Minnesota Session Laws - 1991, Regular Session

  

                         Laws of Minnesota 1991 

                        CHAPTER 314-S.F.No. 204 
           An act relating to consumer protection; providing for 
          the regulation of credit service organizations; 
          providing penalties; proposing coding for new law in 
          Minnesota Statutes, chapter 332.  
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
    Section 1.  [332.52] [DEFINITIONS.] 
    Subdivision 1.  [APPLICABILITY.] The definitions in this 
section apply to sections 1 to 9. 
    Subd. 2.  [BUYER.] "Buyer" means any individual who is 
solicited to purchase or who purchases the services of a credit 
services organization. 
    Subd. 3.  [CREDIT SERVICES ORGANIZATION.] (a) "Credit 
services organization" means any person that, with respect to 
the extension of credit by others, sells, provides, performs, or 
represents that the person will sell, provide, or perform, in 
return for the payment of money or other valuable consideration, 
any of the following services: 
    (1) improve a buyer's credit record, history, or rating; 
    (2) obtain an extension of credit for a buyer; or 
    (3) provide advice or assistance to a buyer with regard to 
either clause (1) or clause (2). 
    (b) "Credit services organization" does not include: 
    (1) any person authorized to make loans or extensions of 
credit under the laws of this state or the United States, if the 
person 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 
any mortgage insurance program under the National Housing Act; 
    (2) any bank, savings bank, or savings and loan institution 
whose deposits or accounts are eligible for insurance by the 
Federal Deposit Insurance Corporation or a subsidiary of the 
bank, savings bank, or savings and loan institution; 
    (3) any credit union, federal credit union, or out-of-state 
credit union doing business in this state; 
    (4) any nonprofit organization exempt from taxation under 
section 501(c)(3) of the Internal Revenue Code of 1986, as 
amended through December 31, 1990; 
    (5) any person licensed as a prorating agency under the 
laws of this state if the person is acting within the course and 
scope of that license; 
    (6) any person licensed as a real estate broker by this 
state if the person is acting within the course and scope of 
that license; 
    (7) any person licensed as a collection agency under the 
laws of this state if the person is acting within the course and 
scope of that license; 
    (8) any person licensed to practice law in this state if 
the person renders services within the course and scope of 
practice as an attorney; 
    (9) any 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 
that regulation; or 
    (10) any consumer reporting agency as defined in the 
federal Fair Credit Reporting Act, United States Code, title 15, 
sections 1681 to 1681t, as amended through December 31, 1990. 
    Subd. 4.  [EXTENSION OF CREDIT.] "Extension of credit" 
means the right, offered or granted primarily for personal, 
family, or household purposes, to defer payment of debt or to 
incur debt and defer its payment. 
    Sec. 2.  [332.53] [WAIVER OF RIGHTS.] 
    Any waiver by a buyer of sections 1 to 9 is void.  Any 
attempt by a credit services organization to have a buyer waive 
rights provided under sections 1 to 9 is a violation of sections 
1 to 9.  In any proceeding involving sections 1 to 9, the burden 
of proving an exemption or an exception from a definition is 
upon the person claiming it. 
    Sec. 3.  [332.54] [REGISTRATION; FEES.] 
    Subdivision 1.  [FILING.] It is unlawful for any credit 
services organization to offer, advertise, or execute or cause 
to be executed by a consumer any contract in this state unless 
the credit services organization at the time of the offer, 
advertisement, sale, or execution of a contract has been 
properly registered with the commissioner.  The commissioner may 
charge the credit services organization a reasonable fee not 
exceeding $100 to cover the costs of filing. 
    Subd. 2.  [DISCLOSURE.] The registration must contain the 
following information: 
    (1) the name and address of the credit services 
organization; 
    (2) the name and address of the registered agent authorized 
to accept service of process on behalf of the credit services 
organization; 
    (3) the name and address of any person who directly or 
indirectly owns or controls a ten percent or greater interest in 
the credit services organization; 
    (4) the name and address of the surety company that issued 
the bond required under section 4; and 
    (5) full disclosure of any litigation or unresolved 
complaint filed within the preceding five years with the state, 
any other state, or the United States relating to the operation 
of the credit services organization, or a notarized statement 
that there has been no litigation or unresolved complaint filed 
within the preceding five years with the state, any other state, 
or the United States relating to the operation of the credit 
services organization. 
    Subd. 3.  [ADDITIONAL INFORMATION.] The credit services 
organization must attach to the registration statement a copy of 
the contract which the credit services organization intends to 
execute with its consumers and evidence of the required bond. 
    Subd. 4.  [UPDATE OF INFORMATION.] The credit services 
organization must update the registration statement required 
under this section not later than 90 days after the date from 
which a change in the information required in the statement 
occurs. 
    Subd. 5.  [BUYER INSPECTION.] Each credit services 
organization registering under this section must maintain a copy 
of the registration statement in its files.  The credit services 
organization must allow a buyer to inspect the registration 
statement on request. 
    Sec. 4.  [332.55] [BOND.] 
    A credit services organization must submit to the 
commissioner at the time of registration, a surety bond of 
$10,000 to be approved by the attorney general and in which an 
insurance company, which is authorized by the state of Minnesota 
to transact the business of fidelity and surety insurance, is a 
surety.  The credit services organization must be the obligor.  
The bond must benefit the state of Minnesota and any person who 
may have a cause of action against the obligor arising out of 
the obligor's activities as a credit services organization.  The 
commissioner may accept a deposit in cash, or securities that 
may be legally purchased by savings banks or for trust funds of 
an aggregate market value equal to the bond requirement, in lieu 
of the surety bond.  The cash or securities must be deposited 
with the state treasurer. 
    Sec. 5.  [332.56] [PROHIBITED ACTS.] 
    Subdivision 1.  [REQUIREMENTS; PROHIBITIONS.] A credit 
services organization, its salespersons, agents, and 
representatives, and independent contractors who sell or attempt 
to sell the services of a credit services organization may not 
do any of the following: 
    (1) charge or receive any money or other valuable 
consideration prior to full and complete performance of the 
services the credit services organization has agreed to perform 
for the buyer; 
    (2) charge or receive any 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 upon substantially 
the same terms as those available to the general public; 
    (3) make, counsel, or advise any buyer to make, any 
statement with respect to a buyer's credit worthiness, credit 
standing, or credit capacity that is untrue or misleading or 
that should be known by the exercise of reasonable care to be 
untrue or misleading to a 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; or 
    (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 any act, 
practice, or course of business that operates or would operate 
as fraud or deception upon any person in connection with the 
offer or sale of the services of a credit services organization. 
    Subd. 2.  [SALESPERSONS; AGENTS.] If a credit services 
organization is in compliance with subdivision 1, clause (1), 
the salesperson, agent, or representative who sells the services 
of that organization is not required to obtain a surety bond. 
     Sec. 6.  [332.57] [DISCLOSURE STATEMENT.] 
    Subdivision 1.  [REQUIREMENT.] 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 any money or other valuable consideration, 
whichever occurs first, the credit services organization shall 
provide the buyer with a statement in writing containing all of 
the information required by subdivision 2.  The credit services 
organization shall maintain on file 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. 
    Subd. 2.  [CONTENTS.] The disclosure statement required 
under subdivision 1 must be printed in bold face and in at least 
ten point type and must include the following statement: 
 "CONSUMER CREDIT FILE RIGHTS UNDER MINNESOTA AND FEDERAL LAW
    You have a right to obtain a copy of your credit report 
from a credit bureau.  You may be charged a reasonable fee.  
There is no fee, however, if you have been turned down for 
credit, employment, insurance, or a rental dwelling because of 
information in your credit report within the preceding 30 days.  
The credit bureau must provide someone to help you interpret the 
information in your credit file. 
    You have a right to dispute inaccurate information by 
contacting the credit bureau directly.  However, neither you nor 
any "credit repair" company or credit services organization has 
the right to have accurate, current, and verifiable information 
removed from your credit bureau report.  Under the federal Fair 
Credit Reporting Act, the credit bureau must remove accurate, 
negative information from your report only if it is over seven 
years old.  Bankruptcy can be reported for ten years. 
    You have a right to sue a credit repair company that 
violates Minnesota's credit services organization act.  This law 
prohibits deceptive practices by credit repair companies and 
gives you a right to cancel your contract for any reason within 
five working days from the date you signed it. 
    Credit bureaus are required to follow reasonable procedures 
to ensure that creditors report information accurately.  
However, mistakes may occur. 
    You may, on your own, notify a credit bureau in writing 
that you dispute the accuracy of information in your credit 
file.  The credit bureau must then reinvestigate and modify or 
remove inaccurate information.  The credit bureau may not charge 
any fee for this service.  Any pertinent information and copies 
of any documents you have concerning an error should be given to 
the credit bureau. 
    If reinvestigation does not resolve the dispute to your 
satisfaction, you may send a brief statement to the credit 
bureau to keep in your file, explaining why you think the record 
is inaccurate.  The credit bureau must include your statement 
about disputed information with any reports it issues about you."
    Sec. 7.  [332.58] [CONTRACT.] 
    Subdivision 1.  [REQUIREMENTS.] 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, and signed by the buyer and must include the following: 
    (1) a conspicuous statement in boldface type, in immediate 
proximity to the space reserved for the signature of the buyer, 
as follows:  "If you, the buyer, have been denied credit within 
the last 30 days, you may obtain a free copy of the consumer 
credit report from the consumer reporting agency.  You also have 
the right to dispute inaccurate information in a report.  You 
may cancel this contract at any time prior to midnight of the 
fifth 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 in this state 
authorized to receive service of process; and 
    (5) with respect to the previous calendar year or the time 
period the credit services organization has been in business, 
whichever is shorter, the percentage of the credit services 
organization's customers for whom the credit services 
organization has fully and completely performed the services the 
credit services organization agreed to perform for the buyer. 
     Subd. 2.  [NOTICE OF CANCELLATION.] The contract must be 
accompanied by a completed form in duplicate, captioned "Notice 
of Cancellation" that must be attached to the contract, is 
easily detachable, and contains in boldface 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 five days from the date the contract is signed.
    If you cancel this contract, any payment made by you under 
this contract will be returned within ten days following receipt 
by the seller of your cancellation notice. 
    To cancel this contract, mail or deliver a signed dated 
copy of this cancellation notice, or any 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)..." 
    Subd. 3.  [BUYER'S COPY.] 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 that they are signed. 
    Sec. 8.  [332.59] [VIOLATIONS.] 
     Any person who violates sections 1 to 7 is guilty of a 
misdemeanor.  The commissioner of commerce may bring a civil 
action or proceeding against a person who violates any provision 
of sections 1 to 7.  A violation of sections 1 to 7 is a 
violation of section 325F.69, subdivision 1, and the provisions 
of section 8.31 apply.  Sections 1 to 7 do not limit or restrict 
the right of any person to pursue any appropriate remedy for a 
violation of sections 1 to 7. 
    Sec. 9.  [332.60] [DAMAGES.] 
    A buyer suffering damages as a result of a violation of 
sections 1 to 7 by a credit services organization may bring an 
action for recovery of damages.  Judgment must be entered for 
actual damages, but in no case shall the amount be less than the 
amount paid by the buyer to the credit services organization, 
plus reasonable attorney fees and costs.  An award may also be 
entered for punitive damages.  The remedies provided under 
sections 1 to 9 are in addition to any other procedures or 
remedies for any violation or conduct otherwise provided by law. 
    Presented to the governor May 30, 1991 
    Signed by the governor June 3, 1991, 4:08 p.m.