Credit Repair Laws

There are so many firms and companies that are offering their services to improve your bad credit score. But the main question arises which company is perfect for you or whether this company is performing its task honestly or sincerely? Normally being as a bad credit scorer, you may consider using a credit repair service to improve your credit. But be cautious because there is large number of companies use dishonest and illegal methods to falsely enhance their customers’ credit. Still, several credit repair services are nothing more than scams to trick consumers out of their hard-earned money.

According to the credit repair laws, Credit Repair Organization Act was put in place to protect consumers from dishonest practices by organizations who claim to repair credit. The Act is totally based on the credit repair laws that seek to ensure that consumers who decide to use credit repair services are aware of their rights and are able to make an informed decision about choosing to pay a credit repair company.

A credit repair organization is any person or business who takes money in exchange for improving your credit.

Restrictions on Credit Repair Organizations:

According to the credit repair laws, here are a few things credit repair organizations cannot legally do:

  • Lie or advise you to lie about your credit history to your current or future creditors
  • Alter your identity, e.g. get a new EIN (Employer Identification Number) or new identity, to try to get a new credit history
  • Misrepresent the services they provide to you
  • Ask you to pay for services before they have been provided
  • The law requires the organization to provide you with a disclosure called “Consumer Credit File Rights under State and Federal Law” that lets you know your right to obtain credit report and dispute inaccurate information on your own. You also have the right to sue an organization for violating the CROA.

Credit Repair Contract Requirements:

Before the credit repair company can perform any services for you, you must be given a contract, you must sign the contract, and the 3-business day cancellation period must expire. The contract should include the following:

  • Payment amount required
  • A description of the services that will be performed to repair your credit
  • An estimate of the time it will take to complete the services (or a date by which the services will be completed)
  • A visible statement letting you know you can cancel the contract within 3 business days

You have the right to cancel a signed contract within 3 business days. According to the credit repair laws organization cannot charge you a fee for this cancellation as long as it’s made within the specified time frame. Your contract should include a Notice of Cancellation form that you can fill out and return to cancel the contract.

Waiving Your Rights:

The credit repair organization can’t ask you to sign any kind of form waiving your rights under the CROA. Any waiver you sign is considered void and cannot be enforced by federal or state.

Reporting Violations:

Organizations that violate the law can be sued for actual damages, punitive damages, and attorney’s fees. You can report violations to the FTC, your state attorney general, and file suit in your state.

You have five years from the date the violation occurred (or the date you learned of the violation) to take action against the organization.

By following these credit repair laws you can easily judge which organization is better for your credit repair.