CHAPTER 393. CREDIT SERVICES ORGANIZATIONS - Texas Statutes

FINANCE CODE

TITLE 5. PROTECTION OF CONSUMERS OF FINANCIAL SERVICES

CHAPTER 393. CREDIT SERVICES ORGANIZATIONS

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 393.001. DEFINITIONS. In this chapter:

(1) "Consumer" 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. Section

1681a(f)).

(3) "Credit services organization" means a person who provides,

or represents that the person can or will provide, for the

payment of valuable consideration any of the following services

with respect to the extension of consumer credit by others:

(A) improving a consumer's credit history or rating;

(B) obtaining an extension of consumer credit for a consumer; or

(C) providing advice or assistance to a consumer with regard to

Paragraph (A) or (B).

(4) "Extension of consumer credit" means the right to defer

payment of debt offered or granted primarily for personal,

family, or household purposes or to incur the debt and defer its

payment.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 393.002. PERSONS NOT COVERED. (a) This chapter does not

apply to:

(1) a person:

(A) authorized to make a loan or grant an extension of consumer

credit under the laws of this state or the United States; and

(B) subject to regulation and supervision by this state or the

United States;

(2) 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. Section 1701 et

seq.);

(3) a bank or savings association the deposits or accounts of

which are eligible to be insured by the Federal Deposit Insurance

Corporation or a subsidiary of the bank or association;

(4) a credit union doing business in this state;

(5) a nonprofit organization exempt from taxation under Section

501(c)(3), Internal Revenue Code of 1986 (26 U.S.C. Section

501(c)(3));

(6) a real estate broker or salesperson licensed under Chapter

1101, Occupations Code, who is acting within the course and scope

of that license;

(7) an individual licensed to practice law in this state who is

acting within the course and scope of the individual's practice

as an attorney;

(8) a broker-dealer registered with the Securities and Exchange

Commission or the Commodity Futures Trading Commission acting

within the course and scope of that regulation;

(9) a consumer reporting agency;

(10) a person whose primary business is making loans secured by

liens on real property;

(11) a mortgage broker or loan officer licensed under Chapter

156, Finance Code, who is acting within the course and scope of

that license; or

(12) an electronic return originator who:

(A) is an authorized Internal Revenue Service e-file provider;

and

(B) makes, negotiates, arranges for, or transacts a loan that is

based on a person's federal income tax refund on behalf of a

bank, savings bank, savings and loan association, or credit

union.

(b) In an action under this chapter, a person claiming an

exemption under this section has the burden of proving the

exemption.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by Acts 1999, 76th Leg., ch. 344, Sec. 2.036, eff. Sept.

1, 1999; Acts 1999, 76th Leg., ch. 1254, Sec. 3, eff. Sept. 1,

1999; Acts 2003, 78th Leg., ch. 135, Sec. 2, eff. Sept. 1, 2003;

Acts 2003, 78th Leg., ch. 1276, Sec. 14A.775, eff. Sept. 1, 2003.

Sec. 393.003. WAIVER VOID. A waiver of a provision of this

chapter by a consumer is void.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER B. REGISTRATION AND DISCLOSURE STATEMENTS

Sec. 393.101. REGISTRATION STATEMENT. (a) Before conducting

business in this state, a credit services organization shall

register with the secretary of state by filing a statement that:

(1) contains the name and address of:

(A) the organization; and

(B) each person who directly or indirectly owns or controls at

least 10 percent of the outstanding shares of stock in the

organization; and

(2) fully discloses any litigation or unresolved complaint

relating to the operation of the organization filed with a

governmental authority of this state or contains a notarized

statement that there has been no litigation or unresolved

complaint of that type.

(b) The organization shall keep a copy of the registration

statement in its files.

(c) The secretary of state may not require an organization to

provide information other than information contained in the

registration statement.

(d) A registration certificate expires on the first anniversary

of its date of issuance. A registered credit services

organization may renew a registration certificate by filing a

renewal application, in the form prescribed by the secretary of

state, and paying the renewal fee.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.44(a), eff. Sept.

1, 1999.

Sec. 393.102. UPDATE OF REGISTRATION STATEMENT. A credit

services organization shall update information contained in the

registration statement not later than the 90th day after the date

on which the information changes.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 393.103. INSPECTION OF REGISTRATION STATEMENT. A credit

services organization shall allow a consumer to inspect the

registration statement on request.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 393.104. FILING FEE. The secretary of state may charge a

credit services organization a reasonable fee to cover the cost

of filing a registration statement or renewal application in an

amount not to exceed $100.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.44(a), eff. Sept.

1, 1999.

Sec. 393.105. DISCLOSURE STATEMENT. Before executing a contract

with a consumer or receiving valuable consideration from a

consumer, a credit services organization shall provide the

consumer with a document containing:

(1) a complete and detailed description of the services to be

performed by the organization for the consumer and the total cost

of those services;

(2) an explanation of the consumer's right to proceed against

the surety bond or account obtained under Section 393.302;

(3) the name and address of the surety company that issued the

surety bond or the name and address of the depository and the

trustee and the account number of the surety account, as

appropriate;

(4) a complete and accurate statement of the consumer's right to

review information on the consumer maintained in a file by a

consumer reporting agency, as provided by the Fair Credit

Reporting Act (15 U.S.C. Section 1681 et seq.);

(5) a statement that information in the consumer's file is

available for review:

(A) without charge on request made to the consumer reporting

agency not later than the 30th day after the date on which the

agency receives notice the consumer has been denied credit; and

(B) for a minimal charge at any other time;

(6) a complete and accurate statement of the consumer's right to

dispute directly with a consumer reporting agency the

completeness or accuracy of an item contained in the consumer's

file maintained by the 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 explaining:

(A) when consumer information becomes obsolete; and

(B) that a consumer reporting agency is prevented from issuing a

report containing obsolete information; and

(9) a complete and accurate statement of the availability of

nonprofit credit counseling services.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 393.106. COPY OF DISCLOSURE STATEMENT. A credit services

organization shall keep in its files a copy of a document

required under Section 393.105, signed by the consumer,

acknowledging receipt, until the second anniversary of the date

on which the organization provides the document.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER C. CONTRACT FOR SERVICES

Sec. 393.201. FORM AND TERMS OF CONTRACT. (a) Each contract

for the purchase of the services of a credit services

organization by a consumer must be in writing, dated, and signed

by the consumer.

(b) In addition to the notice required by Section 393.202, the

contract must:

(1) contain the payment terms, including the total payments to

be made by the consumer, whether to the organization or to

another person;

(2) fully describe the services the organization is to perform

for the consumer, including each guarantee and each promise of a

full or partial refund and the estimated period for performing

the services, not to exceed 180 days;

(3) contain the address of the organization's principal place of

business; and

(4) contain the name and address of the organization's agent in

this state authorized to receive service of process.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 393.202. NOTICE OF CANCELLATION. (a) The contract must

conspicuously state the following, in type that is boldfaced,

capitalized, underlined, or otherwise distinguished from the

surrounding written material and in immediate proximity to the

space reserved for the consumer's signature: "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 contract must have attached two easily detachable copies

of a cancellation notice. 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 three 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)"

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 393.203. ISSUANCE OF CONTRACT AND OTHER DOCUMENTS. A

credit services organization shall give to the consumer, when the

document is signed, a copy of the completed contract and any

other document the organization requires the consumer to sign.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 393.204. BREACH OF CONTRACT. The breach by a credit

services organization of a contract under this chapter, or of an

obligation arising from a contract under this chapter, is a

violation of this chapter.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER D. PROHIBITIONS AND RESTRICTIONS

Sec. 393.301. REPRESENTATIVE. In this subchapter, a

representative of a credit services organization includes:

(1) a salesperson, agent, or other representative of the

organization; and

(2) an independent contractor who sells or attempts to sell the

services of the organization.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 393.302. CHARGE OR RECEIPT OF CONSIDERATION BEFORE

COMPLETION OF SERVICES. A credit services organization or a

representative of the organization may charge or receive from a

consumer valuable consideration before completely performing all

the services the organization has agreed to perform for the

consumer only if the organization has obtained a surety bond for

each of its locations or established and maintained a surety

account for each of its locations in accordance with Subchapter

E.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.43(a), eff. Sept.

1, 1999.

Sec. 393.303. CHARGE OR RECEIPT OF CONSIDERATION FOR REFERRAL.

A credit services organization or a representative of the

organization may not charge or receive from a consumer valuable

consideration solely for referring the consumer to a retail

seller who will or may extend to the consumer credit that is

substantially the same as that available to the public.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 393.304. FALSE OR MISLEADING REPRESENTATION OR STATEMENT.

A credit services organization or a representative of the

organization may not:

(1) make or use a false or misleading representation in the

offer or sale of the services of the organization, including:

(A) guaranteeing to "erase bad credit" or words to that effect

unless the representation clearly discloses this can be done only

if the credit history is inaccurate or obsolete; and

(B) guaranteeing an extension of consumer credit regardless of

the person's credit history unless the representation clearly

discloses the eligibility requirements for obtaining the

extension; or

(2) make, or advise a consumer to make, a statement relating to

a consumer's credit worthiness, credit standing, or credit

capacity that the person knows, or should know by the exercise of

reasonable care, to be false or misleading to a:

(A) consumer reporting agency; or

(B) person who has extended consumer credit to a consumer or to

whom a consumer is applying for an extension of consumer credit.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 393.305. FRAUDULENT OR DECEPTIVE CONDUCT. A credit

services organization or a representative of the organization may

not directly or indirectly engage in a fraudulent or deceptive

act, practice, or course of business relating to the offer or

sale of the services of the organization.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 393.306. ADVERTISING SERVICES WITHOUT FILING REGISTRATION

STATEMENT. A credit services organization or a representative of

the organization may not advertise the services of the

organization if the organization has not filed a registration

statement required by Subchapter B.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 393.307. CAUSING WAIVER PROHIBITED. A credit services

organization may not attempt to cause a consumer to waive a right

under this chapter.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER E. SURETY BOND; SURETY ACCOUNT

Sec. 393.401. SURETY BOND. (a) The surety bond of a credit

services organization must be issued by a surety company

authorized to do business in this state.

(b) A copy of the bond shall be filed with the secretary of

state.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 393.402. SURETY ACCOUNT. (a) The surety account of a

credit services organization must be held in trust at a federally

insured bank or savings association located in this state.

(b) The name of the depository and the trustee and the account

number of the surety account must be filed with the secretary of

state.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by Acts 1999, 76th Leg., ch. 344, Sec. 2.037, eff. Sept.

1, 1999.

Sec. 393.403. AMOUNT OF SURETY BOND OR ACCOUNT. The surety bond

or account of a credit services organization must be in the

amount of $10,000.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 393.404. BENEFICIARY OF SURETY BOND OR ACCOUNT. The surety

bond or account of a credit services organization must be in

favor of:

(1) this state for the benefit of a person damaged by a

violation of this chapter; and

(2) a person damaged by a violation of this chapter.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 393.405. CLAIM AGAINST SURETY BOND OR ACCOUNT. (a) A

person making a claim against a surety bond or account of a

credit services organization for a violation of this chapter may

file suit against:

(1) the organization; and

(2) the surety or trustee.

(b) A surety or trustee is liable only for actual damages,

reasonable attorney's fees, and court costs awarded under Section

393.503(a).

(c) The aggregate liability of a surety or trustee for an

organization's violation of this chapter may not exceed the

amount of the surety bond or account.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 393.406. TERM OF SURETY BOND OR ACCOUNT. The surety bond

or account of a credit services organization must be maintained

until the second anniversary of the date on which the

organization ceases operations.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 393.407. PAYMENT OF MONEY IN SURETY ACCOUNT TO CREDIT

SERVICES ORGANIZATION. (a) A depository may not pay money in a

surety account to the credit services organization that

established the account or a representative of the organization

unless the organization or representative presents a statement

issued by the secretary of state indicating that the requirement

of Section 393.406 has been satisfied in relation to the account.

(b) The secretary of state may conduct an investigation and

require information to be submitted as necessary to enforce this

section.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER F. CRIMINAL PENALTIES AND CIVIL REMEDIES

Sec. 393.501. CRIMINAL PENALTY. (a) A person commits an

offense if the person violates this chapter.

(b) An offense under this chapter is a Class B misdemeanor.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 393.502. INJUNCTIVE RELIEF. A district court on the

application of the attorney general or a consumer may enjoin a

violation of this chapter.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 393.503. DAMAGES. (a) A consumer injured by a violation

of this chapter is entitled to recover:

(1) actual damages in an amount not less than the amount the

consumer paid the credit services organization;

(2) reasonable attorney's fees; and

(3) court costs.

(b) A consumer who prevails in an action under this section may

also be awarded punitive damages.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 393.504. DECEPTIVE TRADE PRACTICE. A violation of this

chapter is a deceptive trade practice actionable under Subchapter

E, Chapter 17, Business & Commerce Code.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 393.505. STATUTE OF LIMITATIONS. An action under Section

393.503 or 393.504 must be brought not later than the fourth

anniversary of the date on which the contract to which the action

relates is executed.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.