Subchapter
V. Credit Services Organizations
422.501. Definitions
In this subchapter:
(1) "Buyer" means a natural person or customer who is
solicited to purchase or who purchases the services of a credit services
organization.
(1m) "Consumer
reporting agency" has the meaning given in 15 USC 1681a(f).
(2)(a) "Credit services organization" means a person or
merchant who, with respect to the extension of credit by others, sells,
provides or performs, or represents that the person will
sell, provide or perform, any of the following services in return for the
payment of money or for other valuable consideration:
1. Improving a buyer's
credit record, credit history or credit rating.
2. Arranging for or
obtaining an extension of credit for a buyer.
3. Providing advice or
assistance to a buyer with regard to subd. 1 or 2.
(b) "Credit services organization" does not include any
of the following:
1. A person organized,
chartered or holding a license or authorization certificate to make loans or
extensions of credit pursuant to the laws of this state or the United States
and who is subject to regulation and supervision by an
official or agency of this state or the United States.
2. A bank or savings and
loan association whose deposits or accounts are insured by the federal deposit
insurance corporation, or a credit union whose deposits or accounts are insured
by the national credit union administration.
3. A nonprofit
organization described under section 501(c)(3) of the
internal revenue code and exempt from taxation under section 501(a) of the
internal revenue code.
4. A person licensed as
an adjustment service company under s. 218.02 if
the person is acting within the course and scope of that license.
5. A person licensed as
a real estate broker or salesperson under ch. 452 if the person is acting
within the course and scope of that license.
6. A person licensed to
practice law in this state if the person is rendering services within the
course and scope of his or her practice as an attorney at law.
7. A broker-dealer or
agent licensed under s. 551.31 if
the broker-dealer or agent is acting within the course and scope of that
license.
8. A person registered
as a mortgage banker, loan originator or mortgage broker under s. 224.72 if
the person is acting within the course and scope of that registration.
9. A consumer reporting
agency, if the consumer reporting agency is acting within the scope of
assembling or evaluating consumer credit information on consumers for the
purpose of furnishing consumer reports, as defined in 15 USC 1681a(d),
to 3rd parties.
(3) "Extension of credit" means the right to defer
payment of debt or to incur debt and defer its payment, that is offered or
granted for debt that is incurred primarily for personal, family or household
purposes.
422.502. Registration
requirements
(1) A person may not act as a credit services organization unless
the person has been issued a certificate of registration from the administrator
and the person has complied with the bond or letter of credit requirements
under sub. (3).
(2) A person desiring to act as a credit services organization
shall apply to the administrator for a certificate of registration on a form
prescribed by the administrator and shall pay the administrator a registration
fee of $100.
(3)(a) A person desiring
to act as a credit services organization shall obtain a surety bond that is
issued by a surety company admitted to do business in this state or an
irrevocable letter of credit from a federally insured bank or savings and loan
association located in this state. The bond or letter of credit shall be in an
amount equal to $25,000.
(b) The credit services
organization shall file a copy of the bond or letter of credit with the
administrator.
(c) The bond or letter
of credit shall be in favor of this state for the benefit of any person who is
damaged by a violation of this subchapter. The bond or letter of credit shall
also be in favor of any person damaged by a violation of this subchapter.
(d) A person claiming
against the bond or letter of credit for a violation of this subchapter may
maintain an action at law against the credit services organization and against
the surety or financial institution. The surety or financial institution may be
liable only for actual damages and not for punitive damages. The aggregate
liability of the surety or financial institution to all persons damaged by a
credit services organization's violation of this subchapter may not exceed the
amount of the bond or letter of credit.
(4) A certificate of registration as a credit services
organization expires on December 1 of the even-numbered year after issuance. A
credit services organization may renew a certificate of registration by
submitting to the administrator a renewal application and a $100 renewal fee on
or before the expiration date of the existing certificate of registration. A
credit services organization shall refile a bond or letter of credit that
satisfies sub. (3) as part of the renewal application.
422.503. Prohibited
activities
(1) A credit services organization, and its salespersons, agents
and representatives who offer or sell the services of the credit services
organization, may not do any of the following:
(a) Charge or receive any money or other valuable consideration
solely for referral of the buyer to a merchant who will or may extend credit to
the buyer, if the credit extended to the buyer is upon substantially the same
terms as is credit that is available to the general public.
(b) Make, or counsel or advise any buyer to make, any statement
which is untrue or misleading and which is known, or which by the exercise of
reasonable care should be known, to be untrue or misleading, to a consumer
reporting agency or to any person who has extended credit to a buyer or to whom
a buyer is applying for an extension of credit, with respect to a buyer's
credit worthiness, credit standing or credit capacity.
(c) Make or use any untrue or misleading representations in the
offer or sale of the services of the credit services organization or engage,
directly or indirectly, in any act, practice or course of business that
operates or would operate as a fraud or deception upon any person in connection
with the offer or sale of the services of a credit services organization.
(2) A violation of this section is subject to s. 425.305.
422.504. Information
statement
(1) Before the execution of a contract or agreement between the
buyer and a credit services organization or before the credit services
organization receives from the buyer any money or other valuable consideration,
the credit services organization shall provide the buyer a written statement
that includes all of the information required under sub. (2). The credit
services organization shall maintain for a period of 2 years an exact copy of
the statement that is signed by the buyer to acknowledge receipt of the
statement.
(2) The information statement under sub. (1) shall include all of
the following information:
(a) Notice of the buyer's right to review any file on the buyer
maintained by a consumer reporting agency; the buyer's right to obtain a copy
of that file; the approximate price the buyer may be charged by the consumer
reporting agency for a copy of the file; and the buyer's
right to obtain a copy of the buyer's file free of charge from the consumer
reporting agency if the buyer requests the copy within 30 days after the buyer
receives notice of a denial of credit.
(b) Notice of the buyer's right to dispute the completeness or
accuracy of any item contained in any file on the buyer maintained by a
consumer reporting agency.
(c) A description of the
services to be performed by the credit services organization for or on behalf
of the buyer and the total amount the buyer will be charged for the services.
(d) Notice of the
buyer's right to proceed against the bond or letter of credit obtained by the
credit services organization, a description of procedures that the buyer is to
follow to proceed against the bond or letter of credit, and the name and
address of the surety company that issued the bond or the name and address of
the financial institution that issued the letter of credit.
(3) A violation of this section is subject to s. 425.305.
422.505. Contracts
(1) Every contract between a buyer and a credit services
organization for the purchase of the services of the credit services
organization shall be in writing, shall be dated and shall be signed by the
buyer. The contract shall include all of the following:
(a) A conspicuous
statement, in not less than 10-point boldface type and 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 5TH 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 description of the
services to be performed by the credit services organization for or on behalf
of the buyer, including all guarantees or promises of full or partial refunds,
and the estimated date by which such services are to be performed or the
estimated length of time for performing such services.
(d) The credit services
organization's principal business address and the name and address of its agent
in this state, other than the department of financial institutions, who is
authorized to receive service of process.
(e) A conspicuous
statement, in not less than 8-point boldface type, as follows: "THIS
CREDIT SERVICES ORGANIZATION IS REGISTERED BY THE DEPARTMENT OF FINANCIAL
INSTITUTIONS at ... (insert address)."
(f) Any disclosures
required under subch. III.
(2)(a) The contract
shall be accompanied by a completed form in duplicate, captioned "NOTICE
OF CANCELLATION", which shall be attached to the contract and easily detachable,
and which shall contain the following statement in not less than 10-point type
and written in the same language as used in the contract:
NOTICE OF CANCELLATION
You may cancel this contract, without any penalty or obligation,
within 5 days after the date on which the contract is signed.
If you cancel, any payment made by you under this contract will be
returned within 15 days following receipt by .......... (name of credit
services organization) of your cancellation notice.
To cancel this contract,
mail or deliver a signed and dated copy of this cancellation notice, or any
other written notice, to .......... (name of credit services organization) at
.......... (address of credit services organization), .......... (place of
business, if different from address) not later than midnight .......... (date).
I hereby cancel this transaction.
...................
(Date)
...................
(Buyer's signature)
(b) A copy of the fully
completed contract and any other document the credit services organization
requires the buyer to sign shall be given to the buyer at the time the contract
or document is signed.
(3) A credit services organization's breach of a contract under
this section or of any obligation arising from such a contract is a violation
of this subchapter.
(4) A violation of this section is subject to s. 425.305.
422.506. Waiver
(1) A waiver by a buyer of any provision of this subchapter shall
be void and unenforceable. An attempt by a credit services organization to have
a buyer waive any right under this subchapter is a violation of this
subchapter.
(2) A violation of this section is subject to s. 425.305.
Case Law
I identified one case construing
the Act.
Premium Air, Inc. v. Luchinski, Slip Copy, 2007 WL 1345839 (
Premium Air, Inc. v. Luchinski, Slip Copy, 2007 WL 1345839 (
Slip Copy, 2007 WL 1345839 (Wis.App.)
Only the Westlaw citation is currently available.
NOTICE: FINAL PUBLICATION DECISION PENDING. SEE W.S.A. 809.23.
Court of
Appeals of
PREMIUM
AIR, INC., d/b/a One Hour Heating & Air Conditioning, Plaintiff-
Appellant,
v.
Gerald
LUCHINSKI and Tammy Luchinski, Defendants-Respondents.
No.
2006AP2976.
May 9,
2007.
Appeal from a judgment of the circuit court for
1 NETTESHEIM, J. [FN1]
FN1. This appeal is decided by one judge pursuant to Wis. Stat. §
752.31(2)(a) (2005-06). All references to the Wisconsin
Statutes are to the 2005-06 version unless otherwise noted.
This case involves various statutes in the Wisconsin Consumer Act,
Wis. Stat. ch. 422. Premium Air, Inc., d/b/a One Hour Heating & Air
Conditioning, filed a small claims action against Gerald and Tammy Luchinski.
The Luchinskis had not paid for a new furnace One Hour Heating installed and
refused the high-interest financing a One Hour Heating employee fraudulently
arranged for them. The trial court found that (1) One Hour Heating was a
"credit services organization" within the meaning of Wis. Stat. § 422.503;
(2) its fraud entitled the Luchinskis to retain the furnace without having to
pay for it, pursuant to Wis. Stat. § 425.305;
and (3) under Wis. Stat. § 425.308,
the Luchinskis could recover their attorney fees for defending the action. We
affirm the judgment and remand for a determination of reasonable appellate
attorney fees.
¶ 2 The facts are undisputed. One Hour Heating sells and services
heating, ventilation and air conditioning equipment. On November 28, 2005, the
Luchinskis signed a contract with One Hour Heating, through one of its
salesmen, to have a new furnace installed for $4993. The Luchinskis did not
have the money to pay for the furnace and intended to finance the entire amount.
In line with One Hour Heating's common practice of assisting its potential
customers to obtain financing, the salesman helped them fill out a credit
application. He informed the Luchinskis that the finance charge would be 9 1/4
%. One Hour Heating installed the furnace the next day.
¶ 3 Two finance companies subsequently denied the Luchinskis'
application. The salesman then submitted an application to a third finance
company, Carmel Financial Corporation. One Hour Heating stipulated at trial
that its salesman forged the Luchinskis' names on the necessary documents. When
the Luchinskis learned of the forgery, Gerald told One Hour Heating that
"they could pick up their furnace, and that [he] wasn't doing business
with them."[FN2] One Hour Heating advised the
Luchinskis to wait to see what
FN2. When One Hour Heating learned of the forgery, it immediately fired the salesman and filed a complaint with the sheriff's department.
¶ 4 One Hour Heating responded with this small claims action
against the Luchinskis, who admitted not paying for the furnace, and claimed as
an affirmative defense that One Hour Heating is a credit services organization
that violated Wis. Stat. § 422.503 through its employee's fraud. Accordingly, the Luchinskis asserted that the
transaction was void under Wis. Stat. § 425.305,
they could retain the furnace without obligation, and, under Wis. Stat. § 425.308,
they were additionally entitled to recover their costs and attorney fees.
¶ 5 The Luchinskis moved for judgment on the pleadings, which the
court took up on the day of trial. The court directed the Luchinskis' attorney
to read Footville State Bank v.
Harvell, 146 Wis.2d 524, 432
N.W.2d 122 (Ct.App.1988), which it believed was on all fours with
the case at bar, and "[t]hen I want you to go out and talk to opposing
counsel. Then you should settle this case." Because the parties already
had stipulated that the furnace's cost was its reasonable value, the court
recommended they discuss "what amount of attorney fees should be offset
against the furnace."
¶ 6 When the parties returned, they advised the court that they
still disagreed, and the trial proceeded. The Luchinskis persuaded the court
that Footville State Bank was not dispositive because it involved a
different consumer protection statute which compelled a different result. In
its final ruling, the court found that One Hour Heating is a credit services
organization. It also found that the conduct of the salesman, One Hour
Heating's agent, operated as a fraud upon the Luchinskis by misrepresenting the
finance charge and upon Carmel by misrepresenting the authenticity of the
signatures, in violation of Wis. Stat. § 422.503(1)(c).
The court acknowledged that One Hour Heating, too, was wronged by its
"rogue employee," but observed that consumer protection laws weigh in
favor of consumers. Finally, the court found that One Hour Heating also
violated Wis. Stat. § 422.505(2)(a) because the Carmel contract contained a three-day, rather than the required
five-day, cancellation period and because the notice of cancellation was not
provided along with the forged consumer credit document.
¶ 7 The trial court concluded that the violations triggered the
remedies available through Wis. Stat. § 425.305 entitling the Luchinskis to retain the goods and services provided without
obligation to pay for them. It also found them entitled to reasonable attorney
fees and, at a later hearing on the matter, granted them the amount they
sought. One Hour Heating appeals. [FN3]
FN3. The notice of appeal indicates that One Hour Heating appeals only from the attorney fee award portion of the judgment. The record reveals that before the appeal reached this court, the parties corresponded with each other about whether the appeal encompassed the entire judgment or was limited to attorney fees. Evidently they came to some agreement because neither raises the scope of our review as an issue on appeal. Therefore, since technical defects in a notice of appeal do not deprive us of jurisdiction and the Luchinskis have participated without objection, any defect is waived. See Wis. Stat. § 807.07(1) and Wis. Stat. Rule 809.83(2).
¶ 8 One Hour Heating challenges the finding that it is a
"credit services organization" under Wis. Stat. § 422.501(2)(a), which provides:
"Credit services organization" means a person or
merchant who, with respect to the extension of credit by others, sells,
provides or performs, or represents that the person will sell, provide or
perform, any of the following services in return for the payment of money or
for other valuable consideration:
1. Improving a buyer's credit record, credit history or credit
rating.
2. Arranging for or obtaining an extension of credit for a buyer.
3. Providing advice or assistance to a buyer with regard to subd.
1. or 2.
The construction of a statute in relation to a given set of facts
presents a question of law, which we review de novo. Turner v. Gene Dencker
Buick-Pontiac, Inc., 2001 WI
App 28, ¶ 13, 240 Wis.2d 385, 623 N.W.2d 151.
¶ 9 The trial court found that One Hour Heating is a credit
services organization under Wis. Stat. § 422.501(2)(a) because it is a merchant which arranges the extension of
credit for a buyer. One Hour Heating admits that it routinely helps potential
customers arrange financing, but argues that it does not do so in return for
money or other valuable consideration. We disagree. The money it receives from
furnace sales via the financing arrangements it facilitates is the valuable
consideration. The Luchinskis never intended to pay for the furnace in cash. We
agree with the trial court that One Hour Heating is a credit services
organization under § 422.501(2)(a).
¶ 10 We next examine whether One Hour Heating violated Wis. Stat. § 422.503,
which provides in relevant part:
422.503 Prohibited activities. (1) A credit services organization, and its salespersons, agents
and representatives who offer or sell the services of the credit services
organization, may not do any of the following:
....
(c) Make or use any untrue or misleading representations in the
offer or sale of the services of the credit services organization or engage,
directly or indirectly, in any act, practice or course of business that
operates or would operate as a fraud or deception upon any person in connection
with the offer or sale of the services of a credit services organization.
(2) A
violation of this section is subject to s. 425.305.
¶ 11 One Hour Heating does not dispute that its salesman's forgery
and misstatement of the finance charge breached Wis. Stat. § 422.503(1)(c),
but asks us not to apply subsec. (2). That subsection triggers Wis. Stat. § 425.305,
which allows the Luchinskis to retain "the goods, services or money
received pursuant to the transaction without obligation to pay any
amount." Instead, One Hour Heating urges us to apply the analysis found in Footville State Bank.
¶ 12 We agree with the trial court and the Luchinskis that, while
factually similar, Footville State Bank does not control this case.
There, Morris Harvell and his son Gus farmed together. Footville State Bank, 146 Wis.2d at 528. Gus applied for
credit and, without Morris' request or signature, made and signed separate
applications for Morris.
¶ 13 As the Luchinskis do here, Morris argued that his entire
obligation was unenforceable under Wis. Stat. § 425.305(1). Footville State Bank, 146 Wis.2d at 535. The supreme
court disagreed, holding that a violation of Wis. Stat. § 422.302(3) does not invoke § 425.305, and
emphasizing that § 425.305 applies only to those sections that expressly say so. Footville State Bank, 146 Wis.2d at 535. [FN4] The court held that since
nothing in the Wisconsin Consumer Act directed otherwise, principles of law and
equity prevented Morris from escaping all liability for the debts incurred in
his name. Id. at 536. The court also considered
whether under Wis. Stat. § 425.107 any aspect of the consumer credit transaction was unconscionable such that it
should not be enforced. Footville State Bank, 146 Wis.2d at 537.
FN4. Wisconsin Stat. § 422.503, the statute now at issue, was not
among the statutory sections the court recited in Footville State Bank v. Harvell, 146 Wis.2d 524, 535, 432
N.W.2d 122 (Ct.App.1988), because the statute did not become effective
until nearly four years later. See 1991
¶ 14 Equitable principles do not drive the case before us. Wisconsin Stat. §
422.503(2) unequivocally triggers Wis. Stat . § 425.305 which just as unequivocally voids the transaction freeing a consumer from all
obligation to pay. We decline One Hour Heating's invitation to evaluate
unconscionability when the statutes are clear and the trial court made no
findings in that regard.
¶ 15 Finally, our decision to affirm is reinforced by the
additional violations involving the notice of cancellation. The trial court
found that, contrary to Wis. Stat. § 422.505(1)(a)
and (2), the notice of cancellation provided only a three-day right
to cancel instead of the statutory five, and that this defective notice was not
given at the same time as the fraudulently executed consumer credit document.
One Hour Heating does not appeal this ruling and issues not briefed generally
are deemed abandoned. See Plourde ex rel. State v. Habhegger, 2006 WI App 147, ¶ 1 n. 2, 294 Wis.2d 746,
720 N.W.2d 130. We raise it to underscore that if One Hour Heating
disagrees that it is a credit services organization, § 422.505 violations also are subject to Wis. Stat. § 425.305,
commanding the same result.
¶ 16 Next, the Luchinskis argue that their right to attorney fees
includes reasonable appellate attorney fees. We agree pursuant to First Wisconsin
National Bank v. Nicolaou, 113 Wis.2d 524, 335 N.W.2d 390 (1983). A customer who prevails in an
action arising out of a consumer transaction shall recover a reasonable amount
for attorney fees. Wis. Stat. § 425.308.
The use of the word "shall" indicates the attorney fee award is
mandatory. Nicolaou, 113 Wis.2d at 536. Because the
Luchinskis prevailed on the credit services organization issue, they are entitled
as a matter of law to recover reasonable attorney fees expended in litigating
it. See id. This includes reasonable fees involved in pursuing the
appeal. See id. at 541; Footville State Bank, 146 Wis.2d at 540.
¶ 17 An attorney fee award "shall be in an amount sufficient
to compensate attorneys representing customers in actions arising from consumer
transactions." Wis. Stat. § 425.308(2).
The award is mandatory, but the precise amount is left to the trial court's
discretion. Nicolaou, 113 Wis.2d at 537; see § 425.308(2)(a)-(f).
That court is best situated to consider the matter of attorney fees. Nicolaou, 113 Wis.2d at 537; see also Kolupar v. Wilde Pontiac Cadillac,
Inc., 2004 WI 112, ¶ 22, 275
Wis.2d 1, 683 N.W.2d 58. We therefore affirm the judgment and remand
to the trial court for a determination of the Luchinski's reasonable appellate
attorney fees.
Judgment affirmed and cause remanded.
This opinion will not be published. See Wis. Stat. Rule
809.23(1)(b)4.
Wis.App.,2007.
Premium Air, Inc. v. Luchinski
Slip Copy, 2007 WL 1345839 (Wis.App.)