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Click here for a FREE online credit evaluation! The Credit Repair
Organizations Act
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)
For purposes of this title, the following definitions apply:
(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.''. |
