DE ST TI 6 § 2401
Title 6. Commerce and Trade
Subtitle
II. Other Laws Relating to Commerce and Trade
Chapter 24. Credit Services Organizations
§ 2401. Definitions
In this chapter:
(1) "Buyer" means an individual who is solicited to purchase or who purchases the services of a credit service organization.
(2) "Consumer reporting agency" has the meaning assigned
by § 603(f), Fair Credit Reporting Act (15 U.S.C. § 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 or household purposes.
(4) "Retail seller" means a person engaged in the
business of selling goods or furnishing services to a buyer.
§ 2402. 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
paragraph (1) or (2) of this subsection.
(b) The following are exempt from this chapter:
(1) 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. § 1701 et seq.);
(2) A bank or building/savings and loan association whose deposits
or accounts are federally insured, or a subsidiary of such a bank or savings
and loan association;
(3) A credit union doing business in this State;
(4) A person licensed under
Chapter 22 of Title 5 or Chapter 24A of this title;
(5) A nonprofit organization
exempt from taxation under § 501(c)(3) of the Internal Revenue Code of 1986 (26 U.S.C. § 501(c)(3));
(6) A person licensed as a real
estate broker or salesperson under Chapter 29 of Title 24 acting within the
course and scope of that license;
(7) A person licensed to
practice law in this State acting within the course and scope of the person's
practice as an attorney;
(8) 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;
(9) A consumer reporting
agency;
(10) Mortgage loan or loan
brokers who are not engaged in the other activities of credit services
organizations as described in subsection (a) of this section; 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.
§ 2403. Prohibited
conduct
A credit services organization, a salesperson, agent 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 § 2404 of this title a surety bond in the amount required by § 2404(e) of this title 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 by § 2404(e) of this title is held in trust as required by § 2404(c) of this title;
(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;
(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 a fraudulent 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 creditworthiness, 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.
§ 2404. Bond; surety
account
(a) This section applies to a credit services organization
required by § 2403(1) of this title 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, a notarized or
otherwise official notification of the deposit by the depository institution
shall be filed with the Secretary of State. Such notification shall include, at
a minimum, the name of the financial institution, name of the credit services
organization, account number and verification that the account is established
in accordance with the terms set forth in subsection (c) of this section.
(c) The bond or surety account required must be in favor of the
State for the benefit of any person who is damaged by any violation of this
chapter. 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 chapter 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 § 2409(a) of this title 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
$15,000.
(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 § 2405(f) of this title 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.
§ 2405. 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 must 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 10 percent or more of the outstanding shares of stock in the
credit services organization.
(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 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.
(3) The name and address of the
credit services organization's agent in the State authorized to receive service
of process.
(c) The credit services organization shall update the 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 hereunder 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 $100 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.
(f) The bond or surety account shall be maintained until 2 years
after the date that the credit services organization ceases operations.
§ 2406. 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 § 2404 of this title;
(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. § 1681 et seq.);
(5) A statement that the
buyer's file is available for review from the consumer reporting agency at no
charge, under certain circumstances, if requested by the consumer
within 30 days of receiving notice of a denial of credit and as provided in the
Federal Fair Credit Reporting Act (15 U.S.C. § 1681j);
(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 2 years after the date the statement is provided, an exact copy of
the statement, signed by the buyer, acknowledging receipt of the statement.
§ 2407. 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 3rd 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
180 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 of 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 3 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.
(d) The breach by a credit services organization of a contract
under this chapter, or of any obligation arising from a contract under this
chapter, is a violation of this chapter.
§ 2408. Waiver
(a) A credit services organization may not attempt to cause a
buyer to waive a right under this chapter.
(b) A waiver by a buyer of any part of this chapter is void.
§ 2409. Action for
damages
(a) A buyer injured by a violation of this chapter 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.
§ 2410. Injunction
The attorney general or a buyer may bring an action in a court to
enjoin a violation of this chapter.
§ 2411. Statute of
limitations
An action may not be brought under § 2409 or § 2410 of this title
after 4 years after the date of the execution of the contract for services to
which the action relates.
§ 2412. Criminal
penalty
An offense under this chapter is a class B misdemeanor.
§ 2413. Burden of
proving exemption
In an action under this chapter the burden of proving an exemption
under § 2402 of this title shall be on the person claiming the exemption.
§ 2414. Remedies
cumulative
The remedies provided by this
chapter are in addition to any other remedies provided by law.
Current through 76 Laws 2007, ch. 38.
Revisions to Acts made by the Delaware Code Revisors were unavailable at time of publication.
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