Overview of Credit Repair Law

Credit repair can feel like a lifeline when negative marks hold back your financial future. But not all credit repair organizations operate with your best interests in mind. Some cross legal lines with false promises, hidden fees, and other prohibited deceptive practices.

That’s why Congress passed the Credit Repair Organizations Act (CROA) and why state laws continue to reinforce these consumer protections. The law places strict limits on credit repair organizations, including a prohibition of advance fees, a requirement for a written contract, and mandatory disclosures about your right to fix your credit on your own.

If you believe a credit repair company has violated your rights or you need help addressing inaccuracies in your credit report, a credit repair lawyer can explain your options and help enforce the protections you’re entitled to under federal and state laws.

What Are Credit Repair Laws?

Credit repair laws are federal and state regulations governing businesses that offer to improve, repair, or alter a consumer’s credit record.

These laws apply to “credit repair organizations,” defined under the Credit Repair Organizations Act (CROA) as any person or business that sells or provides services to improve a consumer’s credit. It covers contracts, advertising, fee collection, and representations made by credit repair companies.

The CROA applies nationwide, with many states adding additional consumer protection requirements. The Fair Credit Reporting Act (FCRA) works in tandem with the CROA. This ensures consumers have access to correct and up-to-date credit information.

Find top Credit Repair lawyers easily

Connect with a qualified attorney today.

Find a lawyer today

The Credit Repair Organizations Act (CROA) Explained

The Consumer Credit Protection Act (CCPA) aims to eliminate deceptive practices by requiring full disclosures before consumers sign a contract.

After signing, consumers can cancel contracts within three business days. CROA explicitly prohibits charging consumers before services are fully performed. The CCPS created a uniform set of standards for creditors and lenders.

The CROA applies to all credit repair organizations offering, selling, or performing services to improve a consumer’s credit record, history, or rating. It includes both direct services and indirect services. Nonprofit organizations, credit counseling services, and licensed attorneys providing legal services are generally exempt from CROA.

Certain behaviors are banned under the CROSA. Credit repair agencies are prohibited from making or engaging in misleading, false, or deceptive claims. The goal is to prevent consumers from being tricked into scams or engaging in potentially illegal activities.

Engaging in deceptive practices can expose a company to lawsuits, penalties, and enforcement actions by the Federal Trade Commission (FTC) or state attorneys general. Consumers can sue credit repair organizations in federal court for violations of CROA.

Your Rights Under the Fair Credit Reporting Act (FCRA)

The FTC and Consumer Financial Protection Bureau (CFPB) oversee the administration of the FCRA. One enforcement action is to hold credit bureaus accountable for errors made. Consumers can dispute inaccurate, incomplete, or outdated information on their credit report directly with the credit reporting agency.

One of the most important consumer rights protected by the FCRA is privacy. Only entities with a permissible purpose can access an individual’s credit file. This prevents unauthorized parties from accessing sensitive credit information. Consumers can place fraud alerts or credit freezes to protect against identity theft. Credit reporting agencies and furnishers of information must use reasonable procedures to ensure maximum possible accuracy.

Other rights afforded consumers include the right to dispute inaccurate information. Disputing incorrect information is free. Once a dispute is filed, the credit reporting agency must investigate within 30 days. Agencies must forward relevant information to the creditor or furnisher of the data. If the information is inaccurate, it must be corrected or deleted. If unverifiable, it must also be removed. Agencies must notify consumers of the results in writing. Consumers receive a free copy of their corrected report.

Consumers can seek a remedy for injuries suffered as a result of a credit agency or someone else violating the FCRA or CROA. Damages may include actual damages, statutory damages, punitive damages, and attorneys’ fees.

How To Spot and Avoid Credit Repair Scams

Being able to spot the signs of a credit repair scam can help consumers avoid further financial loss and legal troubles. It’s good to be skeptical of overly aggressive marketing. High-pressure tactics and “limited-time” offers are often a sign of a scam.

Consumers who are looking to repair their credit are often in financially vulnerable positions. This makes them more likely to be a target of unsavory actors in the credit repair industry. One common sign of a potential scam is a request for you to pay upfront fees. Under the Credit Repair Organizations Act (CROA), companies cannot charge fees before services are fully performed. Scammers often demand a large upfront payment or a monthly subscription before taking any action.

Another common sign of a scam service is a company promising instant or guaranteed improvement of your credit rating. No company can legally “guarantee” to raise your credit score by a certain number of points or remove accurate negative information.

Sometimes a company isn’t an outright scam. It simply isn’t a reputable company. These are companies that do not follow the CROA by failing to provide mandatory disclosures, a written contract, or discouraging consumers from contacting the credit bureaus directly.

Steps To Legally Improve Your Credit

There are several steps consumers can take to improve their credit score:

1. Request a copy of your credit report. The FCRA entitles individuals to obtain one free credit report every 12 months from each of the three major credit reporting agencies (Equifax, Experian, and TransUnion). Review each of the credit reports to ensure they only contain accurate information.
2. Focus on smart financial decisions moving forward. This includes paying your bills on time. Payment history is the single largest factor in determining your credit score. By making on-time payments today, you are taking the first steps towards building a good credit history. Consider setting up autopay or bill reminders if you struggle to make on-time payments.
3. Reduce your credit utilization. This is the ratio of credit card balances to your total credit limits. You have a low credit utilization if you have zero balances on your credit cards. You have a high credit utilization if your credit cards are maxed out. Focus on paying down your credit card balances by making extra payments.

While all of this can be done on your own, some people may find it helpful to have guidance. A nonprofit credit counselor can create a customized roadmap. They can provide budgeting, debt management plans, and credit education. Some may negotiate with creditors to lower interest rates or consolidate payments.

Always verify nonprofit status and check for complaints with state consumer protection agencies. Many are accredited by the National Foundation for Credit Counseling (NFCC) or the Financial Counseling Association of America (FCAA).

When To Consult a Consumer Protection Lawyer

Certain situations signal that an individual may need legal representation to resolve their credit issues. One of the most crucial times when a lawyer can help is if a credit repair company has scammed you. Attorneys can file lawsuits to recover money lost to fraudulent practices. They can seek damages, attorney’s fees, and injunctions against unlawful practices.

Another common situation where a lawyer can help is when you’ve filed a dispute with the credit bureaus and the error persists. If the same inaccurate information reappears, or bureaus repeatedly fail to investigate, you may have a legal claim.

If you are the victim of identity theft, there is a crime associated with your credit situation. You may hear from debt collectors looking to recoup money for debts you do not owe. A lawyer can help you advocate for your rights and avoid financial responsibility for liabilities that are not your own. A lawyer will provide legal advice on how to navigate consumer protection laws to ensure your rights are advocated for.

Find Legal Help

If you’ve been misled or harmed by a credit repair service, working with a knowledgeable attorney can make the difference in protecting your financial health. Find an experienced credit repair law attorney in the Super Lawyers directory.