Credit Repair Organizations Act Overview

The Act seeks to ensure that consumers who decide to use credit repair services are aware of their rights and are able to make an informed decision about choosing to pay a credit repair company.

A credit repair organization is any individual or business who takes money in exchange for repairing bad credit, improving credit scores or fixing bad credit history.

Restrictions on Credit Repair Organizations
By law, credit repair organizations must give you a copy of the “Consumer Credit File Rights under State and Federal Law” before you sign a contract with them. This disclosure includes information about your right to obtain a credit report and dispute inaccurate information on your own, as well as your rights to sue an organization for violating the CROA. They must also give you a written contract that spells out your rights and obligations.

The Credit Repair Organizations Act contains specific consumer protections. For example, credit repair organizations CANNOT:

• Make false claims about their services.
• Lie in your name, or advise you to lie about your credit history when you apply for new credit.
• Alter your current identity, create a new identity for you or advise you do so. For example – advise you to get an EIN (Employer Identification Number) and use it instead of your SSN.
• Charge you BEFORE they have completed the promised services.
• Perform any services for you until they have your signature on a written contract and completing a three-day waiting period, during which you can cancel the contract without paying any fees.

Credit Repair Contract Requirements
Before performing any services for you, the credit repair organization must give you a contract which you must read and sign. After signing, you have 3-business day cancellation period that must expire before the credit repair company can start acting on your behalf.

The contract should include the following:

• Total cost of the services.
• A detailed description of the services to be performed.
• An estimate of the time it will take to complete the services or a date by which the services will be completed.
• Any “guaranties” they offer for the services’ success.
• The company name and business address.
• A visible statement letting you know you can cancel the contract within 3 business days.
• A “Notice of Cancellation Form” that you can fill out and return to cancel the contract.

As mentioned, you have the right to cancel a signed contract within 3 business days. The organization CANNOT charge you a fee for this cancellation as long as it’s made within the specified time frame.

Waiving Your Rights
A credit repair organization can’t ask you to sign any kind of form waiving your rights under the Credit Repair Act. Any waiver you DO sign is considered void and cannot be enforced by federal or state.

Reporting Violations
To report violations contact the FTC, your local consumer protection agency, state Attorney General (AG) or the Better Business Bureau.

Filing Suits
Organizations that violate the law can be sued for actual damages, punitive damages and attorney’s fees. You have five years from the date the violation occurred (or the date you learned of the violation) to take action against the organization.

To file a suit call your state Attorney General (AG). Many AGs have toll-free consumer hotlines. Check with your local directory assistance.

Additional Information
For more information see the FTC’s summary bad credit repair advice.

You can download a copy of the Credit Repair Organization Act from http://www.ftc.gov/ro/chro/croa1.shtm.