BILL NUMBER: SB 500	CHAPTERED  07/20/07

	CHAPTER  91
	FILED WITH SECRETARY OF STATE  JULY 20, 2007
	APPROVED BY GOVERNOR  JULY 20, 2007
	PASSED THE SENATE  MAY 7, 2007
	PASSED THE ASSEMBLY  JULY 3, 2007
	AMENDED IN SENATE  MARCH 29, 2007

INTRODUCED BY   Senator Corbett

                        FEBRUARY 22, 2007

   An act to amend Sections 1789.13 and 1789.25 of the Civil Code,
relating to credit service organizations.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 500, Corbett. Credit services organizations.
   (1) Existing law regulates the activities of credit services
organizations, and requires them to register with the Department of
Justice. Existing law prohibits a credit services organization, its
salespersons, agents, representatives, and contractors, as specified,
from engaging in certain activities, including charging or receiving
money or other consideration for referring the buyer to a retail
seller or other credit grantor who will or may extend credit to the
buyer on substantially the same terms as are generally offered to the
public or without the services of the organization. Existing law
provides that a violation of these provisions is a misdemeanor.
   This bill would provide additional activities in which a credit
services organization, and its salespersons, agents, representatives,
and contractors are prohibited from engaging, including, among
others, directly or indirectly extending credit to any buyer,
referring any buyer to a credit grantor that is related to the credit
services organization by common ownership, management, or control,
and providing a credit grantor with assurance that an extension of
credit to a buyer referred by the credit services organization will
be repaid. The bill would also prohibit the Department of Justice
from providing a credit services organization certificate of
registration to any person who has engaged in, or proposes to engage
in, specified activities. By broadening the definition of a crime,
this bill would impose a state-mandated local program.
   (2) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 1789.13 of the Civil Code is amended to read:
   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 which 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 any
costs, fees, finance charges, or principal.
   (d) Make, or counsel or advise any buyer to make, any statement
which is untrue or misleading and which is known, or which by the
exercise of reasonable care should be known, to be untrue or
misleading, to a consumer credit reporting agency or to any 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 any 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 any act, practice, or
course of business which operates or would operate as a fraud or
deception upon any 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 any buyer.
   (o) Refer any buyer to a credit grantor that is related to the
credit services organization by any common ownership, management, or
control, including any common owner, director, or officer.
   (p) Refer any buyer to a credit grantor for which the credit
services organization provides, or arranges for a third party to
provide, any services related to the extension of credit such as
underwriting, billing, payment processing, or debt collection.
   (q) Provide a credit grantor with any assurance that any 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 any part of the credit grantor's
financial interest in the extension of credit.
   (r) Use any scheme, device, or contrivance to evade the
prohibitions contained in this section.
  SEC. 2.  Section 1789.25 of the Civil Code is amended to read:
   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.
  SEC. 3.  No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.