Credit Repair Organizations Act SummaryThe Credit Repair Organizations Act - (15 U.S.C. §§ 1679-1679j)
What is required?
The Credit Repair Organizations Act (CROA) ensures that companies offering credit repair services comply with specific rules. The Act requires that certain disclosures be made prior to signing a credit repair contract, that any contract be in writing and that a credit repair companies may not charge any fees prior to performing any work.
Who is regulated?
CROA applies to credit repair companies. These are companies that promise to improve a consumer’s credit report, credit history or credit rating.
When does the law apply?
CROA requires credit repair companies to provide disclosures to consumers prior to signing a credit repair contract, allows for a 3-day right to cancel the contract and prohibits up front fees.
- If a company promises to improve a consumer’s credit score, it must provide the consumer with certain information about CROA and credit reporting prior to the consumer signing a contract for credit repair services.
- If a consumer signs a credit repair service contract, that contract must include the option to cancel within 3 business days of signing.
- If a company promises to improve a consumer’s credit score or credit history, it cannot charge any fee until it has performed work – no prepayment is allowed.
Is there a solution?
If a company violates CROA, a consumer may be entitled to actual damages and punitive damages. Additionally, the contract for credit repair services may be void. CROA also contains a “fee-shifting” provision which may require the defendant to pay for the plaintiff’s attorney fees and court costs.
Last Modified: Wednesday, April 10, 2013