State Regulation:
Delaware
Delaware Credit Services Act
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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