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CHAPTER
2--CREDIT REPAIR ORGANIZATIONS(1)
SEC. 2451. REGULATION OF
CREDIT REPAIR ORGANIZATIONS.
Title IV of the Consumer
Credit Protection Act (Public Law 90-321, 82 Stat. 164) is amended to
read as follows:
TITLE IV--CREDIT REPAIR
ORGANIZATIONS''
Sec.
401. Short title.
402. Findings and
purposes.
403. Definitions.
404. Prohibited
practices.
405. Disclosures.
406. Credit repair
organizations contracts.
407. Right to cancel
contract.
408. Noncompliance with
this title.
409. Civil liability.
410. Administrative
enforcement.
411. Statute of
limitations.
412. Relation to State
law.
413. Effective date.
SEC. 401. SHORT TITLE.(2)
This title may be cited
as the 'Credit Repair Organizations Act'.
SEC. 402. FINDINGS AND
PURPOSES.(3)
(a) Findings.--The
Congress makes the following findings:
(1)
Consumers have a vital interest in establishing and maintaining their
credit worthiness and credit standing in order to obtain and use
credit. As a result, consumers who have experienced credit problems may
seek assistance from credit repair organizations which offer to improve
the credit standing of such consumers.
(2)
Certain advertising and business practices of some companies engaged in
the business of credit repair services have worked a financial hardship
upon consumers, particularly those of limited economic means and who
are inexperienced in credit matters.
(b) Purposes.--The
purposes of this title are--
(1)
to ensure that prospective buyers of the services of credit repair
organizations are provided with the information necessary to make an
informed decision regarding the purchase of such services; and
(2)
to protect the public from unfair or deceptive advertising and business
practices by credit repair organizations.
SEC. 403. DEFINITIONS.(4)
(1) Consumer. -- The
term 'consumer' means an individual.
(2) Consumer credit
transaction. -- The term 'consumer credit transaction' means any
transaction in which credit is offered or extended to an individual for
personal, family, or household purposes.
(3) Credit repair
organization. -- The term 'credit repair organization'--
(A)
means any person who uses any instrumentality of interstate commerce or
the mails to sell, provide, or perform (or represent that such person
can or will sell, provide, or perform) any service, in return for the
payment of money or other valuable consideration, for the express or
implied purpose of--
(i) improving any consumer's credit record, credit history, or credit
rating; or
(ii) providing advice or assistance to any consumer with regard to any
activity or service described in clause (i); and
(B)
does not include--
(i) any nonprofit organization which is exempt from taxation under
section 501(c)(3) of the Internal Revenue Code of 1986;
(ii) any creditor (as defined in section 103 of the Truth in Lending
Act),(5) with respect to any consumer, to the extent the creditor is
assisting the consumer to restructure any debt owed by the consumer to
the creditor; or
(iii)
any depository institution (as that term is defined in section 3 of the
Federal Deposit Insurance Act) or any Federal or State credit union (as
those terms are defined in section 101 of the Federal Credit Union
Act), or any affiliate or subsidiary of such a depository institution
or credit union.
(4) Credit.--The term
'credit' has the meaning given to such term in section 103(e) of this
Act.(6)
SEC. 404. PROHIBITED
PRACTICES.(7)
(a) In General.--No
person may--
(1)
make any statement, or counsel or advise any consumer to make any
statement, which is untrue or misleading (or which, upon the exercise
of reasonable care, should be known by the credit repair organization,
officer, employee, agent, or other person to be untrue or misleading)
with respect to any consumer's credit worthiness, credit standing, or
credit capacity to--
(A) any consumer reporting agency (as defined in section 603(f) of this
Act);(8) or
(B) any person--
(i) who has extended credit to the consumer; or
(ii) to whom the consumer has applied or is applying for an extension
of credit;
(2)
make any statement, or counsel or advise any consumer to make any
statement, the intended effect of which is to alter the consumer's
identification to prevent the display of the consumer's credit record,
history, or rating for the purpose of concealing adverse information
that is accurate and not obsolete to--
(A) any consumer reporting agency;
(B) any person--
(i) who has extended credit to the consumer; or
(ii) to whom the consumer has applied or is applying for an extension
of credit;
(3)
make or use any untrue or misleading representation of the services of
the credit repair organization; or
(4)
engage, directly or indirectly, in any act, practice, or course of
business that constitutes or results in the commission of, or an
attempt to commit, a fraud or deception on any person in connection
with the offer or sale of the services of the credit repair
organization.
(b) Payment in
Advance.--No credit repair organization may charge or receive any money
or other valuable consideration for the performance of any service
which the credit repair organization has agreed to perform for any
consumer before such service is fully performed.
SEC. 405. DISCLOSURES.(9)
(a) Disclosure
Required.--Any credit repair organization shall provide any consumer
with the following written statement before any contract or agreement
between the consumer and the credit repair organization is executed:
'Consumer Credit File Rights Under State and Federal Law
You
have a right to dispute inaccurate information in your credit report by
contacting the credit bureau directly. However, neither you nor any
''credit repair'' company or credit repair organization has the right
to have accurate, current, and verifiable information removed from your
credit report. The credit bureau must remove accurate, negative
information from your report only if it is over 7 years old. Bankruptcy
information can be reported for 10 years.
You
have a right to obtain a copy of your credit report from a credit
bureau. You may be charged a reasonable fee. There is no fee, however,
if you have been turned down for credit, employment, insurance, or a
rental dwelling because of information in your credit report within the
preceding 60 days. The credit bureau must provide someone to help you
interpret the information in your credit file. You are entitled to
receive a free copy of your credit report if you are unemployed and
intend to apply for employment in the next 60 days, if you are a
recipient of public welfare assistance, or if you have reason to
believe that there is inaccurate information in your credit report due
to fraud.
You
have a right to sue a credit repair organization that violates the
Credit Repair Organization Act. This law prohibits deceptive practices
by credit repair organizations.
You
have the right to cancel your contract with any credit repair
organization for any reason within 3 business days from the date you
signed it.
Credit bureaus are required to follow reasonable procedures to ensure
that the information they report is accurate. However, mistakes may
occur.
You
may, on your own, notify a credit bureau in writing that you dispute
the accuracy of information in your credit file. The credit bureau must
then reinvestigate and modify or remove inaccurate or incomplete
information. The credit bureau may not charge any fee for this service.
Any pertinent information and copies of all documents you have
concerning an error should be given to the credit bureau.
If
the credit bureau's reinvestigation does not resolve the dispute to
your satisfaction, you may send a brief statement to the credit bureau,
to be kept in your file, explaining why you think the record is
inaccurate. The credit bureau must include a summary of your statement
about disputed information with any report it issues about you.
The
Federal Trade Commission regulates credit bureaus and credit repair
organizations. For more information contact:
The
Public Reference Branch
Federal Trade Commission
Washington, D.C. 20580'.
(b) Separate Statement
Requirement.--The written statement required under this section shall
be provided as a document which is separate from any written contract
or other agreement between the credit repair organization and the
consumer or any other written material provided to the consumer.
(c) Retention of
Compliance Records.--
(1)
In general.--The credit repair organization shall maintain a copy of
the statement signed by the consumer acknowledging receipt of the
statement.
(2)
Maintenance for 2 years.--The copy of any consumer's statement shall be
maintained in the organization's files for 2 years after the date on
which the statement is signed by the consumer.
SEC. 406. CREDIT REPAIR
ORGANIZATIONS CONTRACTS.(10)
(a) Written Contracts
Required.--No services may be provided by any credit repair
organization for any consumer--
(1)
unless a written and dated contract (for the purchase of such services)
which meets the requirements of subsection (b) has been signed by the
consumer; or
(2)
before the end of the 3-business-day period beginning on the date the
contract is signed.
(b) Terms and Conditions
of Contract.--No contract referred to in subsection (a) meets the
requirements of this subsection unless such contract includes (in
writing)--
(1)
the terms and conditions of payment, including the total amount of all
payments to be made by the consumer to the credit repair organization
or to any other person;
(2) a
full and detailed description of the services to be performed by the
credit repair organization for the consumer, including--
(A) all guarantees of performance; and
(B) an estimate of--
(i) the date by which the performance of the services (to be performed
by the credit repair organization or any other person) will be
complete; or
(ii) the length of the period necessary to perform such services;
(3)
the credit repair organization's name and principal business address;
and
(4) a
conspicuous statement in bold face type, in immediate proximity to the
space reserved for the consumer's signature on the contract, which
reads as follows: 'You may cancel this contract without penalty or
obligation at any time before midnight of the 3rd business day after
the date on which you signed the contract. See the attached notice of
cancellation form for an explanation of this right.'.
SEC. 407. RIGHT TO
CANCEL CONTRACT.(11)
(a) In General. -- Any
consumer may cancel any contract with any credit repair organization
without penalty or obligation by notifying the credit repair
organization of the consumer's intention to do so at any time before
midnight of the 3rd business day which begins after the date on which
the contract or agreement between the consumer and the credit repair
organization is executed or would, but for this subsection, become
enforceable against the parties.
(b) Cancellation Form
and Other Information. -- Each contract shall be accompanied by a form,
in duplicate, which has the heading 'Notice of Cancellation' and
contains in bold face type the following statement:
'You
may cancel this contract, without any penalty or obligation, at any
time before midnight of the 3rd day which begins after the date the
contract is signed by you.
To
cancel this contract, mail or deliver a signed, dated copy of this
cancellation notice, or any other written notice to (name of credit
repair organization) at (address of credit repair organization) before
midnight on (date)
I
hereby cancel this transaction,
(
date )
(
purchaser's signature ).'.
(c) Consumer Copy of
Contract Required.--Any consumer who enters into any contract with any
credit repair organization shall be given, by the organization--
(1) a
copy of the completed contract and the disclosure statement required
under section 405; and
(2) a
copy of any other document the credit repair organization requires the
consumer to sign, at the time the contract or the other document is
signed.
SEC. 408. NONCOMPLIANCE
WITH THIS TITLE.(12)
(a) Consumer Waivers
Invalid.--Any waiver by any consumer of any protection provided by or
any right of the consumer under this title--
(1)
shall be treated as void; and
(2)
may not be enforced by any Federal or State court or any other person.
(b) Attempt To Obtain
Waiver.--Any attempt by any person to obtain a waiver from any consumer
of any protection provided by or any right of the consumer under this
title shall be treated as a violation of this title.
(c) Contracts Not in
Compliance.--Any contract for services which does not comply with the
applicable provisions of this title--
(1)
shall be treated as void; and
(2)
may not be enforced by any Federal or State court or any other person.
SEC. 409. CIVIL
LIABILITY.(13)
(a) Liability
Established.--Any person who fails to comply with any provision of this
title with respect to any other person shall be liable to such person
in an amount equal to the sum of the amounts determined under each of
the following paragraphs:
(1)
Actual damages.--The greater of--
(A) the amount of any actual damage sustained by such person as a
result of such failure; or
(B) any amount paid by the person to the credit repair organization.
(2)
Punitive damages.--
(A) Individual actions.--In the case of any action by an individual,
such additional amount as the court may allow.
(B) Class actions.--In the case of a class action, the sum of--
(i) the aggregate of the amount which the court may allow for each
named plaintiff; and
(ii) the aggregate of the amount which the court may allow for each
other class member, without regard to any minimum individual recovery.
(3)
Attorneys' fees.--In the case of any successful action to enforce any
liability under paragraph (1) or (2), the costs of the action, together
with reasonable attorneys' fees.
(b) Factors to Be
Considered in Awarding Punitive Damages.--In determining the amount of
any liability of any credit repair organization under subsection
(a)(2), the court shall consider, among other relevant factors--
(1)
the frequency and persistence of noncompliance by the credit repair
organization;
(2)
the nature of the noncompliance;
(3)
the extent to which such noncompliance was intentional; and
(4)
in the case of any class action, the number of consumers adversely
affected.
SEC. 410. ADMINISTRATIVE
ENFORCEMENT.(14)
(a) In
General.--Compliance with the requirements imposed under this title
with respect to credit repair organizations shall be enforced under the
Federal Trade Commission Act by the Federal Trade Commission.
(b) Violations of This
Title Treated as Violations of Federal Trade Commission Act.--
(1)
In general. -- For the purpose of the exercise by the Federal Trade
Commission of the Commission's functions and powers under the Federal
Trade Commission Act, any violation of any requirement or prohibition
imposed under this title with respect to credit repair organizations
shall constitute an unfair or deceptive act or practice in commerce in
violation of section 5(a) of the Federal Trade Commission Act.
(2)
Enforcement authority under other law. -- All functions and powers of
the Federal Trade Commission under the Federal Trade Commission Act
shall be available to the Commission to enforce compliance with this
title by any person subject to enforcement by the Federal Trade
Commission pursuant to this subsection, including the power to enforce
the provisions of this title in the same manner as if the violation had
been a violation of any Federal Trade Commission trade regulation rule,
without regard to whether the credit repair organization--
(A) is engaged in commerce; or
(B) meets any other jurisdictional tests in the Federal Trade
Commission Act.
(c) State Action for
Violations.--
(1)
Authority of states. -- In addition to such other remedies as are
provided under State law, whenever the chief law enforcement officer of
a State, or an official or agency designated by a State, has reason to
believe that any person has violated or is violating this title, the
State--
(A) may bring an action to enjoin such violation;
(B) may bring an action on behalf of its residents to recover damages
for which the person is liable to such residents under section 409 as a
result of the violation; and
(C) in the case of any successful action under subparagraph (A) or (B),
shall be awarded the costs of the action and reasonable attorney fees
as determined by the court.
(2)
Rights of commission.--
(A) Notice to commission.--The State shall serve prior written notice
of any civil action under paragraph (1) upon the Federal Trade
Commission and provide the Commission with a copy of its complaint,
except in any case where such prior notice is not feasible, in which
case the State shall serve such notice immediately upon instituting
such action.
(B) Intervention.--The Commission shall have the right--
(i) to intervene in any action referred to in subparagraph (A);
(ii) upon so intervening, to be heard on all matters arising in the
action; and
(iii) to file petitions for appeal.
(3)
Investigatory powers. -- For purposes of bringing any action under this
subsection, nothing in this subsection shall prevent the chief law
enforcement officer, or an official or agency designated by a State,
from exercising the powers conferred on the chief law enforcement
officer or such official by the laws of such State to conduct
investigations or to administer oaths or affirmations or to compel the
attendance of witnesses or the production of documentary and other
evidence.
(4)
Limitation. -- Whenever the Federal Trade Commission has instituted a
civil action for violation of this title, no State may, during the
pendency of such action, bring an action under this section against any
defendant named in the complaint of the Commission for any violation of
this title that is alleged in that complaint.
SEC. 411. STATUTE OF
LIMITATIONS.(15)
Any action to enforce
any liability under this title may be brought before the later of--
(1)
the end of the 5-year period beginning on the date of the occurrence of
the violation involved; or
(2)
in any case in which any credit repair organization has materially and
willfully misrepresented any information which--
(A) the credit repair organization is required, by any provision of
this title, to disclose to any consumer; and
(B) is material to the establishment of the credit repair
organization's liability to the consumer under this title, the end of
the 5-year period beginning on the date of the discovery by the
consumer of the misrepresentation.
SEC. 412. RELATION TO
STATE LAW.(16)
This title shall not
annul, alter, affect, or exempt any person subject to the provisions of
this title from complying with any law of any State except to the
extent that such law is inconsistent with any provision of this title,
and then only to the extent of the inconsistency.
SEC. 413. EFFECTIVE
DATE.(17)
This title shall apply
after the end of the 6-month period beginning on the date of the
enactment of the Credit Repair Organizations Act,(18) except with
respect to contracts entered into by a credit repair organization
before the end of such period.''.
1. Pub. L. No. 104-208,
110 Stat. 3009 (Sept. 30, 1996). The amendments to the credit statutes
are in Title II of the Act, entitled "Economic Growth and Regulatory
Paperwork Reduction." The footnotes in this copy of the Act are not
part of the Act, but are cross-references inserted by the FTC staff for
the convenience of the reader.
2. To be codified as 15
U.S.C. § 1679.
3. To be codified as 15
U.S.C. § 1679a.
4. To be codified as 15
U.S.C. § 1679b.
5. Truth in Lending Act
§ 103(f) states in pertinent part: "The term 'creditor' refers
only to creditros who regularly extend, or arrange for the extension
of, credit which is payable by agreement in more than four installments
or for which the payment of a finance charge is or may be required,
whether in connection with loans, sales pf property or services, or
otherwise. . . ."
6. TILA § 103(e)
states: "The term 'credit' means the right granted by a creditor to a
debtor to defer payment of debt or to incur debt and defer its payment."
7. To be codified as 15
U.S.C. § 1679c.
8. Fair Credit Reporting
Act (FCRA) § 603(f) states: "The term 'consumer reporting agency'
means any person which, for monetary fees, dues, or on a cooperative
nonprofit basis, regularly engages in whole or in part in the practice
of assembling or evaluating consumer credit information or other
information on consumers for the purpose of furnishing consumer reports
to third parties, and which uses any means or facility of interstate
commerce for the purpose of preparing or furnishing consumer reports."
9. To be codified as 15
U.S.C. § 1679d.
10. To be codified as 15
U.S.C. § 1679e.
11. To be codified as 15
U.S.C. § 1679f.
12. To be codified as 15
U.S.C. § 1679g.
13. To be codified as 15
U.S.C. § 1679h.
14. To be codified as 15
U.S.C. § 1679i.
15. To be codified as 15
U.S.C. § 1679j.
16. To be codified as 15
U.S.C. § 1679k.
17. To be codified as 15
U.S.C. § 1679l.
18. The statute was
signed by the President on September 30, 1996.
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