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A00598 Memo:

submitted in accordance with Assembly Rule III, Sec 1(f)
SPONSOR: Dinowitz
  TITLE OF BILL: An act to amend the general business law, in relation to the operations of credit services businesses   PURPOSE: The purpose of this bill is to increase consumer protections in the credit repair industry.   SUMMARY OF PROVISIONS: This bill would make several amendments to Article 28-BB of General Business Law, which regulates the practices of businesses that offer services related to improving a consumer's credit rating. Specifically, the bill would: > replace the contents of the disclosure statement required to be provided to consumers under section 458-d with a new statement contain- ing information regarding: - a consumer's right to obtain credit reports and dispute inaccurate or untimely credit report information directly from a credit reporting agency for free; - the fact that no person or business can remove accurate and current negative information from a credit report; - the consumer's right to cancel a credit services agreement; and - how to contact the Attorney General or Federal Trade Commission to tile a complaint against a credit services business; require credit services businesses to provide to consumers that agree to pay for services over the telephone an oral disclosure briefly summarizing the contents of the disclosure statement; > provide that credit services businesses must complete all services within six months; increase the time period during which a consumer may cancel a credit services agreement from three to five business days; > add several prohibited practices to section 458-h of the law, includ- ing: - charging a fee for referring a consumer to a creditor that will offer credit on the same terms as available to the general public; - make, or advise a consumer to make, a statement that is known to be untrue or misleading to a credit reporting agency or creditor; - using a credit reporting agency telephone system or number to repre- sent the caller as the consumer in submitting a dispute of a consumer or requesting disclosure without prior authorization of the consumer; - removing, or advising the consumer to remove, negative information from a credit report that is accurate and timely; and - creating a new credit record for the consumer under a different name and Social Security number; > increase the civil penalty for violations of the law from not more than $1,000 per violation to not more than $2,500 per violation and provide that subsequent violations of provisions banning advance fees or prohibiting certain practices shall he a class A misdemeanor; and > provide that it shall be a violation of the law for any person to provide substantial assistance to any credit services business when such person knows or consciously avoids knowing that the business is engaging in any act or practice that violates the law.   JUSTIFICATION: The recent economic downturn has weakened the financial situation of many consumers, especially those subject to job loss or reduced hours or benefits. Consumers that are struggling to manage debts or pay bills on time may see their credit ratings decline, making it more difficult to obtain reasonably-priced credit in today's tight lend- ing market. Consumers looking for assistance with the difficult task of rebuilding their credit have several options to choose from, including credit services businesses. Advertisements for these businesses have flooded radio and television airwaves and the Internet in recent months. Some of these advertisements make dubious claims, such as, "We can erase your bad credit - 100% guaranteed," "Create a new credit identity - legally, "Get a 720 Credit Score - 100 percent guaranteed permanent results," and" Raise credit scores up to 130 pts in 45 days". Credit services businesses, also referred to as credit repair busi- nesses, offer to provide assistance and advice to consumers interested in improving their credit rating. It has been Widely reported that some credit repair businesses fail to provide meaningful services beyond what a consumer can already perform on his or her own for free under federal air credit reporting law and some regularly engage in questionable busi- ness practices. In addition, several state Attorney Generals and the Federal Trade Commission have brought enforcement actions against credit repair companies for making false claims and misleading consumers. New York's credit repair law (Article 28-BB of the General Business Law) was enacted in 1986. Since that time consumers have been granted a host of new rights and protections under state and federal fair crediting reporting laws, including the right to obtain a free credit report every twelve months from each of the three major credit reporting agencies. Consumers that find inaccurate or untimely information in their report may file a dispute with a credit reporting agency free of charge. This legislation would update Article 28-BB to reflect the rights consumers now have in this area and improve the law by providing several addi- tional protections to purchasers of credit repair services.   LEGISLATIVE HISTORY: New bill.   FISCAL IMPLICATIONS: None to the State.   EFFECTIVE DATE: Ninety days after enactment.
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