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TEXAS STATUTES
FINANCE CODE
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.
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