiness, credit standing or credit capacity.
4. Make or use any untrue or misleading representations in the
offer or sale of the services of a credit services organization or engage,
directly or indirectly, in an act, practice or course of business which
operates or would operate as a fraud or deception on a person in connection
with the offer or sale of the services of a credit services organization.
§ 44-1704. Information statement; necessity and time of
delivery to buyer; acknowledgment of delivery; retention on file
Before the execution of a contract or agreement between the buyer
and a credit services organization or before the receipt by the credit services
organization of monies or other valuable consideration, whichever occurs first,
the credit services organization shall provide the buyer with a statement, in
writing, containing all the information required by § 44-1705. The credit services organization shall maintain on
file or microfilm for a period of two years an exact copy of the statement,
personally signed by the buyer, acknowledging receipt of a copy of the
statement.
§ 44-1705. Information statement; contents
The information statement shall include all of the following:
1. A complete and
accurate statement of the buyer's right to review any file on the buyer maintained
by a consumer credit reporting agency and the right of the buyer to receive a
copy of that file, as provided by § 44-1693. The statement shall include the approximate price
the buyer will be charged by the credit reporting agency for a copy of the
file.
2. A complete and
accurate statement of the buyer's right to dispute the completeness or accuracy
of any item contained in any file on the buyer maintained by any consumer
credit reporting agency as provided by § 44-1694.
3. A complete and
detailed description of the services to be performed by the credit
services organization for or on behalf of the buyer and the total amount the
buyer has to pay, or become obligated to pay, for the services.
4. If the credit
services organization is required to obtain a surety bond pursuant to § 44-1703, the statement shall set forth both of the
following:
(a) The buyer's right to
proceed against the bond under the circumstances and in the manner set forth in § 44-1708.
(b) The name and address
of the surety company which issued the bond.
§ 44-1706. Contracts; requirements; contents
A. Every contract between the buyer and a credit services organization for the
purchase of the services of the credit services organization must be in
writing, be dated, be signed by the buyer and include all of the following:
1. A conspicuous statement in size equal to at least ten point
type in immediate proximity to the space reserved for the signature of the
buyer as follows:
You, the buyer, may cancel this contract at any time before
midnight of the third day after the date of the transaction. See the attached
notice of cancellation form for an explanation of this right.
2. The terms and conditions of payment, including the total of all
payments to be made by the buyer, whether to the credit
services organization or to some other person.
3. A full and detailed description of the services to be performed
by the credit services organization for the buyer, including all guarantees and
all promises of full or partial refunds, and the estimated date by which the
services are to be performed or the estimated length of time for performing the
services.
4. The credit services
organization's principal business address and the name and address of its agent
authorized to receive service of process.
B. The
contract shall be accompanied by a completed form in duplicate, entitled
"Notice of Cancellation", which shall be attached to the contract and
easily detachable and which shall contain in at least ten point type the
following statement written in the same language as used in the contract:
Notice of Cancellation
You may cancel this contract without any penalty or obligation
within three days from the date the contract is signed.
If you cancel, any payment made by you under this contract will be
returned within fifteen days after receipt by the credit services organization
of your cancellation notice.
To cancel this contract, mail or deliver a signed and dated copy
of this cancellation notice, or any other written notice, to
_______________(Name of credit services organization) at
_______________(Address of credit services organization) _______________(Place
of business) not later than midnight ________(Date).
I hereby cancel this transaction.
________(Date)
____________________ (Purchaser's signature)
C. A
copy of the fully completed contract and all other documents the credit
services organization requires the buyer to sign shall be given to the buyer at
the time they are signed.
§ 44-1706.01. Repealed by Laws 1973, Ch. 74, § 6
§ 44-1707. Credit service organization's breach of contract or
obligation; violation of article
The credit services organization's breach of a contract under this
article or of any obligation arising from the contract constitutes a violation
of this article.
§ 44-1708. Surety bond; procedures to obtain or establish;
claim by action at law; limit of liability
A. If a
credit services organization is required to obtain a surety bond pursuant to § 44-1703, the following procedures apply:
1. A copy of the bond
shall be filed with the corporation commission.
2. The bond required
shall be in favor of this state for the benefit of any person who is damaged by
any violation of this article. The bond shall also be in favor of any person
damaged by the practices.
3. A person claiming
against the bond for a violation of this article may maintain an action at law
against the credit services organization and against the surety.
B. The
surety is liable only for actual damages and not the punitive damages permitted
under § 44-1711. The aggregate liability of the surety to all
persons damaged by a credit services organization's violation of this article
shall in no event exceed the amount of the bond.
C. The
bond shall be in an amount equal to five per cent of the total amount of the
fees charged buyers by the credit services organization under the contracts
entered into between the credit services organization and the buyers during the
previous twelve months, but in no case shall the bond be less than five
thousand dollars or more than twenty-five thousand dollars. The amount required
shall be adjusted once a year, no later than the tenth day of the first month
of the credit services organization's fiscal year.
§ 44-1709. Waiver of rights by buyer; prohibition; burden of
proof on exemption or exception from article
A. A
waiver by a buyer of the provisions of this article is deemed contrary to
public policy and is void and unenforceable. An attempt by a credit services
organization to have a buyer waive rights given by this article consitutes [FN1] a violation of this article.
B. In
any proceeding involving this article the burden of proving an exemption or an
exception is on the person claiming it.
[FN1] So in original. Probably should read "constitutes".
§ 44-1710. Violation; classification; enforcement
A. A
person who violates § 44-1703, 44-1704, 44-1705, 44-1706 or § 44-1709, subsection A, is guilty of a class 1 misdemeanor.
B. The
superior court has jurisdiction to restrain and enjoin any violation of this
article.
C. The duty to institute actions
for violations of this article, including proceedings to restrain and enjoin
such a violation, is vested in the attorney general, county attorneys and city
attorneys. The attorney general, a county attorney or a city attorney may
prosecute misdemeanor actions or institute proceedings to restrain and enjoin
such violations, or both.
D. This section does not prohibit
the enforcement by a person of a right provided by this or
any other law.
E. The class 1 misdemeanor
provision of this section does not apply to a seller's breach of a contract
subject to this article.
§ 44-1711. Action for recovery of damages by buyer
A buyer injured by a violation of this article or by the credit
services organization's breach of a contract subject to this article may bring
any action for recovery of damages. Judgment shall be entered for actual
damages, but in no case less than the amount paid by the buyer to the credit
services organization, plus reasonable attorney fees and costs. If the trial
court deems it proper, the court may enter an award for punitive damages.
§ 44-1712. Application of other laws; remedies as additional
A. The provisions of this article
are not exclusive and do not relieve the parties or the contracts subject to
this article from compliance with any other applicable provision of law.
B. The remedies provided in this
article for a violation of this article are in addition to any other procedures
or remedies for any violation or conduct provided for in any other law.
§ 44-1712.01. Renumbered as § 32-1197
§§ 44-1713, 44-1714. Repealed by Laws 1977, Ch. 126, § 1
§§ 44-1713, 44-1714. Repealed by Laws 1977, Ch. 126, § 1
Current through legislation effective May 25, 2007, and also
includes election results from the November 7, 2006 general election.
END OF
Findings and
purpose from the Arizona Credit Repair
Organizations Act
Laws 1988, Ch. 350, § 1, provides:
"Section 1. Findings and purpose
"A. The legislature finds and declares
that:
"1. The ability to obtain and use credit has
become of great importance to consumers. Consumers have a vital interest in
establishing and maintaining their creditworthiness and credit standing. As a
result, consumers who have experienced credit problems may seek assistance from
credit services organizations which offer to obtain credit or improve the
credit standing of the consumers.
"2. Certain advertising and business practices
of some credit services organizations have worked a financial hardship on the
people of this state, often those who are of limited economic means and
inexperienced in credit matters. Credit services organizations have significant
impact on the economy and well-being of this state and its people.
"B. The purposes of this act are to
provide prospective buyers of services of credit services organizations with
the information necessary to make an intelligent decision regarding the
purchase of those services and to protect the public from unfair or deceptive
advertising and business practices.
"C. This act shall be construed
liberally to achieve these purposes."
Case Law
I
identified only one case construing the act. In State ex rel. Woods v. Sgrillo, 176
State ex rel. Woods v. Sgrillo
176
STATE of Arizona ex rel. Grant
WOODS, Attorney General, Plaintiff/Appellee/Cross-Appellant,
v.
Ronald T. SGRILLO and Barbara Jean Sgrillo, also known as Bobbie Sgrillo,
husband and wife, Jam Marketing, Inc., a corporation or purported corporation,
individually and doing business as Baron Financial Group, Baron Financial
Services, Baron Financial Systems, International Credit Card Services, Premier
Credit Card Services, and Premier Group; and Valley National Bank of Arizona,
Defendants/Appellants/Cross-Appellees.
State
filed action under Credit Services Organization Act (CSOA) and Consumer Fraud
Act (CFA) against sellers of information purporting to put consumers in
position to acquire low interest credit cards. The Superior Court,
Affirmed in part and reversed in part.
[1] KeyCite Notes
92B Consumer Credit
92BI In General
92Bk1 k. In General. Most Cited Cases
Credit Services Organization Act (CSOA) applied to criminal
conduct within state directed at nonresidents, despite portion of Act's
statement of purposes that referred to harm suffered by residents from
practices proscribed by Act. A.R.S. §§ 44-1701 to 44-1712.
[2] KeyCite Notes
29T Antitrust and Trade Regulation
29TIII Statutory Unfair Trade Practices and Consumer
Protection
29TIII(A) In General
29Tk139 Persons and Transactions Covered Under General
Statutes
29Tk145 k. Goods or Services. Most Cited Cases
(Formerly 92Hk6 Consumer Protection)
Fraudulent conduct in selling information purporting to put
consumers in position to acquire low interest credit cards was either sale of
“merchandise” within meaning of Consumer Fraud Act (CFA) or deceptive acts in
connection with sale of “merchandise” within meaning of CFA, in light of
statutory definition of “merchandise” to include sale of services, and in light
of fact that book or magazine containing information would fit within statutory
definition of “merchandise.”A.R.S. §§ 44-1521, subd. 5, 44-1522.
**771
|
(Cite as: 176
|
|
|
(Cite as: 176
|
|
Grant
Woods, Atty. Gen. by H. Leslie Hall and John W. Wall, Phoenix, for plaintiff, appellee,
cross-appellant.
Jones, Skelton & Hochuli by Booker T. Evans, Jr.,
OPINION
LIVERMORE, Presiding Judge.
The state alleged that defendants Ronald and Barbara Sgrillo
violated the Credit Services Organization Act (CSOA), A.R.S.
§§ 44-1701-1712, and the Consumer
Fraud Act (CFA), A.R.S.
§§ 44-1521-1534, by their conduct
through various entities in selling information about low interest credit
cards. On cross-motions for summary judgment, the trial court found that all
the conduct violated the CSOA and that a portion of it violated the CFA. The
remainder, it ruled, did not violate the CFA. Judgment was entered accordingly
with remedial injunctive relief, civil penalties of $2,038,000, and a
substantial award of attorneys' fees and costs. The Sgrillos appeal the
applications of the statutes. The state cross-appeals the adverse summary
judgment on the CFA and the scope of the remedy granted. We affirm in part and
reverse in part.
[1]
While admitting that
their conduct would violate the CSOA, defendants contend**772 that it
does not because all victims were non-residents of Arizona victimized only by
use of mail and telephone. This novel criminal immunity is derived from a
portion of the statement of purposes of the CSOA contained in Laws 1988, Ch.
350, § 1, saying that “the people of this state” have been harmed by the
practices now proscribed. Of course, our legislature was motivated in large
part by the harm caused
[2]
Defendants' second argument on appeal, that what they
sold is not “merchandise” within the meaning of the CFA, is equally unavailing. A.R.S. § 44-1521(5) reads: “ ‘Merchandise’ means any objects,
wares, goods, commodities, intangibles, real estate, or services.” Given the
breadth of this definition, the argument that the sale of information is not
covered cannot be sustained. A book or magazine, containing information, would
fit within the definition. So, too, would the packet of information sent by
those for whom defendants acted. Defendants seek to avoid this conclusion by
arguing that their acts were in aid of a sale by another entity. This is of no
assistance because A.R.S. § 44-1522 forbids deceptive acts “in connection with
the sale” of any merchandise regardless of whether the deceiver is the seller.
If the acts of defendants in purporting to put consumers in a position to
acquire low interest credit cards is not the sale of an object, ware, or good
within the meaning of A.R.S. § 44-1521(5), it surely is the sale of a “service” and
thus would still be covered. The broadly remedial purposes of the CFA should
not be defeated by niggling distinctions unrelated to the protection of
consumers by the elimination of fraud. Villegas v. Transamerica Financial Services, Inc., 147
Ariz. 100, 708 P.2d 781 (App.1985).
We deal summarily with the state's cross-appeal. We have examined
the evidence to which the state has directed us, and the existence of which is
not disputed by defendants, and find it sufficient to preclude summary judgment
under the CFA. The state's claim for additional remedies can be pursued in
connection with the trial of those claims. Because we have not been furnished a
transcript of the hearing on remedies, we cannot find an abuse of discretion in
the remedies ordered. We note that the civil penalties ordered will have the
substantial deterrent effect which the state claims would be provided by the
additional remedies it seeks.
Summary judgment in
favor of defendants on the consumer fraud claims is reversed. In all other
respects the judgment is affirmed. The state is awarded a portion of its
attorneys' fees on appeal under A.R.S. § 44-1534 in an amount to be determined upon filing
the statement required by Rule 21, Ariz.R.Civ.App. 1, 17B A.R.S.
LACAGNINA and FERNANDEZ, JJ., concur.