Credit Repair Organizations Act

If you’re struggling with a bad credit history and you’re trying to improve your score, then you’ll want to know about the Credit Repair Organizations Act. Otherwise known as the CROA, this act was passed in September of 1996. It provides you with protections against credit repair companies that are seeking to take advantage of people in your positions, and it provides you with important protections.

Credit Repair Organizations are Expected to be Honest

In the past, companies would make outrageous promises to customers, but this act serves to make them more honest. They’re not allowed to lie about your credit history to your current or future creditors, and they’re forbidden from encouraging you to lie. They’re also required to be honest about the services they provide. Before the act was passed, they could tell you that your credit blemishes could disappear for a small fee, but this isn’t true. Under the CROA, they’re not allowed to misrepresent their services in this manner.

Never Pay Up Front

Credit repair companies that were making false promises stayed in business by asking for payment up front. By the time the client realized that the services would not be provided, the company had their profit and would simply ignore requests for a refund. Under the CROA, repair companies aren’t allowed to ask for payment up front. They must provide the services first, and then they can seek payment from you. If you’re dealing with a company that’s still asking to be paid before they provide any services, you should look for another agency to work with.

Inform You of Your Rights

Consumers don’t always know what their rights are. The fact is that most people can handle credit problems on their own without going through an agency. This is possible because you have a legal right to obtain a free credit report from each agency once a year, and you can dispute information on your own. Unscrupulous companies in the past allowed consumers to think that this could only be done through a special agency. The CROA dictates that credit repair agencies give potential customers a disclosure called the “Consumer Credit File Rights Under State and Federal Law.” When consumers are fully informed about their rights, they can make an informed decision about the credit repair company.

Three-Day Waiting Period

The CROA also allows consumers to rethink their decision and back out of any contract with a credit repair company. You must be given a contract that spells out the terms, you have to sign the contract, and the waiting period of three business days must pass before the agency performs any services. The contract must list the fees for services, what services will be performed, how long it will take to provide the services, and detailed information on how you can cancel the contract within three business days. Furthermore, the agency is forbidden from asking you to sign anything that effectively waives your rights. Any waiver you do sign is considered invalid and unenforceable because it’s in direct violation of the law.

Addressing Violations of the Act

Passing a law does not automatically make companies more honest. There are still agencies who are in violation of the law. It’s important to report any violations of the CROA. Agencies that are found guilty of violating the law may have to pay punitive damages, actual damages and attorney’s fees. Violations should be reported to the FTC and your state’s Attorney General. You have five years to report violations, so you can even report a company that you dealt with in the past.

You may be anxious to get your credit fixed, but it’s important to work with a reputable company. You can request free reports and file your own disputes, but this is time-consuming. It’s easier and less stressful for many people to let a professional company handle this process, but you want to hire the right team. Before signing any contract, learn more about the CROA and how the credit repair agencies are expected to behave. With this information in hand, it will be easier to spot a legitimate, reputable company that will be able to help you.