The Credit Repair Organizations Act (CROA) is an Actthat was created in September of 1996 to protect the public from unfair or deceptive advertising and business practices by credit repair organizations. CROA ensures that potential buyers of credit repair services are provided accurate information before making a purchase.

In general, CROA prohibits credit repair companies from displaying misleading or false advertising about their services. CROA also prohibits credit repair companies from demanding payment for services in advance, meaning the credit repair company must first provide work on behalf of the client before billing them. CROA also requires that credit repair companies provide their clients with a written contract outlining their services, as well as giving their clients the option to cancel their services.

Credit repair laws under CROA

On behalf of their customers, credit repair companies attempt to remove inaccurately reported negative items that can affect their customers’ credit reports and credit scores. For example, if someone was a victim of fraud in the past, or an insurance billing company failed to follow proper HIPAA protocols when reporting medical debt, then any negative items stemming from these situations could be considered inaccurate negative items, and could be removed.

Illegal credit repair practices

According to the Credit Repair Organizations Act and the broader Consumer Credit Protection Act, which CROA is a part of, credit repair companies must conduct their business by following a strict set of rules. Under the Credit Repair Organizations Act, credit repair companies are prohibited from:

1. Exaggerating or misrepresenting their services. It is illegal for a credit repair company to promise to raise your score by a specific amount, within a specific timeframe, or guarantee the removal of accurately reported negative items. Credit repair is subjective to your own unique credit history and can take varying amounts of time. It is impossible to promise any guaranteed results.
2. Making false statements about your information to the credit bureaus or any other data furnisher. A credit repair company cannot falsely misrepresent your credit history or ask that you do the same by lying about past events to the credit bureaus, creditors or lenders.
3. Promising to alter your identity or provide a new identity. It is illegal for a credit repair company to promise to clear your credit history by providing a new identity.
4. Charging you an upfront fee for services they haven’t performed yet. Credit repair companies are required to charge you for services only after they have been performed.
5. Requiring you to waive any of your rights. A credit repair company is not legally allowed to ask you to waive any of your rights in order to use their services, such as the rights outlined under CROA.

Legal credit repair practices

In addition to defining prohibited practices, CROA also states that credit repair organizations must be fully transparent about their services with all potential customers. Here is what credit repair organizations are obligated to provide under CROA:

1. A disclosure statement titled “Consumer Credit File Rights Under State and Federal Law.” At the time of signing, credit repair companies must provide a disclosure that informs you of your rights to order your credit reports, dispute the accuracy of the information in your credit reports yourself, and to sue a credit repair organization that violates CROA. This disclosure must be separate from the contract given to you and requires your signature.
2. A properly constructed credit repair contract. This contract must explicitly state the terms of your payments, all services that will be provided, the length of time in which the service will be completed, a physical address for the company and information about how to cancel the company’s services.
3. The ability to cancel services within three days of signing the contract with any penalty or obligation. As long as you cancel within three business days of signing your contract, no credit repair agency should be able to charge you any fees or penalties for cancelling their services. This policy should be clearly stated in the contract they provided at the time of signing.

How to tell if a credit repair company is a scam

Knowing your rights under CROA can be an effective tool for helping identify the difference between a legitimate credit repair organization and a credit repair scam.

Make sure you avoid any company that charges large upfront fees, advocates the creation of a “new” credit identity, or does not disclose your right to repair your credit yourself. Additionally, any credit repair service that promises to “Fix your credit within 30 days!” or “Raise your score by 100 points immediately!” or makes any similar claims is very likely a scam. One of the most obvious red flags of a credit repair company that doesn’t comply with CROA is the use of these kinds of claims to advertise their services.

It is important to note that if you do make the mistake of signing a contract with a credit repair company not following CROA, the contract may be considered void. If you are in such a situation, we encourage you to seek legal counsel.

Fast Credit Repair Solution strictly adheres to CROA by only charging for services after they have been performed and by utilizing your rights under a variety of consumer protection statutes, including the Fair Credit Reporting Act, to help you legally take action on your credit.

Anna Grozdanov was born in Sofia, Bulgaria but moved to Arizona with her family. Ms. Grozdanov grew up in Arizona and went on to graduate Magna Cum Laude from the University of Arizona with a B.A. in both Philosophy and Psychology. Ms. Grozdanov finished her first year of law school at Pepperdine University School of Law in California, but returned to Arizona where she graduated from the Sandra Day O’Connor College of Law. Since graduating from law school, Ms. Grozdanov has worked in Estate Planning, Estate Administration, Probate, and Personal Injury. She has extensive experience advising and working closely with clients and applies these skills at Fast Credit by helping clients achieve their credit repair goals. Ms. Grozdanov is licensed to practice law in Arizona. She is located in the Phoenix office.

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