Credit Repair Organizations Act
This is a summary of the Credit Repair Organizations Act. It will
provide much needed information that will help you avoid the credit
repair scams that exist as well as answer some of the common credit
When putting this act into place, congress found that consumers have a vital interest in maintaining their credit worthiness.
Now years later with so much more emphasis on the credit score that vital interest has become a vital need.
Consumers that have experienced difficulty with credit problems will
seek assistance from professionals that offer credit repair services to
help their credit ratings.
With this interest in mind this
legislation was put into effect as many credit repair organizations were
found to taking advantage of their customers. Many were committing
fraud, and often STILL are simply scams.
Credit Repair Organizations Act or C.R.O.A as it is often referred to as
is part of the Consumer Credit Protection Act and was created to ensure
that consumers make informed choices about the companies they wish to deal
with and to protect the consumer from unfair practices or deceptive
Things prohibited in the Credit Repair Organizations Act
Statements made to a credit bureau or any other interested party extending a loan to the consumer that are untrue regarding that consumers' creditworthiness.
Many of the credit repair organizations that this act was targeting had been advising their customers to make false statements to their creditors and the credit bureaus about their credit history.
Cannot alter a consumers identity in an attempt to conceal adverse information that is accurate and not obsolete.
Another area that lawmakers were concerned with was the practice of credit repair organizations recommending their clients to apply for an EIN and use in the same way as a social security number. This is illegal and the customer can be charged with fraud.
Cannot make or use untrue or misleading statements of the services rendered.
Many were and still are making exaggerated statements about the services they could perform and in some instances these companies were not even making any attempt at repairing the credit only taking the customers money.
Cannot engage in an act that commits fraud or deception.
May not charge and receive payment for services that are not fully performed.
This is an area that the FTC heavily enforces. No money can be received till services are outlined and work has started and evidence of performance is received or found.
Disclosures that must be given before services are rendered:
1. Consumer Credit File Rights (under state and federal law)
2. Notice of cancellation
3. Separate Statement Requirements
4. Compliance records
of statements signed by consumer acknowledging the receipt of any
separate statement. This must be on file by company for at least 2
- Written contract signed by both parties is required
before services can be rendered. Also services cannot begin before the
end of the 3 day cancellation period.
must state terms and conditions of payment along with full description
of services rendered. Also guarantees of performance must be included.
- An estimate of completion of services or length of time necessary to complete services should also be included.
- Right to cancel should be in a conspicuous place near the signature line of the consumer.
- Any waivers by the consumer are null and void.
If you were obtaining the services of a credit repair company and they
were trying to get you to waive your rights then the best advise I can
give you is to immediately walk away.
This act makes this null and
void for your protection, but the other thought is if they do not know
the law regarding their own industry then they are not very
knowledgeable. Do you want to do business with someone like that??
- Any company trying to obtain a waiver will be in violation of this title.
- Any contracts that are not in compliance with this title will be null and void.
- Any contracts not in compliance will not be enforced by the state or federal courts.
Those who fail to comply are held liable by
1. actual damages
2. punitive damages
3. attorneys fees
This information for the Credit Repair Organizations Act was taken from the Federal trade commission's web site.
that website you can find many instances of the FTC taking action
against credit repair organizations that took advantage of their
Some charging exorbitant fees upfront, not performing
the work, not giving the proper disclosures, not stating the terms of the
contract and worse even taking the money and running with it.
LET THE BUYER BEWARE!!!
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