California Credit Repair
CIVIL CODE
SECTION 1789.10-1789.26
1789.10. This title shall be known and may be cited as the “Credit
Services Act of 1984.”
1789.11. The Legislature finds and declares that:
(a) The ability to obtain and use credit has become of great
importance to consumers, who have a vital interest in establishing
and maintaining their credit worthiness 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 such consumers.
Certain advertising and business practices of some credit services
organizations have worked a financial hardship upon the people of
this state, often those who are of limited economic means and
inexperienced in credit matters. Credit services organizations have
significant impact upon the economy and well-being of this state and
its people.
(b) The purposes of this title 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 title shall be construed liberally to achieve these
purposes.
1789.12. As used in this title:
(a) “Credit services organization” means a person who, with
respect to the extension of credit by others, sells, provides, or
performs, or represents that he or she can or will sell, provide or
perform, any of the following services, in return for the payment of
money or other valuable consideration:
(1) Improving a buyer’s credit record, history, or rating.
(2) Obtaining a loan or other extension of credit for a buyer.
(3) Providing advice or assistance to a buyer with regard to
either paragraph (1) or (2).
(b) “Credit services organization” does not include any of the
following:
(1) Any person holding a license to make loans or extensions of
credit pursuant to the laws of this state or the United States who is
subject to regulation and supervision with respect to the making of
those loans or extensions of credit by an official or agency of this
state or the United States and whose business is the making of those
loans or extensions of credit.
(2) Any bank, as defined in Section 102 of the Financial Code, or
any savings institution, as specified in subdivision (a) or (b) of
Section 5102 of the Financial Code, whose deposits or accounts are
eligible for insurance by the Federal Deposit Insurance Corporation.
(3) Any person licensed as a prorater by the Department of
Corporations when the person is acting within the course and scope of
that license.
(4) Any person licensed as a real estate broker performing an act
for which a real estate license is required under the Real Estate Law
(Pt. 1 (commencing with Sec. 10000), Div. 4, B. & P.C.) and who is
acting within the course and scope of that license.
(5) Any attorney licensed to practice law in this state, where the
attorney renders services within the course and scope of the
practice of law, unless the attorney is an employee of, or otherwise
directly affiliated with, a credit services organization.
(6) Any broker-dealer registered with the Securities and Exchange
Commission or the Commodity Futures Trading Commission where the
broker-dealer is acting within the course and scope of the
regulation.
(7) Any nonprofit organization described in Section 501(c)(3) of
the Internal Revenue Code that, according to a final ruling or
determination by the Internal Revenue Service, is both of the
following:
(A) Exempt from taxation under Section 501(a) of the Internal
Revenue Code.
(B) Not a private foundation as defined in Section 509 of the
Internal Revenue Code.
An advance ruling or determination of tax-exempt or foundation
status by the Internal Revenue Service does not meet the requirements
of this paragraph.
(c) “Buyer” means any natural person who is solicited to purchase
or who purchases the services of a credit services organization.
(d) “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.
(e) “Consumer credit reporting agency” means a consumer credit
reporting agency subject to the Consumer Credit Reporting Agencies
Act, Title 1.6 (commencing with Section 1785.1).
(f) “Person” includes an individual, corporation, partnership,
joint venture, or any business entity.
1789.13. A credit services organization and its salespersons,
agents, representatives, and independent contractors who sell or
attempt to sell the services of a credit services organization shall
not do any of the following:
(a) 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 or on behalf of the
buyer.
(b) Fail to perform the agreed services within six months
following the date the buyer signs the contract for those services.
(c) Charge or receive any money or other valuable consideration
for referral of the buyer to a retail seller or other credit grantor
who will or may extend credit to the buyer, if either of the
following apply:
(1) The credit that is or will be extended to the buyer (A) is
upon substantially the same terms as those available to the general
public or (B) is upon substantially the same terms that would have
been extended to the buyer without the assistance of the credit
services organization.
(2) The money or consideration is paid by the credit grantor or is
derived from the buyer’s payments to the credit grantor for costs,
fees, finance charges, or principal.
(d) Make, or counsel or advise a buyer to make, a statement that
is untrue or misleading and that is known, or that by the exercise of
reasonable care should be known, to be untrue or misleading, to a
consumer credit 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, such as statements concerning a buyer’s identification, home
address, creditworthiness, credit standing, or credit capacity.
(e) Remove, or assist or advise the buyer to remove, adverse
information from the buyer’s credit record which is accurate and not
obsolete.
(f) Create, or assist or advise the buyer to create, a new credit
record by using a different name, address, social security number, or
employee identification number.
(g) Make or use untrue or misleading representations in the offer
or sale of the services of a credit services organization, including
either of the following:
(1) Guaranteeing or otherwise stating that the organization is
able to delete an adverse credit history, unless the representation
clearly discloses, in a manner equally as conspicuous as the
guarantee, that this can be done only if the credit history is
inaccurate or obsolete and is not claimed to be accurate by the
creditor who submitted the information.
(2) Guaranteeing or otherwise stating that the organization is
able to obtain an extension of credit, regardless of the buyer’s
previous credit problems or credit history, unless the representation
clearly discloses, in a manner equally as conspicuous as the
guarantee, the eligibility requirements for obtaining an extension of
credit.
(h) Engage, directly or indirectly, in an act, practice, or course
of business that operates or would operate as a fraud or deception
upon a person in connection with the offer or sale of the services of
a credit services organization.
(i) Advertise or cause to be advertised, in any manner, the
services of the credit services organization, without being
registered with the Department of Justice.
(j) Fail to maintain an agent for service of process in this
state.
(k) Transfer or assign its certificate of registration.
(l) Submit a buyer’s dispute to a consumer credit reporting agency
without the buyer’s knowledge.
(m) Use a consumer credit reporting agency’s telephone system or
toll-free telephone number to represent the caller as the buyer in
submitting a dispute of a buyer or requesting disclosure without
prior authorization of the buyer.
(n) Directly or indirectly extend credit to a buyer.
(o) Refer a buyer to a credit grantor that is related to the
credit services organization by a common ownership, management, or
control, including a common owner, director, or officer.
(p) Refer a buyer to a credit grantor for which the credit
services organization provides, or arranges for a third party to
provide, services related to the extension of credit such as
underwriting, billing, payment processing, or debt collection.
(q) Provide a credit grantor with an assurance that a portion of
an extension of credit to a buyer referred by the credit services
organization will be repaid, including providing a guaranty, letter
of credit, or agreement to acquire a part of the credit grantor’s
financial interest in the extension of credit.
(r) Use a scheme, device, or contrivance to evade the prohibitions
contained in this section.
1789.14. Prior to the execution of a contract or agreement between
the buyer and a credit services organization, the credit services
organization shall provide the buyer a statement in writing,
containing all the information required by Section 1789.15. 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.
1789.15. The information statement shall include all of the
following:
(a) 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 will have to pay, or become
obligated to pay, for the services.
(b) The buyer’s right to proceed against the bond under the
circumstances and in the manner set forth in Section 1789.18.
(c) The name and address of the surety company which issued the
bond.
(d) A complete and accurate statement of the availability of
nonprofit credit counseling services.
The information statement shall be printed in at least 10-point
boldface type and shall include the following statement or any
substantially equivalent alternative that is approved by the
Department of Justice:
“CONSUMER CREDIT FILE RIGHTS UNDER STATE AND FEDERAL LAW
You have a right to obtain a copy of your credit file from a consumer
credit reporting agency. You may be charged a reasonable fee not
exceeding eight dollars ($8). 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 60 days. The consumer credit reporting agency must provide
someone to help you interpret the information in your credit file.
You have a right to dispute inaccurate information by contacting the
consumer credit reporting agency 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 report. Under the Federal Fair Credit Reporting Act,
the consumer credit reporting agency must remove accurate, negative
information from your report only if it is over seven years old.
Bankruptcy information can be reported for 10 years.
If you have notified a credit reporting agency in writing that you
dispute the accuracy of information in your credit file, the consumer
credit reporting agency must then reinvestigate and modify or remove
inaccurate information. The consumer credit reporting agency may not
charge a fee for this service. Any pertinent information and copies
of all documents you have concerning an error should be given to the
consumer credit reporting agency.
If reinvestigation does not resolve the dispute to your
satisfaction, you may send a brief statement to the consumer credit
reporting agency to keep in your file, explaining why you think the
record is inaccurate. The consumer credit reporting agency must
include your statement about disputed information in any report it
issues about you.
You have a right to cancel the contract for any reason within five
working days from the date you signed it. If for any reason you do
cancel the contract during this time, you do not owe any money.
You have a right to sue a credit services organization if it misleads
you.”
1789.16. (a) A credit services organization shall not provide any
service to a buyer except pursuant to a written contract that
complies with this section. Every contract between the buyer and a
credit services organization for the purchase of the services of the
credit services organization shall be in writing, shall be dated,
signed by the buyer, and include all of the following:
(1) A conspicuous statement in size equal to at least 10-point
boldface 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 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 not to
exceed six months or a shorter period consistent with the purposes of
this title as may be prescribed by the Department of Justice.
(4) The credit services organization’s principal business address
and the name and address of its agent, other than the Secretary of
State, in the State of California, authorized to receive service of
process.
(b) 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 in type of at least 10-point 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, any payment made by you under this contract must
be returned within 15 days following receipt by the seller 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 ________________________ at
(name of seller)
____________________________________________________
(address of seller) (place of business)
not later than midnight _____________.
(date)
“I hereby cancel this transaction.”
____________ ___________________________________
(date) (purchaser’s signature)
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.
1789.17. The seller’s breach of a contract under this title or of
any obligation arising therefrom shall constitute a violation of this
title.
1789.18. No credit services organization shall conduct business in
this state unless the credit services organization has first obtained
a surety bond in the principal amount of one hundred thousand
dollars ($100,000) issued by an admitted surety and the bond complies
with all of the following:
(a) The bond shall be in favor of the State of California for the
benefit of any person who is damaged by any violation of this title.
The bond shall also be in favor of any individual damaged by those
practices.
(b) Any person claiming against the bond for a violation of this
title may maintain an action at law against the credit services
organization and against the surety. The surety shall be liable only
for actual damages and not the punitive damages permitted under
Section 1789.21. The aggregate liability of the surety to all persons
damaged by a credit services organization’s violation of this title
shall in no event exceed the amount of the bond.
(c) The bond shall be maintained for two years following the date
on which the credit services organization ceases to conduct business
in this state.
A copy of the bond shall be filed with the Secretary of State.
1789.19. (a) Any waiver by a buyer of the provisions of this title
shall be deemed contrary to public policy and shall be void and
unenforceable. Any attempt by a credit services organization to have
a buyer waive rights given by this title shall constitute a violation
of this title.
(b) In any proceeding involving this title, the burden of proving
an exemption or an exception from a definition is upon the person
claiming it.
1789.20. (a) Any person who violates any provision of this title is
guilty of a misdemeanor. Any superior court of this state shall have
jurisdiction in equity to restrain and enjoin the violation of any
provision of this title.
The duty to institute actions for violation of this title,
including equity proceedings to restrain and enjoin such a violation,
is hereby vested in the Attorney General, district attorneys, and
city attorneys. The Attorney General, any district attorney, or any
city attorney may prosecute misdemeanor actions or institute equity
proceedings, or both.
This section shall not be deemed to prohibit the enforcement by
any person of any right provided by this or any other law.
(b) The misdemeanor provision of this section does not apply to a
seller’s breach of a contract subject to this title.
1789.21. (a) Any buyer injured by a violation of this title or by
the credit services organization’s breach of a contract subject to
this title may bring any action for recovery of damages, or for
injunctive relief, or both. 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’s fees and
costs. An award, if the trial court deems it proper, may be entered
for punitive damages.
(b) Any person, including, but not limited to, a consumer credit
reporting agency, as defined in subdivision (d) of Section 1785.3,
and any consumer of, or user of, a consumer credit report under the
Consumer Credit Reporting Agencies Act (Title 1.6 (commencing with
Section 1785.1)), and any furnisher of credit information under the
Consumer Credit Reporting Agencies Act, may bring an action for the
recovery of damages or for injunctive relief, or both, for a
violation of this title. Any person bringing such an action who
prevails in the action shall be entitled to reasonable attorney’s
fees and costs.
1789.22. The provisions of this title are not exclusive and do not
relieve the parties or the contracts subject thereto from compliance
with any other applicable provision of law.
The remedies provided in this title for violation of any section
of this title shall be in addition to any other procedures or
remedies for any violation or conduct provided for in any other law.
1789.23. If any provision of this title or if any application
thereof to any person or circumstance is held invalid, the remainder
of the title and the application of the provision to other persons
and circumstances shall not be affected thereby.
1789.24. (a) When a deposit has been made in lieu of a bond
pursuant to Section 995.710 of the Code of Civil Procedure, the
person asserting a claim against the deposit shall, in lieu of
proceeding under Section 996.430 of the Code of Civil Procedure,
establish the claim by furnishing evidence to the Secretary of State
of a money judgment entered by a court, together with evidence that
the claimant is a person described in subdivision (b) of Section
1789.18.
(b) When a person has established the claim with the Secretary of
State, the Secretary of State shall review and approve the claim and
enter the date of approval thereon. The claim shall be designated an
“approved claim.”
(c) When the first claim against a particular deposit has been
approved, it shall not be paid until the expiration of a period of
240 days after the date of its approval by the Secretary of State.
Subsequent claims that are approved by the Secretary of State within
the same 240-day period shall similarly not be paid until the
expiration of the 240-day period. Upon the expiration of the 240-day
period, the Secretary of State shall pay all approved claims from
that 240-day period in full unless the deposit is insufficient, in
which case each approved claim shall be paid a pro rata share of the
deposit.
(d) When the Secretary of State approves the first claim against a
particular deposit after the expiration of a 240-day period, the
date of approval of that claim shall begin a new 240-day period to
which subdivision (c) shall apply with respect to any amount
remaining in the deposit.
(e) After a deposit is exhausted, no further claims shall be paid
by the Secretary of State. Claimants who have had their claims paid
in full or in part pursuant to subdivision (c) or (d) shall not be
required to return funds received from the deposit for the benefit of
other claimants.
(f) When a deposit has been made in lieu of a bond, as specified
in subdivision (a), the amount of the deposit shall not be subject to
attachment, garnishment, or execution with respect to an action or
judgment against the credit services organization, other than as to
an amount as no longer needed or required for the purpose of this
title which would otherwise be returned to the credit services
organization by the Secretary of State.
(g) The Secretary of State shall retain a cash deposit for two
years from the date the Secretary of State receives written
notification from the assignor of the deposit that the assignor has
ceased to engage in the business of a credit services organization or
has filed a bond pursuant to Section 1789.18, provided that there
are no outstanding claims against the deposit. The written notice
shall include all of the following: (1) name, address, and telephone
number of the assignor; (2) name, address, and telephone number of
the bank at which the deposit is located; (3) account number of the
deposit; and (4) a statement whether the assignor is ceasing to
engage in the business of a credit services organization or has filed
a bond with the Secretary of State. The Secretary of State shall
forward an acknowledgment of receipt of the written notice to the
assignor at the address indicated therein, specifying the date of
receipt of the written notice and anticipated date of release of the
deposit.
(h) This section shall apply to all deposits retained by the
Secretary of State.
(i) A judge of a superior court may order the return of the
deposit prior to the expiration of two years upon evidence
satisfactory to the judge that there are no outstanding claims
against the deposit or order the Secretary of State to retain the
deposit for a sufficient period beyond the two years specified in
subdivision (g) to resolve outstanding claims against the deposit
account.
1789.25. (a) Every credit services organization shall file a
registration application with, and receive a certificate of
registration from, the Department of Justice before conducting
business in this state. The Department of Justice shall not issue a
certificate of registration until the bond required by Section
1789.18 has been filed with the office of the Secretary of State and
the department establishes that the organization seeking a
certificate satisfies the requirements of subdivision (f). The
application shall be accompanied by a registration fee of one hundred
dollars ($100). The registration application shall contain all of
the following information:
(1) The name and address where business is actually conducted of
the credit services organization.
(2) The names, addresses, and driver’s license numbers of any and
all persons who directly or indirectly own or control 10 percent or
more of the outstanding shares of stock in the credit services
organization.
(3) Either of the following:
(A) A full and complete disclosure of any litigation commenced
against the credit services organization or any resolved or
unresolved complaint that relates to the operation of the credit
services organization and that is filed with the Attorney General or
any other governmental authority of this state, any other state, or
the federal government. With respect to each resolved complaint
identified by the disclosure, the disclosure shall include a brief
description of the resolution.
(B) An acknowledged declaration under penalty of perjury stating
that no litigation has been commenced and no unresolved complaint
relating to the operation of the organization has been filed with the
Attorney General or any other governmental authority of this state,
any other state, or the federal government.
(4) Other information that the Department of Justice requires,
either at the time of application or thereafter.
(b) The Department of Justice may conduct an investigation to
verify the accuracy of the registration application. If the
application involves investigation outside this state, the applicant
credit services organization may be required by the Department of
Justice to advance sufficient funds to pay the actual expenses of the
investigation. Any nonresident applying for registration under this
section shall designate and maintain a resident of this state as the
applicant’s agent for the purpose of receipt of service of process.
(c) Each credit services organization shall notify the Department
of Justice in writing within 30 days after the date of a change in
the information required by subdivision (a), except that 30 days’
advance notice and approval by the Department of Justice shall be
required before changing the corporate name or address, or persons
owning more than 10 percent of the shares of stock in the
organization. Each credit services organization registering under
this section may use no more than one fictitious or trade name and
shall maintain a copy of the registration application in its files.
The organization shall allow a buyer to inspect the registration
application upon request.
(d) A certificate of registration issued pursuant to this section
shall expire annually on the last day of December but may be renewed
by filing a renewal application accompanied by a fee not to exceed
the Department of Justice’s costs of administration.
(e) The credit services organization shall attach to the
registration statement a copy of the contract or contracts which the
credit services organization intends to execute with its customers
and a copy of the required bond.
(f) The Department of Justice shall not issue a certificate of
registration under this title to any person who has engaged in, or
proposes to engage in, any activity that is in violation of Section
1789.13, any law prohibiting the use of untrue or misleading
statements, or any law related to the extension of credit to persons
for personal, family, or household purposes.
1789.26. (a) The Secretary of State shall enforce the provisions of
this title that govern the filing and maintenance of bonds and
deposits in lieu of bonds.
(b) The Secretary of State shall charge and collect a filing fee
not to exceed the cost of filing the bond or the deposit in lieu of a
bond pursuant to Section 995.710 of the Code of Civil Procedure.
