CREDIT REPAIR ORGANIZATIONS ACT (CROA)

The Credit Repair Organizations Act provides regulations to be followed by credit repair agencies when helping to improve consumer credit report scores. The Credit Repair Organizations Act was created to offer protection to consumers from various forms of unfair practices that certain agencies can perform, including those regarding fees, contracts, disclosures, and cancellation of services. Credit repair agencies are prevented from using unfair business practices or misleading advertising to potential consumers. Additionally, credit consumers are given certain rights in regard to working with agencies in order to improve their credit report scores. The Credit Repair Organizations Act provides credit consumers with information in order to make a better informed decision before choosing an agency to help to repair bad credit.

Prohibited Practices of Credit Repair Companies

In the past, some of the shady business practices or intentionally ambiguous advertising used by credit repair agencies have left consumers struggling with finances. These practices were especially detrimental to consumers with little income and those who know very little about credit matters. The Credit Repair Organizations Act lays out regulations to be followed by agencies who wish to help consumers to repair their credit in to improve their credit rating.

Misleading and fraudulent activities. The Credit Repair Organizations Act prevents agencies or their representatives from making false or misleading statements to any credit company, including those that the consumer already has credit with or those with whom the consumer has applied for credit. Such false or misleading statements also apply to altering information about a consumer’s identity that could be used to deceive or commit any type of fraudulent activity. Agencies who help consumers to repair their credit scores may not alter information or hide valid negative information from a consumer credit report. The Credit Repair Organizations Act also provides that a credit repair agency or its representatives may not advise or counsel a consumer to engage in these misleading or fraudulent activities.

Payment in advance. In addition to regulations regarding the dissemination of information, the Credit Repair Organizations Act also addresses payments to agencies who offer to assist consumers in repairing their credit report scores. Agencies are not allowed to charge credit consumers for any services in advance until after the agreed-upon services have been provided to the consumer. Payment may refer to money or any other type of valuable consideration that is used to trade for information or activities designed to help to improve a consumer credit report or credit score.

Disclosures

In order to better protect consumers from potential fraudulence, a credit repair agency must provide disclosure information in writing to the consumer before agreeing to services. The written disclosure must be provided to the consumer on a document that is separate from any contract or other forms required by the agency. This written disclosure must provide certain relevant information to consumers so that they can make a better informed decision in regard to purchasing the services offered by a credit repair agency. A few key pieces of information to be provided to the consumer must include the following:

Notification of the consumer’s right to dispute inaccurate, incomplete, or unverifiable information provided on the credit report
Notification that the consumer may obtain a copy of their credit report for a fee and the instances in which a free report may be obtained
Notification that the consumer has the right provided by the Credit Repair Organizations Act to bring legal redress against a credit repair agency that does not follow the regulations as set forth by the Act

Contracts

Agencies that assist consumers in repairing their credit report scores must provide a written contract to be signed and dated by the consumer. The contract must include certain information to provide the consumer with the protections offered by the Consumer Repair Organizations Act. Information provided to the credit consumer must include the agency’s name and main business address, the specific services provided by the agency to the consumer, the cost of such services, the length of time that is expected to perform the agreed-upon services, the date such services are expected to be completed, and any guarantees offered by the agency regarding a consumer’s credit report or credit rating. Additionally, clear information must be provided to the credit consumer regarding cancellation of services.

Right to Cancel Contract

The Credit Repair Organizations Act allows for credit consumers to cancel a contract with a credit repair agency without any additional obligation or penalty payment. A consumer may cancel such a contract within 3 days of signing a written contract with such an agency. The agency must provide each consumer with a proper cancellation form to use. This cancellation form should be included with the contract and any other documents that are required by the agency to be signed with the contract.

Credit Repair Organizations Act Statutes

<<Consumer Credit Protection Laws

The purpose of the Credit Repair Organizations Act (CROA) is to protect consumers from companies that claim they have secrets that can repair credit. For instance, CROA states that Credit Repair Organizations cannot charge fees before they perform services.