NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A598
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-
- 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-
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.