ASSEMBLY, No. 499
STATE OF NEW JERSEY
Introduced Pending Technical Review by Legislative Counsel
PRE-FILED FOR INTRODUCTION IN THE 1996 SESSION
By Assemblyman ROBERTS
An Act concerning credit reports, credit reporting agencies and credit repair organizations and supplementing P.L.1960, c.39 (C.56:8-1 et seq.).
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. This act shall be known and may be cited as the "New Jersey Fair Credit Reporting and Repair Act."
2. As used in this act:
"Attorney General" means the Attorney General of New Jersey.
"Consumer" means a natural person residing in this State.
"Consumer credit transaction" means any transaction in which credit is offered or extended to a consumer for personal, family, or household purposes.
"Credit repair organization" means a person who uses any instrumentality of interstate commerce or the mails to sell, provide, or perform, or represent that the person can or will sell, provide, or perform, any service, in return for the payment of money or other valuable consideration, for the express or implied purpose of:
(1) improving a consumer's credit record, credit history, or credit rating;
(2) removing adverse credit information that is accurate and not obsolete from the consumer's record, history or rating;
(3) altering the consumer's identification to prevent the display of the consumer's credit record, history, or rating for the purpose of concealing adverse credit information that is accurate and not obsolete; or
(4) providing advice or assistance to a consumer with regard to any activity or service described in paragraphs (1), (2), or (3).
The term "credit repair organization" does not include:
(1) a nonprofit organization that is exempt from taxation under paragraph (3) of subsection (c) of section 501 of the Internal Revenue Code of 1986, 26 U.S.C.§501(c)(3); or
(2) an attorney licensed to practice law in the State of New Jersey.
"Credit" has the same meaning as in section 103 of the federal "Truth in Lending Act," 15 U.S.C.§1602 et seq.
"Credit report" means any written, oral, or other communication of any information by a credit reporting agency bearing on a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living, including an investigative credit report. The term does not include:
(1)(a) a report containing information solely as to transactions or experiences between the consumer and the person making the report;
(b) any communication of that information among persons related by common ownership or affiliated by corporate control; or
(c) any communication of information from a credit application by a consumer among persons related by common ownership or affiliated by common corporate control, if it is clearly and conspicuously disclosed to the consumer with the credit application that the information may be communicated among such persons and the consumer is provided with the option to prohibit such communication, in writing, using a signature line that is separate and distinct from that used for the consumer's consent to the extension of credit, and the consumer does not exercise this option;
(3) an authorization or approval of a specific extension of credit directly or indirectly by the issuer of a credit card or similar device;
(4) any report in which a person who has been requested by a third party to make a specific extension of credit directly or indirectly to a consumer conveys his decision with respect to such request, if the third party advises the consumer of the name and address of the person to whom the request was made and such person makes the disclosures to the consumer required under the federal "Fair Credit Reporting Act," with respect to adverse or potentially adverse actions; or
(5) any communication of information about a consumer between persons who are affiliated by common ownership or common corporate control and in connection with a credit or insurance transaction that is not initiated by the consumer, if either person has clearly and conspicuously disclosed to the consumer to whom the report relates, before the report is provided, that the report might be provided to and used by other persons who are affiliated in the manner described under this paragraph (5) and the provision and use of the report is consented to by the consumer in writing.
"Credit reporting agency" or "agency" means any person which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on a consumer for the purpose of reporting to third parties on the credit rating or creditworthiness of the consumer.
"Investigative credit report" means a report in which information on a consumer's character, general reputation, personal characteristics, or mode of living is obtained through personal interviews with neighbors, friends, or associates of the consumer or with others with whom the consumer is acquainted or who may have knowledge concerning any such items of information. The term does not include reports of specific factual information on a consumer's credit record obtained directly from a creditor of the consumer or from a credit reporting agency when that information was obtained directly from a creditor of a consumer or from the consumer.
3. a. A credit reporting agency shall, upon request and proper identification of any consumer, clearly and accurately disclose to the consumer in writing all information contained in the consumer's file at the time of the request pertaining to the consumer, including, but not limited to:
(1) the name of any user requesting information pertaining to the consumer during the prior twelve-month period and the date of each request; and
(2) a clear and concise explanation of the information.
b. The information required to be provided pursuant to subsection a. of this section shall be provided at a cost that does not exceed the lesser of:
(1) the total costs incurred by the credit reporting agency in making the disclosures; or
(2) $3.
4. a. A credit reporting agency shall not impose a cost for:
(1) providing the information required to be disclosed pursuant to subsection a. of section 3 of this act if:
(a) that information is requested to be disclosed by the consumer within 60 days of receipt by the consumer of a notification pursuant to the federal "Fair Credit Reporting Act," 15 U.S.C §1681m, that the consumer's credit may be or has been adversely affected; or
(b) the consumer certifies in writing that the consumer is a recipient of public welfare assistance, is receiving unemployment benefits pursuant to R.S.43:21-1 et seq., or is a victim of fraud;
(2) providing the notice required pursuant to subsection g. of section 5 of this act; or
(3) notifying any person designated by the consumer pursuant to 15 U.S.C.§1681i of the deletion of information which is found to be inaccurate or which can no longer be verified.
b. Except as provided pursuant to subsection b. of section 3 of this act and subsection a. of this section, for the provision of all other disclosures to consumers of information available to users pertaining to the consumer, the credit reporting agency may impose on a consumer a reasonable charge, not to exceed $7.50.
5. a. If the completeness or accuracy of any item of information contained in the consumer's file is disputed by the consumer and the consumer notifies the credit reporting agency directly of the dispute, the agency shall reinvestigate, free of charge, and record the current status of the disputed information on or before 30 business days after the date the agency receives notice from the consumer.
b. On or before five business days after the date a credit reporting agency receives notice of a dispute from a consumer in accordance with subsection a. of this section, the agency shall provide notice of the dispute to all persons who provided any item of information in dispute.
c. Notwithstanding the provisions of subsection a. of this section, a credit reporting agency may terminate a reinvestigation of information disputed by a consumer if the agency reasonably determines that the dispute by the consumer is frivolous or irrelevant. Upon making such a determination, a credit reporting agency shall promptly notify the consumer of its determination and the reasons therefor, by mail, or if authorized by the consumer for that purpose, by telephone. The presence of contradictory information in the consumer's file shall not in and of itself constitute reasonable grounds for determining the dispute is frivolous or irrelevant.
d. In conducting a reinvestigation under subsection a. of this section, the credit reporting agency shall review and consider all relevant information submitted by the consumer with respect to the disputed information.
e. If, after a reinvestigation under subsection a. of this section of any information disputed by a consumer, the information is found to be inaccurate or cannot be verified, the credit reporting agency shall, within five business days, delete this information from the consumer's file. For purposes of this section, "information" shall not include other information in the same item that is not disputed by the consumer.
f. If any information is deleted after a reinvestigation under subsection a. of this section, the information shall not be reinserted in the consumer's file after deletion unless the person who furnishes the information reinvestigates and certifies in writing or by electronic record to the agency that the information is complete and accurate. A furnisher shall not provide a statement unless the furnisher reasonably believes that the information is compete and accurate. Upon a reinvestigation and statement by the furnisher, the credit reporting agency shall promptly notify the consumer of any reinsertion.
g. A credit reporting agency shall provide written notice of the results of any reinvestigation under this section within five business days of the completion of the reinvestigation, by mail or, if authorized by the consumer for that purpose, by telephone. This notice shall include:
(1) a statement that the reinvestigation is complete;
(2) a statement of the determination of the agency on the completeness or accuracy of the disputed information;
(3) a credit report that is based upon the consumer's file as that file is revised as a result of the reinvestigation;
(4) a description of the manner in which the information disputed by the consumer has been altered, changed, deleted, or modified in the consumer's credit report;
(5) a description of the procedure used to determine the accuracy and completeness of the information, including the name, business address, and, if available, the telephone number of any person contacted in connection with such information; and
(6) a notification that the consumer has the right, pursuant to 15 U.S.C.§1681i, to add a statement to the consumer's file disputing the accuracy or completeness of the information.
6. a. A person shall not obtain the credit report of a consumer unless:
(1) the report is obtained in response to the order of a court having jurisdiction to issue such an order; or
(2) the person has secured the consent of the consumer, and the report is used only for the purpose consented to by the consumer.
b. Credit reporting agencies shall adopt procedures to assure compliance with subsection a. of this section.
c. Nothing in this section shall be construed to affect:
(1) the ability of a person who has secured the consent of the consumer pursuant to paragraph (2) of subsection a. of this section to include in his request to the consumer permission to also obtain credit reports, in connection with the same transaction or extension of credit, for the purpose of reviewing the account, increasing the credit line on the account, for the purpose of taking collection action on the account, or for other legitimate purposes associated with the account; or
(2) the use of credit information for the purpose of prescreening, as defined and permitted from time to time pursuant to the federal "Fair Credit Reporting Act," 15 U.S.C.§1681 et seq., and by the Federal Trade Commission.
7. a. Not later than 180 days after the effective date of this act, each consumer reporting agency that compiles and maintains consumer reports on residents of this State, shall establish and maintain a toll free telephone number for the purpose of making agency personnel accessible to consumers pursuant to section 4 of this act.
b. This number shall be published on an annual basis, or whenever changed, in newspapers whose combined circulation covers all areas of the State and shall also be given to the Department of Banking and the Division of Consumer Affairs in the Department of Law and Public Safety.
8. a. A violation of the provisions of sections 1 through 7 of this act or the rules promulgated pursuant to this act, necessary to effectuate those sections, is deemed to be an unlawful practice. This section shall not be construed to limit a credit reporting agency's liability under any other law.
b. A consumer aggrieved by a violation of the provisions of sections 1 through 7 of this act or rules promulgated pursuant to this act, necessary to effectuate those provisions, may bring an action in Superior Court for the consumer's damages, injunctive relief, punitive damages in the case of a willful violation, and reasonable costs and attorneys' fees. In the case of a violation by a credit reporting agency, or in the case of a willful violation by any person, the court, in addition, may issue an award for the consumer's actual damages or $100, whichever is greater. In considering the amount of punitive damages, the court may consider, among other relevant factors:
(1) the extent to which a credit reporting agency failed to consider relevant information provided by the consumer during any reinvestigation of information in the consumer's file; and
(2) the extent to which a credit reporting agency maintained and complied with its procedures designed to ensure compliance with the requirements of this act.
9. a. The provisions of sections 1 through 7 of this act shall not apply to education loans made, guaranteed or serviced by the higher education assistance authority pursuant to the "higher education assistance authority law," (N.J.S.18A:72-1 et seq.).
b. The provisions of section 6 of this act shall not apply to the State IV-D agency when investigating a child support case pursuant to Title IV-D of the Social Security Act, 42 U.S.C. §651 et seq., and P.L.1981, c.417 (C.2A:17-56.7 et seq.).
c. The provisions of section 6 of this act shall apply only to a consumer credit transaction entered into on or after the effective date of this act.
10. No credit repair organization, and no officer, employee, agent, or other person participating in the conduct of the affairs of a credit repair organization, may:
a. Receive any money or other valuable consideration for the performance of any service that the credit repair organization has agreed to perform for a consumer before such service is fully performed;
b. Make any statement, or counsel or advise a consumer to make any statement, that is untrue or misleading, or that, upon the exercise of reasonable care, should be known by the credit repair organization, officer, employee, agent, or other person to be untrue or misleading, with respect to the consumer's credit history, credit rating, or credit standing to:
(1) any consumer reporting agency; or
(2) any person who has extended credit to the consumer or to whom the consumer has applied or is applying for an extension of credit;
c. Make any statement, or counsel or advise a consumer to make any statement, the intended effect of which is to alter the consumer's identification to prevent the display of the consumer's credit record, history, or rating for the purpose of concealing adverse credit information that is accurate and not obsolete to:
(1) any consumer reporting agency; or
(2) any person who has extended credit to the consumer or to whom the consumer has applied or is applying for an extension of credit;
d. Make or use any untrue or misleading representation of the services of the credit repair organization; or
e. Engage, directly or indirectly, in any act, practice, or course of business that constitutes or results in the commission of, or an attempt to commit, a fraud or deception on a person in connection with the offer or sale of the services of the credit repair organization.
11. a. Before any contract or agreement between a consumer and a credit repair organization is executed, the credit repair organization shall provide the consumer with the following written statement:
"Consumer Credit File Rights Under State and Federal Law"
You have a right to dispute inaccurate information in your consumer report by contacting the credit reporting agency directly. However, neither you nor any "credit repair" company or credit repair organization has the right to have accurate, current, and verifiable information removed from your consumer report. The credit reporting agency must remove accurate, negative information from your report only if it is over seven years old. Bankruptcy information can be reported for 10 years.
You have a right to obtain a copy of your consumer report from a credit reporting agency. You are entitled to receive a free copy of your credit report if you have been turned down for credit, employment, insurance, or a rental dwelling because of information in your consumer report during the preceding 60 days, if you are a recipient of public welfare assistance, or if you have been the victim of fraud. Otherwise you may be charged a reasonable fee. The credit reporting agency must provide someone to help you interpret the information in your credit file.
You have a right to sue a credit repair organization that violates any provisions of this act dealing with credit repair organizations.
You have a right to cancel your contract with any credit repair organization for any reason not later than three business days from the date you signed it.
You may, on your own, notify a credit reporting agency in writing that you dispute the accuracy of information in our credit file. The credit reporting agency must then reinvestigate and modify or remove inaccurate information. The credit reporting agency may not charge any fee for this service. Any pertinent information and copies of all documents you have concerning an error should be given to the credit reporting agency.
If reinvestigation does not resolve the dispute to your satisfaction, you may send a brief statement to the credit reporting agency, to be kept in your file, explaining why you think the record is inaccurate. The credit reporting agency must include your statement about disputed information with any report it issues about you.
The Division of Consumer Affairs in the Department of Law and Public Safety has responsibility under this act for regulating certain operations of credit reporting agencies and credit repair organizations. For more information contact:
Division of Consumer Affairs
P.O. Box 45027
Newark, New Jersey 07101
(201-504-6534)
b. The written statement required pursuant to subsection a. of this section shall be provided to the consumer as a document that is separate from any written contract or other agreement between the credit repair organization and the consumer or any other written material provided to the consumer.
c. The credit repair organization shall maintain a copy of the statement signed by the consumer acknowledging receipt of the statement in the organization's files for two years after the date on which the statement is provided to the consumer.
12. a. A credit repair organization shall not provide services for a consumer unless a written and dated contract for the purchase of such services that meets the requirements of subsection b. of this section has been signed by the consumer.
b. No contract referred to in subsection a. of this section meets the requirements of this subsection unless the contract includes the following information, in writing:
(1) the terms and conditions of payment, including the total amount of all payments to be made by the consumer to the credit report organization or to any other person;
(2) a full and detailed description of the services to be performed by the credit repair organization for the consumer including all guarantees and all promises of full or partial refunds and estimate of:
(a) the date by which the performance of the services which are to be performed by the credit repair organization or any other person will be complete; or
(b) the length of the period necessary to perform such services;
(3) the credit repair organization's name and principal business address;
(4) a conspicuous statement in boldface type, in immediate proximity to the space reserved for the consumer's signature on the contract, which reads as follows: "You may cancel this contract without penalty or obligation at any time before midnight of the third business day after the date on which you signed the contract. See the attached notice of cancellation form for an explanation of this right."
13. a. A consumer may cancel any contract with a credit repair organization without penalty or obligation by notifying the credit repair organization of the consumer's intention to do so at any time before midnight of the third business day after the date on which the contract or agreement between the consumer and the credit repair organization is signed.
b. Each contract shall be accompanied by a form, in duplicate, which has the heading, "Notice of Cancellation" and contains in boldface type the following comment:
"You may cancel this contract without penalty or obligation at any time before midnight of the third business day which begins after the date the contract is signed by you.
If you cancel, any payment you made under this contract will be returned before the end of the 10-day period beginning on the date the seller receives your cancellation notice.
To cancel this contract, mail or deliver a signed, dated copy of this cancellation notice, or any other written notice to (insert name of credit repair organization) before midnight on (insert date).
I hereby cancel this transaction.
(purchaser's signature)
(date).
c. A consumer who enters into any contract with a credit repair organization shall be given by the organization:
(1) a copy of the completed contract and the disclosure statement required pursuant to section 11 of this act; and
(2) a copy of any other document the credit repair organization requires the consumer to sign.
14. a. Any waiver by a consumer of any protection provided by or any right of the consumer under this act:
(1) shall be treated as void; and
(2) shall not be enforced by a federal or State court or any other person.
b. An attempt by any credit repair organization to obtain a waiver from a consumer of any protection provided by or any right of the consumer under this act shall be treated as a violation of this act.
15. a. A credit repair organization that fails to comply with any provision of this act with respect to any person shall be liable to that person in an amount equal to the sum of the amounts determined as follows:
(1) the greater of:
(a) the amount of any actual damage sustained by such person as a result of such failure; or
(b) any amount paid by the person to the credit repair organization;
(2) in the case of:
(a) an action by an individual, such additional amounts as the courts may allow;
(b) a class action, the sum of:
(i) the aggregate of the amount that the court may allow for each named plaintiff; and
(ii) the aggregate of the amount that the court may allow for each other class member, without regard to any minimum individual recovery.
(3) In the case of a successful action to enforce any liability of any credit repair organization under paragraph (1) or (2) of subsection a. of this section, the costs of the action, together with reasonable attorneys' fees.
b. In determining the amount of any liability of any credit repair organization under paragraph (2) of subsection a. of this section, the court shall consider, among other relevant factors:
(1) the frequency and persistence of noncompliance by the credit repair organization;
(2) the nature of the noncompliance;
(3) the extent to which the noncompliance was intentional; and
(4) in the case of any class action, the number of consumers adversely affected.
c. An action under this section may be sought in any court of competent jurisdiction, before the later of:
(1) the end of the two-year period beginning on the date of the occurrence of the violation involved; or
(2) the end of the two-year period beginning on the date of the discovery by the consumer of a misrepresentation in any case in which a credit repair organization has materially and willfully misrepresented any information that:
(a) the credit repair organization is required, by any provision of this act, to disclose to a consumer; and
(b) is material to the establishment of the credit repair organization's liability to the consumer under this section.
16. The Attorney General has the same authority to conduct civil investigations and bring civil actions with respect to any alleged violations of this act as is provided the Attorney General pursuant to P.L.1960, c.39 (C.56:8-1 et seq.) and the authority, in consultation with the Commissioner of Banking, to promulgate rules and regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), necessary to effectuate the provisions of this act.
17. This act shall take effect on the 180th day after enactment.
STATEMENT
This bill provides protection for consumers from: the results of credit reports that contain incorrect or incomplete information regarding the credit worthiness of the consumer; and those credit repair organizations which inappropriately lead consumers to believe that adverse information in consumer reports can be deleted or modified regardless of the accuracy of the information and charge, and often receive in advance, fees for such services.
With respect to consumer reporting agencies, the bill requires a consumer reporting agency, upon request and proper identification of any consumer, to clearly and accurately disclose to the consumer in writing all information contained in the consumer's file at the time of the request which pertains to the consumer. This information is to be disclosed at a cost which does not exceed the lesser of (1) the actual costs of providing the disclose or (2) $3. Under circumstances spelled out in the bill, this information is to be provided without cost.
The bill requires a credit reporting agency to make the following responses with respect to a dispute regarding the accuracy or completeness of information in a consumer's file:
a. Reinvestigate, without charge to the consumer and within thirty days from the date of receipt of a notice from the consumer, a dispute concerning the accuracy or completeness of any item contained in a consumer's file and record the current status of the information;
b. Provide a notice, within five business days after receipt of notice from consumer, to all persons who provided the agency with information which is now being disputed by a consumer;
c. Delete from the consumer's file any information which is found to be inaccurate or which cannot be verified; and
d. Send the consumer a notice, within five days of completion of the reinvestigation, indicating that the reinvestigation is complete and providing the consumer with the results of the reinvestigation including: a revised credit report, if any; a description of the procedures whereby the reinvestigation took place; and a notice to the consumer of the consumer's rights under federal law to add a statement to the consumer's file if the consumer still believes that the file contains an inaccuracy or is incomplete.
With certain limited exceptions, primarily concerning prescreening, credit reporting agencies are prohibited from releasing any credit information regarding a consumer unless it is ordered released by a court having jurisdiction to make such an order or the consumer has consented to the release of such information.
Each credit reporting agency that compiles and maintains consumer reports on residents of this State is required to establish and maintain a toll-free telephone number, publish this number on an annual basis, or whenever it changes, whichever occurs first, and provide the number to the Department of Banking and the Division of Consumer Affairs in the Department of Law and Public Safety.
With respect to credit repair organizations, the bill prohibits any such organization from: charging or receiving money prior to completion of the services that it has agreed to perform for the consumer; and making, or advising consumers to make, any statement that is misleading or untrue concerning that consumer's credit history. In addition, the bill requires a credit repair organization to provide a written contract detailing the services it intends to provide and the all the costs the consumer will have to pay and to provide disclosures to consumers that indicate the consumer's rights under the federal "Fair Credit Reporting Act" and this bill before the contract is signed.
Under the bill, the Attorney General is authorized to promulgate regulations, in consultation with the Commissioner of Banking, conduct investigations and bring civil actions with respect to any alleged violations of its provisions.
Enacts the "New Jersey Fair Credit Reporting and Repair Act."