Arizona Credit Repair Organizations Act
Title 44. Trade and Commerce
Chapter 11. Regulations Concerning Particular Businesses
Article 7. Credit Services
§ 44-1701. Definitions
In this article, unless the context otherwise requires:
1. "Buyer" means any natural person who is solicited to purchase or who
purchases the services of a credit services organization.
2. "Credit services organization" means a person who, with respect to the
extension of credit by others, sells, provides, performs or represents that he
can or will sell, provide or perform any of the following services in return for
the payment of monies or other valuable consideration:
(a) Improving a buyer's credit record, history or rating.
(b) Obtaining an extension of credit for a buyer.
(c) Providing advice or assistance to a buyer with regard to either
subdivision (a) or (b) of this paragraph.
3. "Extension of credit" means the right to defer payment of debt or to incur
debt and defer its payment, which is offered or granted primarily for personal,
family or household purposes.
§ 44-1702. Exemptions
This article does not apply to:
1. A person who is 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 institution whose deposits or accounts are
eligible for insurance by the federal deposit insurance corporation or the
federal savings and loan insurance corporation.
3. A person licensed as a real estate broker by this state if the person is
acting within the course and scope of that license.
4. A person licensed to practice law in this state if the person renders
services within the course and scope of his practice as an attorney at law.
5. A broker-dealer registered with the securities and exchange commission or
the commodity futures trading commission if the broker-dealer is acting within
the course and scope of such regulation.
6. Any nonprofit organization exempt from taxation under § 501(c)(3) of the
Internal Revenue Code.
§ 44-1702.01. Repealed by Laws 1977, Ch. 126, § 1
§ 44-1703. Credit services organizations; prohibited activities
A credit services organization and its salespersons, agents and
representatives who sell or attempt to sell the services of a credit services
organization shall not do any of the following:
1. Charge or receive monies or other valuable consideration before full and
complete performance of the services the credit services organization has agreed
to perform for or on behalf of the buyer, unless the credit services
organization, in conformity with § 44-1708, has obtained a surety bond issued by
a surety company authorized to do business in this state. If a credit services
organization is in compliance with this paragraph, the salesperson, agents and
representatives who sell the services of the organization are not required to
obtain the surety bond provided for in § 44-1708.
2. Charge or receive monies 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 which is or will be extended to the buyer is on
substantially the same terms as those available to the general public.
3. Make or counsel or advise a 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 credit 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 creditworthiness,
credit standing or credit capacity.
4. Make or use any untrue or misleading representations in the offer or sale
of the services of a credit services organization or engage, directly or
indirectly, in an act, practice or course of business which operates or would
operate as a fraud or deception on a person in connection with the offer or sale
of the services of a credit services organization.
§ 44-1704. Information statement; necessity and time of delivery to buyer;
acknowledgment of delivery; retention on file
Before the execution of a contract or agreement between the buyer and a
credit services organization or before the receipt by the credit services
organization of monies or other valuable consideration, whichever occurs first,
the credit services organization shall provide the buyer with a statement, in
writing, containing all the information required by § 44-1705. The credit
services organization shall maintain on file or microfilm for a period of two
years an exact copy of the statement, personally signed by the buyer,
acknowledging receipt of a copy of the statement.
§ 44-1705. Information statement; contents
The information statement shall include all of the following:
1. A complete and accurate statement of the buyer's right to review any file
on the buyer maintained by a consumer credit reporting agency and the right of
the buyer to receive a copy of that file, as provided by § 44-1693. The
statement shall include the approximate price the buyer will be charged by the
credit reporting agency for a copy of the file.
2. A complete and accurate statement of the buyer's right to dispute the
completeness or accuracy of any item contained in any file on the buyer
maintained by any consumer credit reporting agency as provided by § 44-1694.
3. A complete and detailed 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 has to pay, or become obligated to pay, for the services.
4. If the credit services organization is required to obtain a surety bond
pursuant to § 44-1703, the statement shall set forth both of the following:
(a) The buyer's right to proceed against the bond under the circumstances and
in the manner set forth in § 44-1708.
(b) The name and address of the surety company which issued the bond.
§ 44-1706. Contracts; requirements; contents
A. Every contract between the buyer and a credit services organization for
the purchase of the services of the credit services organization must be in
writing, be dated, be signed by the buyer and include all of the following:
1. A conspicuous statement in size equal to at least ten point 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.
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 some
other 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 date by which the
services are to be performed or the estimated length of time for performing the
services.
4. The credit services organization's principal business address and the name
and address of its agent authorized to receive service of process.
B. The contract shall be accompanied by a completed form in duplicate,
entitled "Notice of Cancellation", which shall be attached to the contract and
easily detachable and which shall contain in at least ten point type the
following statement written in the same language as used in the contract:
Notice of Cancellation
You may cancel this contract without any penalty or obligation within three
days from the date the contract is signed.
If you cancel, any payment made by you under this contract will be returned
within fifteen days after receipt by the 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) not later than midnight
________(Date).
I hereby cancel this transaction. ________(Date)
____________________ (Purchaser's signature)
C. A copy of the fully completed contract and all other documents the credit
services organization requires the buyer to sign shall be given to the buyer at
the time they are signed.
§ 44-1706.01. Repealed by Laws 1973, Ch. 74, § 6
§ 44-1707. Credit service organization's breach of contract or obligation;
violation of article
The credit services organization's breach of a contract under this article or
of any obligation arising from the contract constitutes a violation of this
article.
§ 44-1708. Surety bond; procedures to obtain or establish; claim by action at
law; limit of liability
A. If a credit services organization is required to obtain a surety bond
pursuant to § 44-1703, the following procedures apply:
1. A copy of the bond shall be filed with the corporation commission.
2. The bond required shall be in favor of this state for the benefit of any
person who is damaged by any violation of this article. The bond shall also be
in favor of any person damaged by the practices.
3. A person claiming against the bond for a violation of this article may
maintain an action at law against the credit services organization and against
the surety.
B. The surety is liable only for actual damages and not the punitive damages
permitted under § 44-1711. The aggregate liability of the surety to all persons
damaged by a credit services organization's violation of this article shall in
no event exceed the amount of the bond.
C. The bond shall be in an amount equal to five per cent of the total amount
of the fees charged buyers by the credit services organization under the
contracts entered into between the credit services organization and the buyers
during the previous twelve months, but in no case shall the bond be less than
five thousand dollars or more than twenty-five thousand dollars. The amount
required shall be adjusted once a year, no later than the tenth day of the first
month of the credit services organization's fiscal year.
§ 44-1709. Waiver of rights by buyer; prohibition; burden of proof on
exemption or exception from article
A. A waiver by a buyer of the provisions of this article is deemed contrary
to public policy and is void and unenforceable. An attempt by a credit services
organization to have a buyer waive rights given by this article consitutes [FN1]
a violation of this article.
B. In any proceeding involving this article the burden of proving an
exemption or an exception is on the person claiming it.
[FN1] So in original. Probably should read "constitutes".
§ 44-1710. Violation; classification; enforcement
A. A person who violates § 44-1703, 44-1704, 44-1705, 44-1706 or § 44-1709,
subsection A, is guilty of a class 1 misdemeanor.
B. The superior court has jurisdiction to restrain and enjoin any violation
of this article.
C. The duty to institute actions for violations of this article, including
proceedings to restrain and enjoin such a violation, is vested in the attorney
general, county attorneys and city attorneys. The attorney general, a county
attorney or a city attorney may prosecute misdemeanor actions or institute
proceedings to restrain and enjoin such violations, or both.
D. This section does not prohibit the enforcement by a person of a right
provided by this or any other law.
E. The class 1 misdemeanor provision of this section does not apply to a
seller's breach of a contract subject to this article.
§ 44-1711. Action for recovery of damages by buyer
A buyer injured by a violation of this article or by the credit services
organization's breach of a contract subject to this article may bring any action
for recovery of damages. Judgment shall be entered for actual damages, but in no
case less than the amount paid by the buyer to the credit services organization,
plus reasonable attorney fees and costs. If the trial court deems it proper, the
court may enter an award for punitive damages.
§ 44-1712. Application of other laws; remedies as additional
A. The provisions of this article are not exclusive and do not relieve the
parties or the contracts subject to this article from compliance with any other
applicable provision of law.
B. The remedies provided in this article for a violation of this article are
in addition to any other procedures or remedies for any violation or conduct
provided for in any other law.
§ 44-1712.01. Renumbered as § 32-1197
§§ 44-1713, 44-1714. Repealed by Laws 1977, Ch. 126, § 1
§§ 44-1713, 44-1714. Repealed by Laws 1977, Ch. 126, § 1
Current through legislation effective May 25, 2007, and also includes
election results from the November 7, 2006 general election.
END OF DOCUMENT
Findings and purpose from the Arizona Credit Repair Organizations Act
Laws 1988, Ch. 350, § 1, provides:
"Section 1. Findings and purpose
"A. The legislature finds and declares that:
"1. The ability to obtain and use credit has become of great importance to consumers. Consumers have a vital interest in establishing and maintaining their creditworthiness and credit standing. As a result, consumers who have experienced credit problems may seek assistance from credit services organizations which offer to obtain credit or improve the credit standing of the consumers.
"2. Certain advertising and business practices of some credit services organizations have worked a financial hardship on the people of this state, often those who are of limited economic means and inexperienced in credit matters. Credit services organizations have significant impact on the economy and well-being of this state and its people.
"B. The purposes of this act are to provide prospective buyers of services of credit services organizations with the information necessary to make an intelligent decision regarding the purchase of those services and to protect the public from unfair or deceptive advertising and business practices.
"C. This act shall be construed liberally to achieve these purposes."
Case Law
I identified only one case construing the act. In State ex rel. Woods v. Sgrillo,
176 Ariz. 148, 859 P.2d 771 (Ariz.App. Div. 2,1993), the court ruled that the
Arizona Credit Repair Organizations Act is not limited to conduct that affects
in state residents. Conduct by in state residents that affects out of state
residents is also included.
State ex rel. Woods v. Sgrillo
176 Ariz. 148, 859 P.2d 771 (Ariz.App. Div. 2,1993)
STATE of Arizona ex rel. Grant WOODS, Attorney General, Plaintiff/Appellee/Cross-Appellant,
v.
Ronald T. SGRILLO and Barbara Jean Sgrillo, also known as Bobbie Sgrillo,
husband and wife, Jam Marketing, Inc., a corporation or purported corporation,
individually and doing business as Baron Financial Group, Baron Financial
Services, Baron Financial Systems, International Credit Card Services, Premier
Credit Card Services, and Premier Group; and Valley National Bank of Arizona,
Defendants/Appellants/Cross-Appellees.
No. 2 CA-CV 93-0176.
Aug. 26, 1993.
State filed action under Credit Services Organization Act (CSOA) and Consumer
Fraud Act (CFA) against sellers of information purporting to put consumers in
position to acquire low interest credit cards. The Superior Court, Maricopa
County , Cause No. CV91-04440, Alfred J. Rogers, J., entered judgment in favor
of state. Sellers appealed and state cross-appealed. The Court of Appeals,
Livermore, P.J., held that: (1) CSOA applied to criminal conduct within state
directed at nonresidents, and (2) fraudulent conduct of sellers was either sale
of “merchandise” within meaning of CFA or deceptive acts in connection with sale
of “merchandise.”
Affirmed in part and reversed in part.
West Headnotes
[1] KeyCite Notes
92B Consumer Credit
92BI In General
92Bk1 k. In General. Most Cited Cases
Credit Services Organization Act (CSOA) applied to criminal conduct within state directed at nonresidents, despite portion of Act's statement of purposes that referred to harm suffered by residents from practices proscribed by Act. A.R.S. §§ 44-1701 to 44-1712.
[2] KeyCite Notes
29T Antitrust and Trade Regulation
29TIII Statutory Unfair Trade Practices and Consumer Protection
29TIII(A) In General
29Tk139 Persons and Transactions Covered Under General Statutes
29Tk145 k. Goods or Services. Most Cited Cases
(Formerly 92Hk6 Consumer Protection)
Fraudulent conduct in selling information purporting to put consumers in position to acquire low interest credit cards was either sale of “merchandise” within meaning of Consumer Fraud Act (CFA) or deceptive acts in connection with sale of “merchandise” within meaning of CFA, in light of statutory definition of “merchandise” to include sale of services, and in light of fact that book or magazine containing information would fit within statutory definition of “merchandise.”A.R.S. §§ 44-1521, subd. 5, 44-1522.
**771
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(Cite as: 176 Ariz. 148, 859 P.2d 771, **771)
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*148
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(Cite as: 176 Ariz. 148, *148, 859 P.2d 771, **771)
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Grant Woods, Atty. Gen. by H. Leslie Hall and John W. Wall, Phoenix, for
plaintiff, appellee, cross-appellant.
Jones, Skelton & Hochuli by Booker T. Evans, Jr., Phoenix , for defendants,
appellants, cross-appellees.
OPINION
LIVERMORE, Presiding Judge.
The state alleged that defendants Ronald and Barbara Sgrillo violated the Credit Services Organization Act (CSOA), A.R.S. §§ 44-1701-1712, and the Consumer Fraud Act (CFA), A.R.S. §§ 44-1521-1534, by their conduct through various entities in selling information about low interest credit cards. On cross-motions for summary judgment, the trial court found that all the conduct violated the CSOA and that a portion of it violated the CFA. The remainder, it ruled, did not violate the CFA. Judgment was entered accordingly with remedial injunctive relief, civil penalties of $2,038,000, and a substantial award of attorneys' fees and costs. The Sgrillos appeal the applications of the statutes. The state cross-appeals the adverse summary judgment on the CFA and the scope of the remedy granted. We affirm in part and reverse in part.
[1] While admitting that their conduct would violate the CSOA, defendants contend**772 that it does not because all victims were non-residents of Arizona victimized only by use of mail and telephone. This novel criminal immunity is derived from a portion of the statement of purposes of the CSOA contained in Laws 1988, Ch. 350, § 1, saying that “the people of this state” have been harmed by the practices now proscribed. Of course, our legislature was motivated in large part by the harm caused Arizona residents. How that can lead to the conclusion that the legislature intended to allow Arizona residents to engage in criminal conduct against non-residents escapes us. The best protection of our residents is in eliminating criminal conduct entirely not in limiting it to non-residents. Accordingly, we conclude that the CSOA applies to conduct within the state directed at those without it. See State ex rel. Corbin v. Pickrell, 136 Ariz. 589, 667 P.2d 1304 (1983) (RICO); State ex rel. Corbin v. Goodrich, 151 Ariz. 118, 726 P.2d 215 (App.1986) (CFA).
[2] Defendants' second argument on appeal, that what they sold is not “merchandise” within the meaning of the CFA, is equally unavailing. A.R.S. § 44-1521(5) reads: “ ‘Merchandise’ means any objects, wares, goods, commodities, intangibles, real estate, or services.” Given the breadth of this definition, the argument that the sale of information is not covered cannot be sustained. A book or magazine, containing information, would fit within the definition. So, too, would the packet of information sent by those for whom defendants acted. Defendants seek to avoid this conclusion by arguing that their acts were in aid of a sale by another entity. This is of no assistance because A.R.S. § 44-1522 forbids deceptive acts “in connection with the sale” of any merchandise regardless of whether the deceiver is the seller. If the acts of defendants in purporting to put consumers in a position to acquire low interest credit cards is not the sale of an object, ware, or good within the meaning of A.R.S. § 44-1521(5), it surely is the sale of a “service” and thus would still be covered. The broadly remedial purposes of the CFA should not be defeated by niggling distinctions unrelated to the protection of consumers by the elimination of fraud. Villegas v. Transamerica Financial Services, Inc., 147 Ariz. 100, 708 P.2d 781 (App.1985).
We deal summarily with the state's cross-appeal. We have examined the evidence to which the state has directed us, and the existence of which is not disputed by defendants, and find it sufficient to preclude summary judgment under the CFA. The state's claim for additional remedies can be pursued in connection with the trial of those claims. Because we have not been furnished a transcript of the hearing on remedies, we cannot find an abuse of discretion in the remedies ordered. We note that the civil penalties ordered will have the substantial deterrent effect which the state claims would be provided by the additional remedies it seeks.
Summary judgment in favor of defendants on the consumer fraud claims is
reversed. In all other respects the judgment is affirmed. The state is awarded a
portion of its attorneys' fees on appeal under A.R.S. § 44-1534 in an amount to
be determined upon filing the statement required by Rule 21, Ariz.R.Civ.App. 1,
17B A.R.S.
LACAGNINA and FERNANDEZ, JJ., concur.
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