(No ) (Approved December 15, 2013) AN ACT

Transcription

1 (S. B. 405) (Conference) (No ) (Approved December 15, 2013) AN ACT To create the Credit Repair Organizations Act, in order to regulate any person or entity engaged in providing assistance or advice with regard to credit repair; repeal Act No , as amended, known as the Act to Regulate Credit Repair Agencies ; amend Act No. 5 of April 23, 1973, as amended, known as the Department of Consumer Affairs Organic Act, in order to include Credit Repair Organizations under the jurisdiction of the Department of Consumer Affairs, among other matters. STATEMENT OF MOTIVES Act No was approved in order to offer greater consumer protection against the unfair or deceptive practices used at that time by the so-called entities or organizations engaged in the business of credit repair services. Furthermore, said statute sought to adopt measures to ensure that credit repair organizations adhere to the agreements entered into with the consumer, thus ensuring that the customer receives the services for which he contracted the organization. The foregoing Act placed credit repair organizations under or classified them as institutions subject to the jurisdiction of the Office of the Commissioner of Financial Institutions (OCFI). However, upon reviewing Act No. 4 of October 11, 1985, known as the Financial Institutions Commissioner s Office Act, and Act No. 5 of April 23, 1973, as amended, known as the Department of Consumer Affairs Organic Act, we deem necessary to transfer to the Department of Consumer Affairs the powers granted to the OCFI under Act No with regards to the entities engaged in providing credit repair services. This is due to the fact that said entities do not offer

2 2 financing services and are not in any way financial entities or institutions that require the supervision and oversight of the OCFI. Rather, credit repair organizations offer consumers a service and, therefore, their actions would be most effectively overseen by the Department of Consumer Affairs. Moreover, after reviewing the nature and duties of the so called credit repair business, it is deemed convenient and proper to amend the Act to also temper the name to the true nature of the services offered by such entities. The term Credit Restoring Agency can confuse consumers and create the false expectation that their credit shall be restored when, in fact, such agencies are solely empowered to correct any incorrect or inaccurate information in the consumer s credit report. Consistent with the foregoing, the Act subject to this amendment shall henceforth be known as the Credit Repair Organizations Act. BE IT ENACTED BY THE LEGISLATIVE ASSEMBLY OF PUERTO RICO: Section 1.- Short Title This Act shall be known as the Credit Repair Organizations Act, in order to regulate any person or entity engaged in the business of providing assistance or advice with regard to credit repair services. Section 2.- Definitions For purposes of this Act, the following terms shall have the meaning stated hereinbelow: a. Credit Repair Organization - any persons or entities engaged in providing consumers with assistance or advice on debt planning and management, and that advertise themselves through personal contact, telephone, written communication, social networks, Internet, or through advertisements in newspapers, publications, handouts, signs, banners, telephone books, radio, television, or any other means of communication, that initiate affirmative actions on behalf of any person to change incorrect information, reduce the negative effects of adverse

3 3 information, update or otherwise change, alter, or modify inaccurate information in the files, registers, or reports of consumer reporting agencies, and require the payment of service fees, commissions, or any other consideration for services rendered. b. Investigation Fees - the fees to be paid by every license applicant to defray expenses incurred by the Department for the investigation to be conducted prior to issuing a license. c. Consumer - any individual who requests and uses the services of a Credit Repair Organization. d. Service Contract - an agreement executed between a Credit Repair Organization and the consumer that establishes in writing, among other aspects, the services to be offered and fees to be paid. e. Credit - the eligibility and capacity that entitles a person to acquire funds, merchandise, loans, or financing from another based on his credit and repayment history. f. Department - the Department of Consumer Affairs, created by virtue of Act No. 5 of April 23, 1973, as amended, known as the Department of Consumer Affairs Organic Act. g. License Fees - the annual fees paid by the license holder to operate as a Credit Repair Organization at the time of the license application or renewal. h. Credit Report - the report issued by a consumer reporting agency, credit bureau, or similar entity, containing a consumer s credit and repayment history, as defined in the Fair Credit Reporting Act, 15 USC 1681 et seq. i. Uniform Administrative Procedures Act - refers to Act No. 170 of August 12, 1988, as amended, known as the Uniform Administrative Procedures Act.

4 4 j. License - the authorization to operate as a Credit Repair Organization issued to an applicant by the Department. k. Administrative Fine - a financial sanction imposed pursuant to the provisions of the Uniform Administrative Procedures Act, or any special laws, and/or regulations under the jurisdiction of the Department. l. Office or Business Location - the place where credit repair services are rendered and which requires a Use Permit issued by the Permit Management Office of the Commonwealth of Puerto Rico. m. To Operate or Do Business - means to be engaged in a series of similar activities for the purpose of generating profits or achieving an objective. n. Person - means any natural or juridical person. o. Consumer Credit Transactions - any transaction in which credit is offered or extended to a natural person for personal, family, or household purposes. p. Complete Performance of Services - for purposes of this Act, the term complete performance of services shall mean actions taken by the Credit Repair Organization that result in a substantial improvement of the consumer s credit history. Section 3.- Oversight The Department of Consumer Affairs shall be the government body in charge of issuing licenses, supervising, and overseeing Credit Repair Organizations. Section 4.- Applicability, Exclusions, and Prohibitions This Act shall apply to every person, partnership, entity, or corporation engaged in the business of credit repair services. This Act shall not apply to any person who acts in his capacity as owner, partner, director, officer, lawyer, accountant, agent, or employee of any of these businesses authorized by law, such as: banks, savings and loans associations and banks, trust companies, federal agencies or instrumentalities of the Commonwealth

5 5 of Puerto Rico, retirement systems, federal savings and loan associations and financing companies, small personal loan companies, mortgage institutions, savings and credit unions, and other similar businesses whose main activity is to grant loans, such as businesses that offer to sell or lease goods and services. Furthermore, it shall also not apply to lawyers or accountants that provide said service specifically as an incidental part of their business. This Act shall not apply to Financial Intermediation Businesses certified as such by the Office of the Commissioner of Financial Institutions and regulated under the provisions of Act No , known as the Act to Regulate the Financial Intermediation Business. Section 5.- Powers of the Department In addition to the powers and authorities conferred to the Department by its Organic Act, said Department shall be empowered to: a. Conduct investigations, at the request of an interested party or at its own discretion, pertaining to alleged infringements of this Act, as well as any other investigations necessary for the proper implementation thereof. b. Issue summons and compel witnesses to appear and furnish information deemed necessary for the implementation of this Act. c. Receive testimony, data, or information. If a summons, request, or order issued by the Department were not duly complied with, the Department may appear before the Court of First Instance and request that the court issue an order of compliance for same. The Court of First Instance shall be empowered to punish as contempt the willful disobedience of any order and shall direct the appearance of witnesses or production of any data or information previously requested by the Department. No person may refuse to comply with a summons issued by the Department or a court order thus issued by alleging that the testimony, data, or information required may be incriminating or result in the imposition of a penalty;

6 6 however, such a person may not be criminally prosecuted with respect to any transaction, issue, or matter about which said person testified or produced data or information. d. Investigate, address, and settle claims filed with the Department. e. Impose administrative fines for violations to this Act or any applicable Regulation. f. Issue orders, including cease and desist orders, upon prior determination that a Credit Repair Organization has committed a violation of this Act, of the regulations approved thereunder, or of an administrative order or resolution. Moreover, the Department may also prescribe those corrective terms and conditions that, according to the available evidence, are determined to be beneficial to the public interest and necessary to comply with the provisions of this Act. g. The Secretary of the Department of Consumer Affairs shall be responsible for implementing all that is herein provided and shall be empowered to prescribe regulations to establish any administrative procedures consistent with this Act. h. Take any and all actions necessary to efficiently achieve the purposes of this Act. Section 6.- Obtaining a License; Exceptions No person, except those excluded from the application of this Act, may engage in the business of credit repair services without having previously obtained a license issued by the Department pursuant to the provisions of this Act. Section 7.- Application, Investigation, and License Fees The application for a license shall be submitted in writing, under oath, and filed with the Department. The application shall contain the following information: a. Name and address of the location in Puerto Rico where the business main office shall be established. The applicant shall further provide any other

7 7 information that the Department requests, including the identification of each applicant. b. Upon submitting the license application, the applicant shall pay an investigation fee of five hundred dollars ($500) and an annual license fee of one thousand dollars ($1,000). Both payments shall be made through a certified check payable to the Secretary of the Treasury; if the license were to be issued after June 30 th of any year, the annual license fee shall be five hundred dollars ($500) for the current year and one thousand dollars ($1,000) for subsequent years. The Secretary of the Treasury shall open a special account with the funds collected from these payments, which shall be transferred to the Department of Consumer Affairs to fulfill the purposes of this Act. c. Any other document requested by the Department pursuant to Regulations. If the applicant is a juridical person, then the following documents shall be filed with the application: d. Certificate of Corporate Existence issued by the Department of State of the Commonwealth of Puerto Rico, in the case of corporations, or by the government entity empowered to certify the existence to such juridical persons. e. Articles of Incorporation, Corporate Charter, or any other document required by law to organize said entity. f. The name and the street and mailing addresses of the Board of Directors and of each one of their officials. g. The name and the street and mailing address of the registered agent or the agent authorized to accept service of process on behalf of said entity.

8 8 h. The name, address, and a copy of the driver s license, or any other photo identification allowed by law, of every person that directly or indirectly controls ten percent (10%) or more of the capital stocks of the business established under the provisions of this Act. i. Any other document required by the Department pursuant to its procedures. j. Certificate of Good Standing issued by the Department of State, in the case of corporations, certifying that the corporation has complied with the filing of the annual corporate reports with the Department of State and that it is fully compliant with the Department s requirements. Section 8.- Operating Requirements of Credit Repair Organizations Any person who wishes to obtain a license to operate a Credit Repair Organization shall hold a bachelor s degree and have two (2) years of experience in credit analysis and granting in a financial institution or otherwise, five (5) years of experience in this market if the requirement of a bachelor s degree is not met. In the case of juridical entities, said requirement shall apply to the chief officer in charge or the person responsible for the daily operations of said entity. The Department may establish other requirements through regulations. Section 9.- Application Process A. License Issuance: Upon filing the license application and paying the applicable fees and the investigation fee, the Department shall conduct those investigations it deems necessary. If the Department finds that the financial responsibility, experience, character, required premises, and general competence of the applicant are such as to warrant belief that the business will be operated pursuant to the purposes and provisions of this Act, and that the issuance of said requested license shall be convenient and favorable to the community where the business shall be operated,

9 9 then the Department shall approve said application. Once the application is approved and evidence is provided that the applicant furnished the bond pursuant to Section 11 of this Act, the Department shall issue the applicant a license to operate as a Credit Repair Organization in accordance with the provisions of this Act. B. Denial of License: If the Department denies a license application, the investigation fee paid shall be retained by the Department and the annual license fee shall be reimbursed to the applicant. The Department may refuse to issue a license for any reasons it deems may affect public interest including, but not limited to, the following reasons: a. The applicant does not meet some requirements set forth in this Act or the Regulations thereunder; b. The applicant has violated any of the provisions of the special laws and regulations enforced by the Department; c. The applicant or any other person who, at the time of submitting the application, is a shareholder, director, officer, member, partner, agent, or the spouse of the applicant and has had a Department issued license, franchise, or permit previously revoked; d. The applicant was liable for any action or omission the consequence of which was the revocation of a license, franchise, or permit issued by the Department; e. The applicant provided false information in the license application submitted to the Department; f. The investigation reveals negative or adverse information, or if in the Department s judgment the applicant s competence and character or that of any person related thereto, according to the foregoing, indicates that it is not in the public interest that said applicant be issued a license.

10 10 The Department may leave a license application pending if the person applying pursuant to the provisions of this Act is accused of a misdemeanor or a felony under state or federal laws. The license application shall remain pending until the case is resolved by a competent court. C. Denial Reconsideration Any person adversely affected by a determination issued by the Department pursuant to the provisions of this Act may submit a request for reconsideration to the Department, pursuant to the terms and provisions set forth in the Uniform Administrative Procedures Act, as amended. Section 10.- Annual Licenses A. License Content: a. Every license shall contain the address of the main office in Puerto Rico where the business shall be conducted and the name thereof. b. The license shall not be transferable and shall be placed in a visible area in the business location. c. No other license shall be issued unless the holder thereof certifies in writing and under oath that the original license was lost or destroyed. d. In the event that the license holder wishes to change the location and street address of the business, said holder shall notify such change in writing to the Department, which shall proceed to issue a new license. In such case, the holder of said license shall return the original license to the Department prior to the issuance of a new license. B. Period to Begin Operations: All license holders shall begin operations as a Credit Repair Organization within a term not to exceed ninety (90) days as of the date on which the Department or its representative issues the license. If the business cannot begin operations within the term set forth herein, an extension shall be requested from the

11 11 Department explaining the reasons for the delay. The Department or its representative shall evaluate the request and grant the requested extension if, in its judgment, the justification is valid. The license issued under this Act shall be void if operations fail to begin within the term set forth in this subsection or if the term of any extension granted has elapsed. C. License Renewal: Every license issued under this Act shall remain in effect until its expiration date, which shall be at the end of each calendar year, or until said license is suspended, revoked, or surrendered. License renewal applications shall be filed not later than December 1 st of each year together with the pertinent payments and documents. Any license holder that pays the fees or submits the information required for the license renewal after December 1 st of each year shall be subject to the imposition of an administrative fine pursuant to the provisions of this Act. The license renewal fee shall be one thousand dollars ($1,000) for each office. If the payment and the information required for the renewal are not received on or before December 31 st, it shall be understood as being surrendered due to a lack of interest from the license holder. D. Prohibition During Renewal Process: If the term provided to request the renewal of a license elapses without the filing of the application with the requested documents, it shall be deemed that the previous license has expired. Once the previous license has expired, the holder thereof shall not be eligible to continue operating as a Credit Repair Organization, to collect commissions and/or generate income from the operation of the business until the Department issues the appropriate license.

12 12 E. Denial of Renewal Application: In the event the Department denies the license renewal application to any holder thereof, it shall issue a notice to the applicant, in writing, within thirty (30) days after its determination, stating the reasons for such decision and informing the license holder that he may request an informal hearing, reconsideration, and subsequent review before the Court of Appeals, as set forth in the Uniform Administrative Procedure Act, as amended. F. Offices: A license shall be required for each office to be established. If a license holder wishes to relocate the offices or branches, he shall notify the Department, in writing, thirty (30) days prior to the relocation. The license shall be duly amended by the Department after it authorizes the request, it being understood that no license holder shall be authorized to relocate its offices without written authorization from the Department. Once the request for office relocation is duly authorized, the Department may, free of charge, amend the license issued to the license holder indicating such relocation and the date of effectiveness thereof. In such cases, the license holder shall surrender the original license to the Department and the amended license shall constitute authorization to operate the business under such license in the new location. Section 11.- Capital and Bond Requirements Every business established under the provisions of this Act shall: a. Maintain not less than ten thousand dollars ($10,000) in liquid assets to manage the business of each authorized office. b. Furnish and maintain a surety bond in the minimum amount of thirty thousand dollars ($30,000) up to a maximum amount of one hundred thousand dollars ($100,000), depending on the volume of business.

13 13 c. Said bond shall be furnished by an insurance company authorized by the Insurance Commissioner to engage in business in the Commonwealth of Puerto Rico. The bond shall be furnished to the Commonwealth of Puerto Rico to answer for the petitioner s failure to discharge any of the duties set forth in this Act, including the payment of fines and examination fees. Said bond shall be filed with the Department. Section 12.- Inspections and/or Examinations Any business established under the provisions of this Act shall be required to make available to the Department the accounting books, records, documents, and any other information that the Department deems necessary for due inspection. Moreover, the Department or any of its representatives shall be permitted to enter and inspect any properties, facilities, and business operation locations. Any business established under the provisions of this Act shall pay the Department an inspection fee of one hundred dollars ($100) per day or fraction thereof. Said fee shall be charged for each inspector that conducts each inspection. The Department shall not conduct more than one inspection per year unless serious irregularities are found during the first inspection. All inspection fees shall be paid by check payable to the Secretary of the Treasury. Section 13.- Disposal of Books and Records Upon previous authorization from the Department, any license holder pursuant to the provisions of this Act may dispose of its books and records after five (5) years have elapsed from the date of the last entry therein or from the date in which any obligation ceases to be enforceable according to the documents in its possession. The license holder shall submit a written request to the Department for authorization to dispose of said records. A list of the documents and their respective disposal schedule shall be enclosed with said request.

14 14 The request shall also certify that any obligation appearing in the documents to be disposed of has ceased to be enforceable. If the Department does not deny the request within fifteen (15) days from the date it was filed, it shall be understood that the same has been authorized and the disposal of such records may proceed. Once the disposition of records is carried out, an authorized official or representative of the license holder shall certify said disposal. Said certification shall be submitted to the Department within fifteen (15) days from the date the same was granted. The aforementioned certification shall become part of the permanent records of the business. Section 14.- Credit Repair Organization Duties and Obligations Any attempt by the license holder to contract the rendering of services shall be preceded by a free, thorough, and efficient orientation for the consumer on the services to be offered; said orientation shall include all the information required under the disclosure clause contained in this Act. This process shall be conducted with the utmost professionalism and shall fully comply with the provisions of this Act on prohibited practices. A. Disclosure of Consumer Rights Before any contract is executed, any business established under the provisions of this Act shall provide each consumer with a written statement, separate and independent from any other, including the contract, containing the consumer s rights under state and federal laws. The statement shall be printed in at least fourteen (14)-point boldface type and shall be previously approved by the Department. The statement shall include the following:

15 15 Consumer Credit File Rights Under State and Federal Law You have a right to dispute any inaccurate information in your credit report by directly contacting the credit bureau that issued the unfavorable report. Notwithstanding this right, neither you nor any Credit Repair Organization has the right to have accurate, current, and verifiable information removed from your credit report. The credit bureau shall remove any negative information from your report that is over seven (7) years old even if it is accurate. Bankruptcy information may remain in your credit report for a maximum term of ten (10) years. You have the right to obtain a copy of your credit report from a credit bureau for which you may be charged a fee. There is no fee, however, if you have been turned down for credit, employment, insurance, or a rental dwelling because of negative information in your credit report within the preceding sixty (60) days. The credit bureau shall provide someone to help you interpret the information in your credit file. Moreover, you are entitled to receive a free copy of your credit report if you are unemployed and intend to apply for employment in the next sixty (60) days, if you are a recipient of public welfare assistance, or if you have reason to believe that there is inaccurate information in your credit report due to fraud. You have a right to sue a Credit Repair Organization that violates the provisions of this Act or the applicable Federal Act. Both laws prohibit deceptive practices by such organizations. You have the right to cancel your contract with any Credit Repair Organization for any reason within seven (7) calendar days from the date you signed it. Credit bureaus are required to follow reasonable procedures to ensure that the information they report is accurate. However, mistakes may occur.

16 16 Every consumer may, on his own, notify a credit bureau in writing that he disputes the accuracy of information in his credit file. The credit bureau must then reinvestigate and modify or remove any pertinent information and copies of all documents concerning the error correction procedure shall be provided to the credit bureau. If the organization does not resolve the dispute to the consumer s satisfaction, he may send a written statement explaining why the record is incomplete or questionable; provided, further, that said statement shall be included in the consumer s credit file and the credit bureau shall include a summary of said statement with any credit report it issues in the future. License holders under the provisions of this Act shall keep a true and exact copy of the statement signed by the consumer, acknowledging receipt of same, for a period of up to two (2) years after the contract has expired. Said copy shall constitute evidence of the fact that the document was in fact delivered to the consumer and that he knows its contents and understands his rights. In addition to the written statement, the license holder shall give the consumer a good faith estimate containing a complete and itemized list of the services to be offered and the cost of said services in a document separate from any other document. Furthermore, Credit Repair Organizations established under the provisions of this Act shall have the following duties: a. The relationship between the Credit Repair Organization and the clients shall be considered of a fiduciary nature; therefore, in accordance with this Act, it shall discharge its duties with the utmost diligence, care, loyalty to, and financial benefit of the client. b. To maintain an office or establishment that is suitable to serve customers and where it may be reached during business hours.

17 17 c. To keep and maintain within the office or business location every report, book, record, register, document, paper, and any other evidence related to the business. d. To prepare and submit to the Department any business or operations report it requests. e. To comply with any order or resolution from the Department. Section 15.- Contract All service contracts of the license holder shall be made in writing, in not less than fourteen (14)-point type and in a single document. The service contract shall be dated and signed by the consumer and by an authorized representative of the license holder. It shall include the following information: a. A conspicuous statement in not less than fourteen (14)-point boldface type in the immediate proximity to the space reserved for the signature of the consumer, to read as follows: Notice to Purchaser: Do not sign this contract until you read it or if it contains information other than the one you provided to the license holder. By signing this contract you acknowledge that the credit history information to be used by this license holder was provided by you and that it is you who declared that the adverse information on your credit report may and should be corrected pursuant to federal legislation. b. The contract shall contain the name and the two (2) last names of the parties; and the payment terms and conditions, including the total number of payments to be made to the Credit Repair Organization or to any other person. c. A detailed and complete description of the services that the Credit Repair Organization shall render to the consumer, including the estimated time for rendering said services, which shall not exceed six (6) months, and the service costs thereof.

18 18 d. The name and the street and mailing addresses of the Credit Repair Organization s main office. e. A notice to consumers regarding their responsibility to provide all information and documents related to any service to be rendered. f. A statement warning consumers that any action on their part geared toward requesting any credit may adversely affect the services rendered. g. A statement directed at the consumer clearly indicating that no Credit Repair Organization may request any amount of money in advance, that any requirement to such effect may render the contract null, and that any counseling services provided by the license holder during the effectiveness of said contract are part of same and shall not be charged separately. h. A consumer notice informing that said contract shall be effective for six (6) months and that, upon the expiration of same, the business shall have the right to charge for services rendered up to said date. Provided, that no amount shall be charged for unperformed services, including accounts that were not repaired, eliminated, or corrected within said six (6)-month period. i. A statement regarding the consumer s right to negotiate a six (6)-month contract extension in order to correct information that could not be corrected within the original term and/or to include information that was not included in the original contract. Provided, that under this scenario as well, the license holder shall not charge for services in advance. j. The contract shall clearly state that service contracts shall not constitute, in any way, an express warranty that the consumer s credit shall be rebuilt nor a guarantee that the result shall be favorable in improving his credit. k. The contract shall be attached to a pre-printed form in duplicate titled Notice of Cancellation, which shall include the following statement in not less than fourteen (14)-point type:

19 19 Notice of Cancellation You may cancel this contract, without any penalty or obligation, within seven (7) calendar days after the date the contract is signed. To cancel this contract, mail or deliver a signed copy of this Notice of Cancellation or any other written notice to (name of the Credit Repair Organization) not later than midnight of the seventh calendar day after the date the contract is signed. I hereby cancel this transaction. (Date) (Signature of the Consumer) A copy of the contract signed by both parties, of all other documents the Credit Repair Organization requires the consumer to sign, and of all documents furnished by the consumer for the service contract process shall be given to the consumer by the Credit Repair Organization at the time they are signed. Section 16.- Transfer of Capital or Control No Credit Repair Organization under the provisions of this Act may initiate the sale, assignment, barter, exchange, or other transfer of voting shares, interest, or participation in the capital of another Credit Repair Organization, without the previous written authorization from the Department, if under such transaction a person could directly or indirectly acquire control of ten percent (10%) or more of any class of stock, interest, or participation in the capital with voting rights. Any sale, assignment, merger, barter, exchange, or other transfer of voting shares, interest, or participation in the capital of another Credit Repair Organization, as expressed in the preceding paragraph, shall be null without prior written authorization from the Department.

20 20 The credit repair organization shall notify the Department, within thirty (30) days in advance, of any proposed transaction mentioned in this Section, the identity of the transferor and of the transferee, and the nature of the transaction, enclosing the payment of investigation fees referred to in Section 5 of this Act. The Department may require such additional information as deemed necessary to determine whether the transaction would be detrimental to the security or financial solvency of the Credit Repair Organization or whether it would violate any law, rule, or regulation that governs it, in which case, the Department may deny the authorization. Any person to whom such authorization is denied shall have the right to request an informal hearing pursuant to the provisions of the Uniform Administrative Procedures Act and the Regulations prescribed under the same by the Department. Section 17.- Prohibited Practices A Credit Repair Organization shall not: a. Operate or engage in business as a Credit Repair Organization without having previously obtained a license from the Department. b. Request, receive, or charge the total or partial payment of any commission or fee in advance for services to be rendered, including consumer credit report fees. c. Charge a fee in addition to the payment previously agreed to in the contract. d. Advertise, show, distribute, broadcast, or allow the advertisement, showing, distribution, or broadcast of misleading or false information regarding any services offered.

21 21 e. Make any statement or counsel or advise any consumer to provide any information which is untrue or misleading, either knowingly or which upon the exercise of reasonable care should be known to be untrue or misleading, with respect to the consumer s credit worthiness and credit capacity. f. State that it can or is authorized to arrange for the removal of exact, accurate, real, and verifiable information from the credit report. g. Create, or assist or advise the consumer to create, a new credit history by using a different name, address, social security number, or employer identification number. h. Engage in any act, practice, or plan that constitutes or results in the commission or attempt to commit fraud or deceit. i. Make false, misleading, or erroneous statements in the offer or sale of services to potential clients, including guaranteeing or otherwise stating that the Credit Repair Organization is able to delete an adverse credit history, unless it is clearly stated as conspicuous as the guarantee that this can be done only if the credit history is inaccurate or obsolete and is not claimed and proven to be accurate by the creditor who submitted the information. j. Engage, directly or indirectly, in any activity, practice, or with any business that operates or shall operate fraudulently with respect to credit repair services. k. Transfer or assign a license issued by the Department without prior written authorization from the Department to do so. l. Submit any information being disputed to a consumer reporting agency without the consumer's prior authorization. m. Conduct investigations in connection to the consumer s credit without the consumer s prior authorization.

22 22 n. Refuse to return any document or instrument prepared for the rendering of services to the consumer upon the latter s request. o. Call a consumer reporting agency s telephone system as if he were a consumer who wants to dispute certain information, nor may it request the disclosure of information without proper authorization from the consumer. p. Wrongfully withhold any amount of money and/or document related to a transaction or fail to notify a client of his right or of any amount of money or document that is part of a transaction. q. Forge documents that are part of a transaction. r. Submit, publish, or make false reports or statements in order to deceive or defraud any person or agent authorized by the Department to conduct examinations. s. Engage in unlawful or dishonest trade practices, defined as such when a company uses deceptive practices in bad faith to discredit a competitor, or offer a customer services that are inferior in quality to that of its competitors, while making them seem of average or superior quality, at a price inferior to what is considered fair and average in the market. t. Any person who takes part, instigates, or cooperates in the commission of the aforementioned actions, shall be guilty of violating this Act, regardless of whether the person obtained any personal financial profit. Section 18.- Surrender Any Credit Repair Organization may surrender its business license by means of a written notice to the Department. The Department may order and conduct an examination of the business prior to accepting the surrender of any license. If after such examination, it is determined that a violation to this Act has occurred, the Department may impose the corresponding penalty in accordance with the provisions of this Act.

23 23 Section 19.- Voluntary Surrender If the license renewal term provided in this Act has elapsed without the submission of the application to such effect, then it shall be understood that the same has been voluntarily surrendered and the person shall cease any operations or business as a credit repair organization. Section 20.- Revocation of License No license shall be revoked without previously holding an administrative hearing pursuant to the provisions of the Uniform Administrative Procedures Act. The Department, on its own initiative or upon request of a party, may initiate the process for the revocation of licenses issued under the provisions of this Act. Section 21.- Grounds for Revocation of License Upon prior notice and hearing, the Department may revoke any license issued under the provisions of this Act if it determines that: a. There is a fact that had existed or been known at the time of application for or issuance of the license, the Department would have found sufficient cause to deny the same. b. The Credit Repair Organization or any representative thereof has violated any of the provisions of this Act or of any applicable regulations. c. The Credit Repair Organization has violated any of the provisions of the enabling acts and regulations under the jurisdiction of the Department after having been directed to comply through an order. d. The license holder has been accused of a misdemeanor or a felony. e. Any other cause the Department deems that affects public interest. f. Any license revocation and its date of effectiveness shall be established through a written order listing any findings of fact and conclusions of law supporting the same. A copy thereof shall be sent to the license holder. The evidence that the

24 24 Department has taken into consideration shall be filed in the public records of the Department. g. If the license holder fails to appear at proceedings or if having appeared the license holder fails to prevail, the Department shall issue a resolution ordering the revocation of such license. Said order shall be notified by mail and include an official notice of the right to file a motion for reconsideration and appeal before the Court of Appeals, as the case and applicable terms may be. Section 22.- Penalties The Department may impose and charge civil fines to any Credit Repair Organization for violations of this Act or the applicable regulations, orders, or resolutions approved and issued by the Department, as well as any other sanction prescribed by regulations. No administrative fine shall exceed ten thousand dollars ($10,000) for each violation of this Act or regulation promulgated thereunder. When the nature of the violation of this Act or of the rules, regulations, orders, or resolutions issued by the Department so warrant, the Department may initiate a criminal action against the offender in addition to the imposition of the civil fines authorized in the preceding paragraph. Section 23.- Consumer Claims The Department shall have exclusive jurisdiction to address any consumer claims in connection with credit repair organizations. Moreover, the Department shall have jurisdiction over any consumer claims related to advertising campaigns by credit repair organizations that promote unrealistic offers which are prejudicial to consumers. A consumer may also file a complaint with the Department of Consumer Affairs to vindicate the rights granted by this Act, or that are the result of contractual noncompliance by a Credit Repair Organization.

25 25 Furthermore, any consumer may bring legal action in a competent Court requesting compensation for damages or contract compliance or both remedies. Prevailing consumers are entitled to claim attorney s fees and costs. Section 24.- Reconsideration All that is related to procedures in connection with administrative hearings, adjudicative procedures, reconsiderations, and reviews of orders and resolutions or any determination of the Department pursuant to this Act, or any regulation issued by the Department may be subject to reconsideration and review pursuant to the provisions of the Uniform Administrative Procedures Act and the Regulations promulgated thereunder. Section 25.- Review Before the Court of Appeals Any party adversely affected by a final order or resolution, or a determination issued by the Department under the provisions of this Act or applicable regulations may file a request for review before the Court of Appeals, within a term of thirty (30) days as of the entry of the notice of order, final resolution, or administrative determination. Any party adversely affected by a final resolution of the Court of Appeals may petition for a writ of certiorari before the Supreme Court of Puerto Rico within the jurisdictional term of thirty (30) days after the Court of Appeals resolution is entered or after the ruling on a duly filed motion for reconsideration. Section 26.- Compliance The provisions of this Act shall not exempt contracting parties from complying with any other law or applicable regulation, including federal laws and regulations.

26 26 Section 27.- Waiver of Liability Any contractual clause regarding the waiver of liability of the provisions of this Act granted by a consumer to a Credit Repair Organization in order to exempt the latter from complying with this Act is hereby deemed contrary to public policy and shall be void. Likewise, any contract that fails to comply with the provisions of this Act shall be void. Any attempt to obtain a waiver of liability in order to purposely not comply with the provisions set forth herein shall be deemed a violation of this Act. Such conduct may entail, among others, the revocation of the license to operate as a Credit Repair Organization issued by the Department under this Act. Section 28.- Existing Businesses Any person who was engaged in the business of credit repair by virtue of a license duly issued by the Financial Institutions Commissioner s Office on the effective date of this Act may continue to operate said business with such license. However, once said license expires, the same shall be renewed with the Department pursuant to the regulatory provisions applicable thereto. Section 29.- Act No , as amended, known as the Act to Regulate Credit Repair Agencies is hereby repealed. Section 30.- Transfer of Functions A new subsection (dd) is hereby added to Section 6 of Act No. 5 of April 23, 1973, as amended, known as the Department of Consumer Affairs Organic Act, in order to provide that the regulation and oversight of credit repair organizations shall be under the jurisdiction of the Department of Consumer Affairs, to read as follows: (dd) To Regulate and Oversee Credit Repair Organizations.

27 27 Section 31.- The Secretary of the Department of Consumer Affairs is hereby empowered to promulgate any regulations necessary to properly implement this Act within a term not to exceed ninety (90) days as of its effective date. Section 32.- Severability If any provision of this Act were challenged and held to be unconstitutional or null by a competent Court, such holding shall not invalidate the remaining provisions of this Act, but rather it shall be specifically limited to the provision thus held to be unconstitutional or null. Section 33.- If any part, paragraph, or section of this Act were held to be null or invalid by a Court of competent jurisdiction, said holding shall only affect the part, paragraph, or section thus held to be null or invalid. Section 34.- Any Act, Order, Resolution, Joint Resolution, or Concurrent Resolution that, in whole or in part, were incompatible with this Act, is hereby repealed to the extent of such incompatibility. Section 35.- Effectiveness This Act shall take effect immediately after its approval.

28 28 CERTIFICATION I hereby certify to the Secretary of State that the following Act No (S. B. 405) (Conference) of the 2 nd Regular Session of the 17 th Legislative Assembly of Puerto Rico: AN ACT to create the Credit Repair Organizations Act, in order to regulate any person or entity engaged in providing assistance or advice with regard to credit repair; repeal Act No , as amended, known as the Act to Regulate Credit Repair Agencies ; amend Act No. 5 of April 23, 1973, as amended, known as the Department of Consumer Affairs Organic Act, in order to include Credit Repair Organizations under the jurisdiction of the Department of Consumer Affairs, among other matters. has been translated from Spanish to English and that the English version is correct. In San Juan, Puerto Rico, on this 11 th day of September, Orlando Pagán-Ramírez Director