IA ST T. XIII,
Subt. 3,
Chapter 538A.
Credit Services Organizations
Title XIII. Commerce [chs. 505-554D]
Subtitle
3. Money and Credit [Chs. 535-541A]
Chapter
538A. Credit Services Organizations (Refs & Annos)
538A.1. Definitions
In this chapter, unless the context otherwise requires:
1. "Buyer" means an individual who is solicited to
purchase or who purchases the services of a credit services organization.
2. "Consumer reporting agency" has the meaning assigned
by section 603(f), Fair Credit Reporting Act, 15 U.S.C. § 1681a(f) as amended through January 1, 1989.
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.
538A.2. Credit services
organization defined--exemptions
1. 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:
a. Improving a buyer's credit record, history, or rating.
b. Providing advice or assistance to a buyer with regard to
paragraph "a".
2. The following are exempt from this chapter:
a. 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 of 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.
b. 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 successor
deposit insurance entities, or a subsidiary of a bank or savings and loan
association.
c. A credit union doing
business in this state.
d. A nonprofit
organization exempt from taxation under section 501(c)(3) of the
Internal Revenue Code, as defined in section 422.3.
e. A person licensed as
a real estate broker or salesperson, under section543B.20, acting
within the course and scope of that license.
f. A person licensed to
practice as an attorney in this state acting within the course and scope of the
person's practice as an attorney.
g. A broker-dealer
registered with the securities and exchange commission or the commodity futures
trading commission acting within the course and scope of the regulations of the
commission that person is registered with.
h. A consumer reporting
agency.
538A.3. 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
shall 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 a bond in accordance with section 538A.4 or established and maintained a surety account at a federally insured bank or
savings and loan association located in this state in the amount required by section 538A.4, subsection
5.
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.
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.
538A.4. Bond--surety
account
1. This section applies to a credit services organization required
by section 538A.3, subsection
1, to obtain a surety bond or establish a surety account.
2. 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.
3. If a bond is obtained, the bond shall be executed by a surety
company authorized to do business in this state, and the bond shall be
continuous in nature until canceled by the surety with not less than thirty
days' written notice to both the credit services organization and to the
secretary of state. The notice shall indicate the surety's intent to cancel the
bond effective on a date at least thirty days after the date of the notice.
4. The bond or surety account required must be in favor of the
state for the benefit of any person who is damaged by a violation of this
chapter.
5. A 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
is liable only for damages awarded under section 538A.9, subsection
1, 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 shall not exceed the amount
of the surety account or bond.
6. The bond or the surety account shall be in an amount of at
least ten thousand dollars.
7. A depository holding money in a surety account under this
chapter shall 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 538A.5, subsection
6, 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.
538A.5. Registration
1. 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 both of the following:
a. The name and address of the credit services organization.
b. 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.
2. The registration statement must also contain one of the
following:
a. 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.
b. A notarized statement
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 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.
4. A 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.
5. 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 shall not require a credit services organization to
provide information other than that provided in the registration statement.
6. The bond or surety account shall be maintained until two years
after the date that the credit services organization ceases to operate.
538A.6. Disclosure
statement
1. 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 all of the
following:
a. 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.
b. A statement explaining the buyer's rights to proceed against
the bond or surety account required by section 538A.4.
c. The name and address of the surety company which issued the
bond, or the name and address of the depository and the trustee, and the
account number of the surety account.
2. 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.
538A.7. Form in terms
of contract
1. A 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 all of the following:
a. A conspicuous
statement in boldface 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."
b. 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.
c. 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
estimated length of time for performing the services.
d. 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.
2. The contract must have attached two easily detachable copies of
the notice of cancellation. The notice must be in boldface type and in the
following form:
Notice of Cancellation
You may cancel this contract, without any
penalty or obligations, 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).
(date)
(Purchaser's signature)
3. 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.
538A.8. Waiver
1. A credit services organization shall not attempt to cause a
buyer to waive a right under this chapter.
2. A waiver by a buyer of any part of this chapter is void.
538A.9. Action for
damages
1. A buyer injured by a violation of this chapter may bring an
action for recovery of damages. The damages awarded shall not be less than the
amount paid by the buyer to the credit services organization, plus reasonable
attorney's fees and court costs.
2. The buyer may also be awarded punitive damages.
538A.10. Injunction
The attorney general or a buyer may bring an action in a district
court to enjoin a violation of this chapter.
538A.11. Statute of
limitations
An action shall not be brought under section 538A.9 after ten years after the date of the execution of the contract for services to
which the action relates.
An action shall not be brought under section 538A.12 after four years after the date of the execution of the contract for services to
which the action relates.
538A.12. Criminal
penalty
A person who violates a provision of this chapter commits a
serious misdemeanor.
538A.13. Burden of
proving exemption
In an action under this chapter, the burden of proving an
exemption under section 538A.2, subsection
2, is upon the person claiming the exemption.
538A.14. Remedies cumulative
The remedies provided by this
chapter are in addition to other remedies provided by law.
Current with immediately eff. Legislation signed as of 5/9/2007
from the 2007 1st Reg. Sess.
END OF DOCUMENT
<Chapter 538A, Credit
Services Organizations, Code 1993, consisting of §§ 538A.1 to 538A.14, was transferred
from Chapter 533C, Credit Services Organizations, Code 1991, consisting of §§ 533C.1 to
533C.14, by the Code Editor as part of the Iowa Code Reorganization.>
<Chapter 533C, Credit Service Organizations, Code 1991, consisting of §§ 533C.1 to 533C.14, was enacted by Acts 1989 (73 G.A.) ch. 183, §§ 1 to 14.>
Case Law
I identified no significant cases construing the act.