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Credit Repair Organizations Act

Credit Repair Organizations Act (CROA)



Credit repair allows you to correct mistakes and errors that appear in your credit report. And you have a right to make those corrections so you can maintain a clean credit profile and maximize your credit score. The Credit Repair Organizations Act (CROA) is the main law that protects your rights during the credit repair process. It’s actually an amendment made in 1996 to the Consumer Credit Protection Act of 1968.

The information below is designed to help you understand the Credit Repair Organizations Act and how it protects your rights to legitimate, reputable credit repair services. We break the law down in plain English so you can understand your rights. If you still have questions or you want to find a reputable provider, call us or complete the form to the right to get started.

The Credit Repair Organizations Act starts off by explaining two findings that led to a need for CROA:

  1. It’s in any consumer’s best interest to maintain the highest credit score possible, so consumers who’ve experienced problems have a right to seek credit repair assistance.
  2. Certain companies make false or misleading claims in advertising or use bad business practices, which can create hardship for consumers who are often already struggling.

Based on those two purposes, CROA was put in place with the following two purposes:

  1. To ensure consumers who purchase credit repair services are fully informed so they can make purchasing decisions.
  2. To protect consumers from unfair or deceptive advertising and business practices.

Defining credit repair companies

The first part of the act defines all of the terms and parties involved. So it defines you as a consumer and the credit transactions you make. However, the really important part is defining what does and doesn’t count as a credit repair company.

A credit repair organization is any entity which sells and/or performs services related to improving a consumer’s credit report or providing assistance for a consumer to repair their credit on their own. But it doesn’t include any nonprofit organization, actual credit card issuers and lenders, or any bank or credit union.

5 prohibited practices

There are five basic practices that CROA outlines as expressly prohibited under the law:

  1. Companies can’t make false statements about a consumer’s credit score or creditworthiness to the credit bureaus or any creditor or lender (or the consumers, themselves). They also can’t advise you to make false or misleading statements.
  2. Companies can’t alter a consumer’s identity (or tell consumers to do it) in order to hide negative information and/or create a new credit identity. In other words, no taking on an alias to escape a bad credit rating.
  3. They can’t make untrue or misleading claims about the services they provide or what you can end up with once you’ve completed the service.
  4. They can’t in any practice that would constitute fraud, according to the law.
  5. A company can’t charge advance fees and must fully perform all services as they are paid for – basically, the company has to be doing something in order to charge you any money.

A disclosure you must receive

The third part of the law outlines a full disclosure that must be given to you before you sign your contract. You can read the full disclosure here. It’s supposed to be a separate paper from your contract and the company has to get a signed copy in order to provide any services to you. They have to keep the signed disclosure 2 years from the day you sign it.

The key point here: If you don’t receive this disclosure, buyer beware! The provider isn’t following part of CROA, so you have to wonder what other parts of the law they’re ignoring.

What your contract should say

The next part of the act provides a detailed overview of how a credit repair contract has to be written and provided. Basically, you have to receive a written and dated contract before any credit repair services can be provided.

Here’s what your contract should include:

  • Terms and conditions about your payments, including a total amount of payments to be made by the consumer.
  • A detailed description of there services that will be provided
  • An estimate how long it will take – they either have to define an estimated date of completion or the length of time it will take to complete the process.
  • The company’s name and physical address
  • A cancellation statement that is printed conspicuously in boldface type near where you sign your name that says: “You may cancel this contract without penalty or obligation at any time before midnight of the 3rd business day after the date on which you signed the contract. See the attached notice of cancellation form for an explanation of this right.”

Again, if your contract doesn’t include all of those things, then you may want to reconsider signing up.

No cancellation penalties

This part of the law reiterates what needs to happen with that last part of your contract. As long as you cancel before midnight of the third business day after the date you sign, there can’t be any fees or penalties assessed – i.e. you get off without paying anything.

In addition to the disclosure from Part C and the contract, you should receive a separate Notice of Cancellation. The company is required to keep a signed copy of this, too.

You can’t waive your own rights

This part helps ensure that shady providers and fraudsters can’t trick you into waiving your rights. Companies violate the law if they make any attempt to get that kind of waiver from you, and even if they do, it’s going to be considered invalid because of this part of the Act.

Additionally, contracts that don’t comply with all parts of the Act are also considered void and cannot be enforced.

Your right to seek damages

This section is important, because it determines what kind of damages or compensation you can seek if a credit repair company violates the law when you enroll in their services.

You have a right to:

  • Actual damages – the amount you’re actually out because of fees and any other monies paid to the company.
  • Punitive damages – an amount set by the court, either for you as an individual or as part of a class-action suit.
  • Attorneys fees – i.e. you can recoup the money it to you to file the suit.

Who enforces CROA

This section outlines which administrative organization oversees CROA regulation and addresses specific complaints about consumers. The Federal Trade Commission (FTC) is the agency you go to if a company violates CROA, commits fraud, or infringes on your right to reputable, legitimate credit repair.

In addition, if states have specific laws that further regulate credit repair companies operating in that state, or they believe state residents are facing violations of CROA, then the AG or Chief Law Enforcement Officer of the State can bring a suit on consumers’ behalf. Suits can’t be brought by a state if the FTC is already investigating that organization.

How much time do you have to complain

As with most suits, there is a defined statute of limitations on how long you (or a state) has to file a suit if you believe your rights were violated. You must file within five years of the date the violation occurred.

State vs. federal law

This last section of CROA basically says that the states are free to make any laws or regulations needed to protect their citizens as long as those regulations don’t conflict with anything that CROA says.

With that in mind, if you’re signing up for a credit repair service, it can be a good idea to look into your state’s law regarding credit repair. Then, you have the full list of what a service provider has to do to serve you effectively and within the letter of the law. This can help you define your expectations and protect your rights. will only match you with an accredited repair service that adheres to our strict code of ethics.

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