HOUSE BILL REPORT

SSB 5147

As Amended by the House

BYSenate Committee on Financial Institutions & Insurance (originally sponsored by Senators von Reichbauer, Rasmussen, Johnson, Smitherman, McMullen, McCaslin and West)

Revising definition of credit services organization.

House Committe on Financial Institutions & Insurance

Majority Report:  Do pass with amendments.  (11)

      Signed by Representatives Dellwo, Chair; Zellinsky, Vice Chair; Chandler, Ranking Republican Member; Anderson, Baugher, Beck, Day, P. King, Schmidt, K. Wilson and Winsley.

House Staff:John Conniff (786-7119)

AS PASSED HOUSE APRIL 13, 1989

BACKGROUND:

In 1986, the Legislature adopted the Credit Services Organization Act (act).  For a fee, these businesses generally offer to assist individuals in obtaining credit.  Typical services include offering to improve a customer's credit, obtaining an extension of credit for the customer, or providing related advice.

The act requires a credit service organization offering assistance for a fee to meet certain financial and disclosure requirements.  A credit service organization is prohibited from charging or receiving any money prior to full and complete performance of the services it has agreed to perform for the buyer, unless, the organization has obtained a surety bond for $10,000.  All contracts must be in writing and specify cancellation rights, terms of payment, and a full description of the services to be performed. 

The act also grants an individual a "cooling off" period of five days during which he or she may cancel the contract.  Any contract provision waiving the rights granted under the act is prohibited.  Certain exemptions are made from the act, including various lenders, real estate brokers, securities broker-dealers, and attorneys.  A violation of this act constitutes a gross misdemeanor.

A relatively new business has surfaced which offers similar services as a credit service organization but is not subject to the act.  The organizations, called foreclosure relief companies, offer advice and assistance in exchange for a fee.  Often fees are collected up front and range from $400-$500.

SUMMARY:

The definition of a credit service organization is expanded to include organizations offering to save or preserve a person's credit or to stop, prevent, or delay the foreclosure of a deed of trust, mortgage, or other security instrument.

Provisions governing bonding requirements are clarified.

Fiscal Note:      Not Requested.

House Committee ‑ Testified For:    None Presented.

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    None Presented.

House Committee - Testimony Against:      None Presented.