Article
6C. Credit Services Organizations
§ 46A-6C-1. Definitions
(1) "Buyer" means an individual who is solicited to
purchase or who purchases the services of a credit services organization as
defined in section two of this article.
(2) "Consumer reporting agency" has the meaning assigned
by Section 603(f), Fair Credit Reporting Act (15 U.S.C. Section 1681a(f)).
(3) "Extension of credit" means the "right to defer
payment of debt or to incur debt and defer its payment offered or granted primarily
for personal, family, household or agriculture purposes."
§ 46A-6C-2. Credit
services organization
(a) A credit services organization is 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:
(1) Improving a buyer's credit record, history or rating;
(2) Obtaining an extension of credit for a buyer; or
(3) Providing advice or assistance to a buyer with regard to
subdivision (1) or (2) of this subsection.
(b) The following are
exempt from this article:
(1) A person authorized to make loans or extension of credit under
the law 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.);
(2) A bank or savings and loan association whose deposit 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;
(3) A credit union doing
business in this state;
(4) A nonprofit organization exempt from taxation under Section 501(c)(3) of the
Internal Revenue Code of 1986;
(5) A person licensed as
a real estate broker or salesman under the Real Estate Brokers License Act
acting within the course and scope of that license;
(6) A person licensed to
practice law in this state acting within the course and scope of the person's
practice as an attorney;
(7) A broker-dealer
registered with the securities and exchange commission or the commodity future
trading commission acting within the course and scope of that regulation;
(8) A consumer reporting
agency;
(9) A person whose primary business is making loans secured by
liens on real property;
(10) A person whose
primary business is the retail sale of automobiles and trucks: Provided, That the person is not extending credit for a buyer, excluding assignments; and
(11) A person licensed
to practice public accounting in this state acting within the course and scope
of the person's practice as an accountant.
§ 46A-6C-3. Prohibited
conduct
A credit services organization, a salesperson, agency or
representative of a credit services organization or an independent contractor
who sells or attempts to sell the services of a credit services organization
may not:
(1) Charge a buyer or
receive from a buyer money or other valuable consideration before completing
performance of all services the credit services organization has agreed to
perform for the buyer, unless the credit services organization has obtained in
accordance with section four of this article a surety bond in the amount
required by section four of this article issued by a surety company authorized
to do business in this state or established and maintained a surety account at
a federally insured bank or savings and loan association located in this state
in which the amount required is held in trust as required by section four of
this article;
(2) Charge a buyer or receive from a buyer money 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 that is or will be extended to the
buyer is substantially the same as that available to the general public from
other sources;
(3) Make or use a false
or misleading representation in the offer or sale of the services of a credit
services organization, including:
(A) Guaranteeing to
"erase bad credit" or words to that effect unless the representation
clearly discloses that this can be done only if the credit history is
inaccurate or obsolete; and
(B) Guaranteeing an
extension of credit regardless of the person's previous credit problem or
credit history unless the representation clearly discloses the eligibility
requirements for obtaining an extension of credit.
(4) Engage, directly or
indirectly, in an unfair or deceptive act, practice, or course of business in
connection with the offer or sale of the services of a credit services
organization;
(5) Make, or advise a
buyer to make a statement with respect to a buyer's credit worthiness, credit
standing, or credit capacity that is false or misleading or that should be
known by the exercise of reasonable care to be false or misleading, to a
consumer reporting agency or to a person who has extended credit to a buyer or
to whom a buyer is applying for an extension of credit;
(6) Advertise or cause
to be advertised, in any manner whatsoever, the services of a credit services
organization without filing a registration statement with the secretary of
state, unless otherwise provided by this chapter.
§ 46A-6C-4. Bond;
surety account
(a) This section applies to a credit services organization
required by section three of this article to obtain a surety bond or establish
a surety account.
(b) If a bond is obtained, a copy of it shall be filed with the
secretary of state. If a surety account is established, notification of the
depository, the trustee, and the account number shall be filed with the
secretary of state.
(c) The bond or surety account required must be in favor of the
state of the benefit of any person who is damaged by any violation of this
article. The bond or surety account must also be in favor of any person damaged
by such a violation.
(d) Any person claiming against the bond or surety account for a
violation of this article may maintain an action at law
against the credit services organization and against the surety or trustee. The
surety or trustee shall be liable only for damages awarded under section nine
of this article and not the punitive damages permitted under that section. The
aggregate liability of the surety or trustee to all persons damaged by a credit
services organization's violation of this chapter may not exceed the amount of
the surety account or bond.
(e) The bond or the surety account shall be in the amount of
fifteen thousand dollars.
(f) A depository holding money in a surety account under this
chapter may not convey money in the account to the credit services organization
that established the account or a representative of the credit services
organization unless the credit services organization or representative presents
a statement issued by the secretary of state indicating that section five of
this article has been satisfied in relation to the account. The secretary of
state may conduct investigations and require submission of information as
necessary to enforce this subsection.
§ 46A-6C-5.
Registration
(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; and
(2) The name and address of any person who directly or indirectly
owns or controls ten percent or more of the outstanding shares of stock in the
credit services organization.
(b) The registration statement shall also contain either:
(1) A full and complete disclosure of any litigation or unresolved
complaint filed with a governmental authority of this state 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 relating to the operation of
the credit services organization.
(c) The credit services organization shall update the statement
not later than the ninetieth 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 the files of the
credit services organization. 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 with the secretary of state a
reasonable fee not to exceed one hundred dollars to cover the cost of filing.
The secretary of state may not require a credit services organization to
provide information other than that provided in the registration statement. All
fees and moneys collected by the secretary of state pursuant to the provisions
of this article shall be deposited by the secretary of state as follows:
One-half shall be deposited in the state fund, general revenue and one-half
shall be deposited in the service fees and collections account established by
section two, article one, chapter fifty-nine of this code for the operation of
the office of the secretary of state. The secretary of state shall dedicate
sufficient resources from that fund or other funds to provide the services
required in this article.
(f) The bond or surety account shall be maintained until two years
after the date that the credit services organization ceases operations.
§ 46A-6C-6. Disclosure
statement
(a) Before executing a contract or agreement with a buyer or
receiving money or other valuable consideration, a credit services organization
shall provide the buyer with a statement in writing, containing:
(1) A complete and detailed description of the services to be
performed by the credit services organization for the buyer and the total cost
of the services;
(2) A statement explaining the buyer's right to proceed against
the bond or surety account required by section three of this article;
(3) The name and address of the surety company that issued the
bond, or the name and address of the depository and the trustee, and the
account number of the surety account;
(4) 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 by the Fair Credit Reporting Act (15 U.S.C. Sec. 1681 et seq.);
(5) A statement that the
buyer's file is available for review at no charge on request made to the
consumer reporting agency within thirty days after the date of receipt of
notice that credit has been denied, and that the buyer's file is available for
a minimal charge at any other time;
(6) A complete and
accurate statement of the buyer's right to dispute directly with the consumer
reporting agency the completeness or accuracy of any item contained in a file
on the buyer maintained by that consumer reporting agency;
(7) A statement that
accurate information cannot be permanently removed from the files of a consumer
reporting agency;
(8) A complete and
accurate statement of when consumer information becomes obsolete, and of when
consumer reporting agencies are prevented from issuing reports containing
obsolete information; and
(9) A complete and
accurate statement of the availability of nonprofit credit counseling services.
(b) The credit services organization shall maintain on file, for a
period of two years after the date the statement is provided, an exact copy of
the statement, signed by the buyer, acknowledging receipt of the statement.
§ 46A-6C-7. Form and
terms of contract
(a) Each contract between the buyer and a credit services
organization for the purchase of the services of the credit services organization
must be in writing, dated, signed by the buyer, and must include:
(1) A statement in type
that is boldfaced, capitalized, underlined, or otherwise set out from
surrounding written materials so as to be conspicuous, 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 length of time, not to exceed one hundred eighty
days, 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 or process.
(b) The contract must have attached 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 ten 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.
(d) The breach by a credit services organization of a contract
under this article, or of any obligation arising from this article, is an
unfair or deceptive act or practice.
§ 46A-6C-8. Waiver
(a) A credit services organization may not attempt to cause a
buyer to waive a right under this article.
(b) A waiver by a buyer of any part of this article is void.
§ 46A-6C-9. Action for
damages
(a) A buyer injured by a violation of this article may bring any
action for recovery of damages. The damages awarded may not be less than the
amount paid by the buyer to the credit services organization, plus reasonable
attorney's fees and court costs.
(b) The buyer may also be awarded punitive damages.
§ 46A-6C-10. Criminal
penalty
A person who violates the provisions of this article is guilty of
a misdemeanor, and, upon conviction thereof, shall be fined not less than one
thousand dollars, imprisoned in the county jail not more than one year, or both
fined and imprisoned.
§ 46A-6C-11. Burden of
proving exemption
In an action under this article, the burden of proving an
exemption under section two of this article is on the person claiming the
exemption.
§ 46A-6C-12. Remedies
cumulative
The remedies provided by this
article are in addition to other remedies provided by law.
Case Law
I identified several cases
construing the Act.
Herrod v.
Brown v. Mortgagestar, Inc., 194 F.Supp.2d 473 (S.D.
Supreme Court of Appeals of
Orville ARNOLD and Maxine
Arnold Plaintiffs,
v.
UNITED COMPANIES LENDING CORPORATION, a corporation, and Michael T. Searls, an
individual, Defendants.
Submitted Sept. 16, 1998.
Decided Dec. 11, 1998.
Borrowers
filed suit against lender and loan broker, seeking declaratory judgment that
arbitration agreement, signed as part of loan transaction, was void and
unenforceable. The Circuit Court,
Certified questions answered.
[1] KeyCite Notes
30 Appeal and
Error
30XVI Review
30XVI(F) Trial
De Novo
30k892 Trial De
Novo
30k893 Cases
Triable in Appellate Court
30k893(1) k. In
General. Most Cited Cases
The appellate standard of review of questions of law answered and
certified by a circuit court is de novo.
[2] KeyCite Notes
30 Appeal and
Error
30V Presentation and Reservation in Lower Court of Grounds of Review
30V(E) Cases
and Questions Reserved or Certified
30k307 Nature
and Grounds of Reservation or Certification
30k308 k.
Nature of Questions in General. Most Cited Cases
In a certified case, the Supreme Court of Appeals will not
consider certified questions not necessary to a decision of the case.
[3] KeyCite Notes
25T Alternative
Dispute Resolution
25TII Arbitration
25TII(B) Agreements to Arbitrate
25Tk131 Requisites and Validity
25Tk134 Validity
25Tk134(6) k.
Unconscionability. Most Cited Cases
(Formerly 33k6.2 Arbitration)
Arbitration agreement contained in consumer loan contract subject
to the Consumer Credit and Protection Act (CCPA) was unconscionable and, thus,
void and unenforceable; lender was a national corporation and borrowers were
elderly, unsophisticated consumers, loan broker did not make any other loan
option available to borrowers, borrowers were not represented by legal counsel
during transaction, and arbitration agreement waived borrowers' right of access
to courts, while preserving lender's right of access to courts. Code, 46A-1-101 et seq. , 46A-5-101(1), 46A-2-121.
[4] KeyCite Notes
92B Consumer
Credit
92BI In General
92Bk3 License
and Regulation in General
92Bk3.1 k. In
General. Most Cited Cases
92B Consumer
Credit KeyCite Notes
92BI In General
92Bk17 k.
Effect of Violation of Regulations or Lack of License. Most Cited Cases
The legislature, in enacting the Consumer Credit and Protection
Act (CCPA), sought to eliminate the practice of including unconscionable terms
in consumer agreements covered by the Act and, to further this purpose, the
legislature created a cause of action for consumers and imposed civil liability
on creditors who include unconscionable terms in consumer agreements. Code, 46A-1-101 et seq. , 46A-5-101(1), 46A-2-121.
[5] KeyCite Notes
95 Contracts
95I Requisites
and Validity
95I(A) Nature
and Essentials in General
95k1 k. Nature
and Grounds of Contractual Obligation. Most Cited Cases
A determination of unconscionability must focus on the relative
positions of the parties, the adequacy of the bargaining position, the
meaningful alternatives available to the challenging party, and the existence
of unfair terms in the contract.
[6] KeyCite Notes
25T Alternative
Dispute Resolution
25TII Arbitration
25TII(B) Agreements to Arbitrate
25Tk131 Requisites and Validity