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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:
Based on those two purposes, CROA was put in place with the following two purposes:
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.
There are five basic practices that CROA outlines as expressly prohibited under the law:
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.
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 contact before any credit repair services can be provided.
Here’s what your contract should include:
Again, if your contract doesn’t include all of those things, then you may want to reconsider signing up.
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.
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.
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:
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 which 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.
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.
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.
Article last modified on October 30, 2019. Published by Debt.com, LLC
DISCLAIMER: Debt.com does not provide credit oriented services, but, upon request, acts as a locator service for BBB registered companies. Such credit report resolution specialists will not remove any derogatory information (defined as accurate negative information appearing on a Client’s credit report that actually belongs there), nor will such credit report resolution specialists assist you on improving your credit rating. Instead, as Credit Repair Organization Act compliant companies, such credit report resolution specialists will solely assist you in removing or correcting inaccurate information appearing on your credit reports. While Debt.com endeavors to connect individuals and families with appropriate professionals and resources, individual situations and results will vary from person to person. It is ultimately up to you to determine whether the companies that we may introduce you to are appropriate for your situation.
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