IL ST Ch. 815,
ACT 605, Refs
Act 605. Credit Services Organizations Act
Chapter 815. Business Transactions
Contracts
Act 605. Credit Services Organizations Act
605/1. Short title
§ 1. This Act shall be
known and may be cited as the "Credit Services Organizations Act".
605/2. Legislative
findings and declaration
§ 2. The General Assembly finds and declares that:
(a) The ability to
obtain and use credit has become of great importance to consumers who have a
vital interest in establishing and maintaining their credit worthiness and
credit standing. As a result, consumers who have experienced credit problems
may seek assistance from credit service businesses which offer to improve the
credit standing of such consumers. Certain advertising and business practices
of some companies engaged in the business of credit services have worked a
financial hardship upon the people of this State, often on those who are of
limited economic means and inexperienced in credit matters.
(b) The purpose of this
Act is to provide prospective consumers of credit services companies with the
information necessary to make an informed decision regarding the purchase of
those services and to protect the public from unfair or deceptive advertising
and business practices.
605/3. Definitions
§ 3. As used in this
Act:
(a) "Buyer"
means an individual who is solicited to purchase or who purchases the services
of a credit services organization.
(b) "Consumer
reporting agency" has the meaning assigned by Section 603(f), Fair Credit
Reporting Act (15 U.S.C. Section 1681a(f)).
(c) "Extension of
Credit" means the right to defer payment of a debt or to incur a debt and
defer its payment offered or granted primarily for personal, family, or
household purposes.
(d) "Credit
Services Organization" means a person who, with respect to the extension
of credit by others and in return for the payment of money or other valuable
consideration, provides, or represents that the person can or will provide, any
of the following services:
(i) improving a buyer's credit record, history, or rating:
(ii) obtaining an extension of
credit for a buyer; or
(iii) providing advice or
assistance to a buyer with regard to either subsection (i) or (ii).
"Credit Services Organization" does not include any of
the following:
(i) a person authorized to make loans or extensions of credit under the laws of this State or the United States who is subject to regulation and supervision by this State or the United States, or a lender approved by the United States Secretary of Housing and Urban Development for participation in a mortgage insurance program under the National Housing Act (12 U.S.C. Section 1701 et seq.);
(ii) a bank or savings and loan
association whose deposits or accounts are eligible for insurance by the
Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance
Corporation, or a subsidiary of such a bank or savings and loan association;
(iii) a credit union doing
business in this State;
(iv) a nonprofit organization
exempt from taxation under Section 501(c)(3) of the Internal Revenue Code of 1986, [FN1]
provided that such organization does not charge or receive any money or other
valuable consideration prior to or upon the execution of a contract or other
agreement between the buyer and the nonprofit organization;
(v) a person licensed as a real
estate broker by this state if the person is acting within the course and scope
of that license;
(vi) a person licensed to
practice law in this State acting within the course and scope of the person's
practice as an attorney;
(vii) a broker-dealer
registered with the Securities and Exchange Commission or the Commodity Futures
Trading Commission acting within the course and scope of that regulation;
(viii) a consumer reporting
agency; and
(ix) a residential mortgage
loan broker or banker who is duly licensed under the Illinois Residential
Mortgage License Act of 1987. [FN2]
(e) "Person"
means an individual, corporation, partnership, joint venture or any business
entity.
[FN1] 26 U.S.C.A. § 501.
[FN2] 205 ILCS 635/1-1 et seq.
605/4. Interpretations
of Fair Credit Reporting Act
§ 4. In construing this
Act consideration shall be given to the interpretations of the Fair Credit
Reporting Act (15 U.S.C. Section 1681 et seq.).
605/5. Prohibited acts
§ 5. No credit services
organization, its salespersons, agents or representatives, or any independent
contractor who sells or attempts to sell the services of a credit services
organization shall:
(1) Charge or receive
any money or other valuable consideration prior to 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
has, in conformity with Section 10 of this Act, obtained a surety bond issued
by a surety company licensed to do business in this State. If a credit services
organization is in compliance with this subsection the salespersons, agents,
and representatives who sell the services of such organization shall not be
required to obtain the surety bond provided for by this Act.
(2) Charge or receive
any money or other valuable consideration solely for the referral of a buyer to
a retail seller who will or may extend credit to the buyer if such extension of
credit is in substantially the same terms as those available to the general
public.
(3) Make, or advise any
buyer to make, any statement that is untrue or misleading, or that should be
known by the exercise of reasonable care to be untrue or misleading, with
respect to a buyer's credit reporting agency or to any person who has extended
credit to a buyer or to whom a buyer has made application for an extension of
credit.
(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 any act,
practice or course of business intended to defraud or deceive a buyer in
connection with the office or sale of such services; including but not limited
to: the amount or type of credit a consumer can expect to receive as a result
of the performance of the services offered; the qualifications, training or
experience of its personnel; or the amount of credit improvement the consumer
can expect to receive as a result of the services.
605/6. Consumer
statement
§ 6. Before the
execution of a contract or other form of agreement between a buyer and a credit
services organization or before the receipt by any such organization of money
or other valuable consideration, whichever occurs first, such organization
shall provide the buyer with a statement, in writing, containing the following:
(1) a complete and accurate statement of the buyer's right to review any file on the buyer maintained by a consumer reporting agency, as provided under the Fair Credit Reporting Act (15 U.S.C. Section 1681 et seq.);
(2) a statement that the buyer
may review his consumer reporting agency file at no charge if a request therefor
therefore is made to such agency within 30 thirty days after receipt by the
buyer of notice that credit has been denied and if such request is not made
within the allotted time, the approximate charge to the buyer for such review;
(3) 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 a
consumer reporting agency;
(4) a complete and detailed
description of the services to be performed by the credit services organization
and the total cost to the buyer for such services;
(5) a statement notifying the
buyer that: (i) credit reporting agencies have no obligation to remove
information from credit reports unless the information is erroneous, cannot be
verified or is more than 7 years old; and (ii) credit reporting agencies have
no obligation to remove information concerning bankruptcies unless such
information is more than 10 years old;
(6) a statement asserting the
buyer's right to proceed against the surety bond required under Section 10; and
(7) the name and business
address of any such surety company together with the name and the number of the
account.
The credit services organization shall maintain on file, for a
period of 2 years after the date the statement is provided, an exact copy of
the statement, signed by the buyer, acknowledging receipt of the statement.
605/7. Contracts
§ 7. (a) Each contract
between the buyer and a credit services organization for the purchase of the
services of the credit services organization shall be in writing, dated, signed
by the buyer, and shall include:
(1) a conspicuous
statement in boldfaced 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 another 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; and
(4) the address of the
credit services organization's principal place of business and the name and
address of its agent in the State authorized to receive service of process.
(b) The contract must
have two easily detachable copies of a notice of cancellation. The notice must
be in boldfaced type and in the following form:
"Notice of Cancellation"
"You may cancel this contract, without any penalty or
obligation, within three days after the date the contract is signed.
If you cancel, any payment made by you under this contract will be
returned within 10 days after the date of receipt by the seller of your
cancellation notice.
To cancel this contract, mail or deliver a signed, dated copy of
this cancellation notice, or other written notice to:
(name of seller) at (address of seller) (place of business) not
later than midnight (date)
I hereby cancel this transaction."
.............................. ........................................
(date) (purchaser's signature)
(c) The credit services
organization shall give to the buyer a copy of the completed contract and all
other documents the credit services organization requires the buyer to sign at
the time they are signed.
605/8. Noncompliance;
waiver
§ 8. Any contract for
services which does not comply with applicable provisions of this article shall
be void and unenforceable as contrary to public policy. Any waiver by a buyer
of the provisions of this Act shall be deemed void and unenforceable by a
credit services organization as contrary to public policy. Any attempt by a
credit services organization to have a buyer waive rights granted by this Act
shall constitute a violation of this Act.
605/9. Registration
statement
§ 9. (a) A credit
services organization shall file a registration statement with the Secretary of
State before conducting business in this State. The registration statement
shall contain:
(1) the name and address
of the credit services organization;
(2) the name and address
of the registered agent authorized to accept service of process on behalf of
the credit services organization;
(3) the name and address
of any person who directly or indirectly owns or controls 10 percent or more of
the outstanding shares of stock in the credit services organization; and
(4) the name, numbers,
and location of the surety company issuing a surety bond maintained as required
by Section 10 of this Act.
(b) The registration
statement must also contain either:
(1) a full and complete
disclosure of any litigation or unresolved complaint filed with a governmental
authority of this State, any other state or the United States relating to the
operation of the credit services organization; or
(2) a notarized
statement that states that there has been no litigation or unresolved complaint
filed with a governmental authority of this State, any other state or the
United States relating to the operation of the credit services organization.
(c) The credit services organization shall update such statement
not later than the 90th day after the date on which a change in the information
required in the statement occurs.
(d) Each credit services
organization registering under this Section shall maintain a copy of the
registration statement in their files. The credit services organization shall
allow a buyer to inspect the registration statement on request.
(e) The Secretary of
State may charge each credit services organization that files a registration
statement a reasonable fee not to exceed $100 to cover the cost of filing.
605/10. Surety bond
§ 10. If a credit
services organization is required to obtain a surety bond pursuant to paragraph
(1) of Section 5 of this Act, the following procedures shall be applicable:
(a) If a bond is
obtained, a copy of it shall be filed with the Office of the Secretary of
State.
(b) The required bond
shall be in favor of the State of
(c) The bond shall be in
the amount of $100,000 and shall be maintained for a period of 2 years after
the date that the credit services organization ceases operations.
605/11. Damages
§ 11. Any person injured
by a violation of this Act or by the credit services organization's breach of a
contract entered into pursuant to Section 7 of this Act, may bring any action
for recovery of actual damages. Such person may also be awarded punitive
damages, reasonable attorney's fees and court costs.
605/12. Injunction
§ 12. A. The Attorney
General, the State's Attorney of any county, or a buyer may bring an action in
a circuit court to enjoin a violation of this Act. In addition to any
injunction, the Attorney General or any State's Attorney or any county, in the
name of the People of the State of
605/13. Misdemeanor;
felony
§ 13. Any person, as
defined under this Act, violating any provision of this Act except breach of
contract, upon conviction for the first offense, is guilty of a Class A
misdemeanor. Upon conviction of a second or subsequent offense the violator is
guilty of a Class 4 felony.
605/14. Burden of proof
§ 14. In an action under
this Act the burden of proving an exemption under paragraph (d) of Section 3 is
on the person claiming the exemption.
605/15. Nature of
remedies; violation of Consumer Fraud and Deceptive Business Practices Act
§ 15. The remedies
provided by this Act are in addition to other remedies provided by law. A
violation of this Act shall also constitute a violation of the Consumer Fraud
and Deceptive Business Practices Act. [FN1]
[FN1] 815 ILCS 505/1 et seq.
605/16. Liberal
construction
§ 16. This Act shall be liberally construed to effect the purposes
thereof.
Current through P.A. 95-5 of the 2007 Reg. Sess.
END OF DOCUMENT
815 ILCS 505/2Z
Formerly cited as IL ST CH 121 1/2 P 262Z
815 ILCS 505/2Z
Formerly cited as IL ST CH 121 1/2 ¶ 262Z
Chapter 815. Business Transactions
Deceptive Practices
Act 505. Consumer Fraud and Deceptive Business Practices Act
505/2Z. Violations of other Acts
§ 2Z. Violations of
other Acts. Any person who knowingly violates the Automotive Repair Act, [FN1] the Automotive Collision
Repair Act, [FN2] the Home Repair and
Remodeling Act, [FN3] the Dance Studio Act, [FN4] the Physical Fitness Services
Act, [FN5] the Hearing Instrument
Consumer Protection Act, [FN6] the Illinois Union Label Act, [FN7] the Job Referral and Job
Listing Services Consumer Protection Act, [FN8] the Travel Promotion Consumer
Protection Act, [FN9] the Credit Services Organizations Act, [FN10] the Automatic Telephone
Dialers Act, [FN11] the Pay-Per-Call Services
Consumer Protection Act, [FN12] the Telephone Solicitations
Act, [FN13] the Illinois Funeral or
Burial Funds Act, [FN14] the Cemetery Care Act, [FN15] the Safe and Hygienic Bed
Act, [FN16] the Pre-Need Cemetery Sales
Act, [FN17] the High Risk Home Loan Act, [FN18] the Payday Loan Reform Act, [FN19] the Mortgage Rescue Fraud
Act, subsection (a) or (b) of Section 3-10 of the Cigarette Tax Act, [FN20] the Payday Loan Reform Act,
subsection (a) or (b) of Section 3-10 of the Cigarette Use Tax Act, [FN21] the Electronic Mail Act, [FN22] paragraph (6) of subsection
(k) of Section 6-305 of the Illinois Vehicle Code, [FN23] Article 3 of the Residential
Real Property Disclosure Act, [FN24] the Automatic Contract
Renewal Act, [FN25] or the Personal Information
Protection Act [FN26] commits an unlawful practice within the meaning of
this Act.
Case Law
I identified several cases construing the act. In Arnold v.
Goldstar Financial Systems, Inc., 2002 WL 1941546 (N.D.
Not Reported in F.Supp.2d, 2002 WL 1941546
N.D.Ill.,2002.
August 22, 2002
Jon ARNOLD, et al., Plaintiff,
v.
GOLDSTAR FINANCIAL SYSTEMS, INC., et al., Defendants.
Customers
sued company providing credit repair services, and its law firm, claiming
breach of contract to manage debt. Company and attorney moved to dismiss or
compel arbitration. The District Court, Gottschall, J.,
held that: (1) personal jurisdiction was lacking over attorney; (2) court did
not have jurisdiction over claim of nonresident customer; (3) court had
jurisdiction over claims made by Illinois residents; (4) motion to compel
arbitration would be treated as motion to stay proceedings; and (5) proceedings
would not be stayed, due to likelihood that costs of arbitration would be
prohibitive.
Motion granted in part, denied in part.
[1] KeyCite Notes
170B Federal
Courts
170BII Venue
170BII(A) In
General
170Bk76 Actions
Against Non-Residents; “Long-Arm” Jurisdiction in General
170Bk76.20 k.
Persons Acting in Representative Capacity, Venue For; Fiduciary Shield. Most Cited Cases
Under Illinois law, court lacked personal jurisdiction over
attorney employed by company in credit repair business, in suit by customers
alleging federal and state violations arising out of failure to live up to
promises; attorney acted only in her capacity as employee of company, and was
protected by fiduciary shield doctrine. S.H.A. 735 ILCS 5/2-209(c).
[2] KeyCite Notes
170B Federal
Courts
170BII Venue
170BII(A) In
General
170Bk77 Corporations, Actions by or Against
170Bk81 k.
Sales, Solicitation and Advertising. Most Cited Cases
Under Illinois law, court had personal jurisdiction over
nonresident company providing credit repair services, sued by Illinois
customers for failing to honor promises; representatives of company had made
phone calls to customers in state, urging them to enter into contract. S.H.A. 735 ILCS 5/2-209(c).
[3] KeyCite Notes
92 Constitutional Law
92XXVII Due
Process
92XXVII(E) Civil Actions and Proceedings
92k3961 Jurisdiction and Venue
92k3965 Particular Parties or Circumstances
92k3965(5) k.
Services and Service Providers. Most Cited Cases
170B Federal
Courts KeyCite Notes
170BII Venue
170BII(A) In
General
170Bk77 Corporations, Actions by or Against
170Bk84 k.
Miscellaneous Particular Activities. Most Cited Cases