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You have a right to repair your credit to correct mistakes in your credit report no matter where you live, but not every company is licensed in every state.
Credit repair may not have the best reputation as financial services go, but it’s a federally protect right. There are two main credit repair laws that guarantee consumers the right to correct errors in their credit report. There are also laws in every state that regulate the credit repair industry and service providers.
It’s important to note that credit repair is legal in all 50 states. There’s a federal law that guarantees consumers the right to dispute information in their credit report to have it corrected. There’s also a federal law that outlines how credit repair companies can provide services to consumers. These two laws basically set the foundation for how credit repair works in the U.S.
The Fair Credit Reporting Act (FCRA) is the law that essentially created the credit repair process back in 1970. Small private companies started providing consumer credit histories in summary reports to banks starting in the 1960s. The reports helped banks make lending decisions for local customers. But consumers found that these reports weren’t always entirely accurate. Since this affected people’s ability to qualify for loans, the federal government stepped in to regulate credit reporting.
The FCRA did more than just create the credit repair process, though. It also provided the following protections for consumers:
When it comes to credit repair, the Fair Credit Reporting Act outlines the process credit bureaus must follow.
While the FRCA creates the credit repair process, the Credit Repair Organizations Act regulates the credit repair industry. It’s the law that grants you the right to authorize a qualified third party to make disputes on your behalf. Basically, this means that you can hire someone to do the work for you, reducing the time and aggravation of repairing your credit.
Congress passed CROA in 1996 after consumer watchdog organizations like the FTC found high rates of consumer abuse within the credit repair industry. The law recognizes that consumers need to maintain a high score and have a right to seek assistance to correct their credit. It also recognizes the companies often make false or misleading claims or use abusive or predatory practices to create hardship for consumers who are already struggling.
The main purpose if CROA is to define what companies or organizations have a legal right to provide credit repair services. Then it outlines how those services must be provided.
In addition to the two federal credit repair laws, almost every state has their own credit repair laws, as well. Most state laws stipulate that a credit repair company must have a state-licensed attorney on staff. In other words, only a credit repair attorney authorized to practice in that state is legally allowed to make disputes on your behalf. This gives you an easy way to make sure that a credit repair company is legitimate. If they don’t have state-licensed attorneys for your state on staff, then buyer beware! The service may be a scam.
Some states require the company to be bonded to work for clients in that particular state. Other states establish more specific systems for when fees can be assessed and prohibited acts that credit repair companies can’t engage in without breaking the law. Disclaimers and disclosures that are legally required can also be set by the state, as well as standards for advertising and making claims during sales calls.
If you want to know your state’s specific consumer protections for credit repair, contact your state Attorney General’s office. They can provide information about your state’s credit repair laws and help you understand the legalese, so you don’t have to read the law yourself to know what rights you have.
If a company violates any of the rights outlined above or doesn’t follow the laws in your state, you have a right to sue and a right to file a formal complaint against the company. Here’s what you should do if you think a company didn’t follow the letter of the law and tried to scam you:
Note that complaints made to the FTC don’t mean that they will help you sue the company. You usually must pursue a civil lawsuit on your own. The point of filing complaints is to get the company into the federal database of consumer complaints. If they receive enough complaints, then they go after the company with fines and possible business closure. By contrast, your state AG’s office may decide to file a class action lawsuit against a company if they receive enough complaints. But if you believe you’re the victim of a scam, don’t wait for your AG to act! Instead, talk to an attorney about pursuing a civil lawsuit on your own.
Article last modified on August 8, 2019. Published by Debt.com, LLC