Credit Repair Organizations Act: What Is It + Why Is It Important?
You might consider getting the help of a credit repair service for improving your credit. Unfortunately, the truth is that many of these service companies employ illegal and dishonest methods to improve the credit of their clients. Aside from that, there are also a lot of credit repair services that ate just scams that try to trick unknowing consumers and squeeze them dry of their money.
Credit Repair Organizations Act – What is It?
The Credit Repair Organizations Act is the federal law that is established with the purpose of protecting consumers from dishonest credit repair companies. The purpose of this law is to ensure that those consumers who enlist the assistance of credit repair services know their rights and can reach an educated decision when it comes to hiring a credit repair company and paying for its service.
Credit repair organizations are businesses or people who take money to help you improve your credit in return without including credit card issuers, nonprofit agencies, and banks.
Credit Repair Organization Act Restrictions:
Under the Credit Repair Organizations Act, there are several things that cannot be legally done by credit repair organizations. These include the following:
- Advise you to lie or lie regarding your credit history to both future and current creditors.
- Misrepresent the services that they offer to you.
- Change your identity such as getting a new identity or a new Employer Identification Number or EIN in an attempt of getting a new credit history.
- Ask you for payment for their services before they even provide it.
The organization is required by the law to give you a disclosure named Consumer Credit File Rights Under State and Federal Law” informing you of your right to receive a credit report and personally dispute any inaccurate information. It also gives you the right to file a case against an organization if they violate the CROA.
Contract Requirements for Credit Repair
Before a credit repair company could offer you any services at all, you will be provided a contract that you should sign and the cancellation period of three business days must expire. This contract must contain the following details:
- The required amount of payment
- Description of services to be carried out for repairing your credit
- Estimated time it will take for completing the service or the specific date that the services are going to be completed
- A visible statement that informs you that you could cancel the contract in 3-business days
As stated, you got the right to cancel your signed contract in 3 business days. A credit repair company cannot charge you with a fee for the cancellation provided that you do it within the set period of time. The contract must also include the Notice of Cancellation form you need to fill out then return for the contract to be cancelled.
Reporting Violations
An organization that violates the Credit Repair Organizations Act could be sued for punitive damages, attorney’s fees, and actual damages. Violations can be reported to the attorney general in your state and the Consumer Financial Protection Bureau and the suit filed in your specific state.