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 repair questions.

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.

The 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 advertising.



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



    Copy of statements signed by consumer acknowledging the receipt of any separate statement. This must be on file by company for at least 2 years.


    Contract requirements


    • 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.

    • Contract 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.


    Non Compliance



    • 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.


    Civil Liability:


    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.

    On that website you can find many instances of the FTC taking action against credit repair organizations that took advantage of their customers.

    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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