The Credit Repair Organization Act (CROA) was passed in 1996 as a way to protect consumers from shady tactics (and downright scams) in the credit repair industry.
Designed to regulate the credit repair industry, as well as encourage consumers to be informed about their credit repair rights, the CROA places several restrictions and requirements on credit repair organizations (any group, company, or organization offering credit repair services for a fee).
Restrictions & requirements placed on credit repair companies by the CROA
According to the CROA, a credit repair organization cannot:
- Advise you to lie about your credit history (or lie on your behalf)
- Misrepresent their services
- Alter or create a new identity for you
- Charge you until services have been provided
In addition to these restrictions, the CROA requires credit repair companies to provide a contract to consumers before agreeing to perform any services. The contract must contain details outlining the credit repair services to be performed, the time frame needed to carry out those services, and the payment amount. They must also allow for a 3-business day cancellation period, during which the consumer may cancel for any reason without incurring any fees.
Are there still credit repair scams out there?
Thankfully, the CROA is pretty effective at preventing credit repair scams, but as a consumer you still need to be diligent. For example, two credit repair organizations were sued by the FTC in 2005 for targeting Spanish-speaking consumers with promises of deleting accurate information from their credit reports.
These kinds of deceptive claims are precisely what the CROA aims to combat. Unfortunately, there are still scam artists out there who often go after vulnerable groups desperate for help.
How to spot a legitimate credit repair company
You don’t have to be a lawyer or a credit expert to tell the good from the bad. A reputable credit repair company will always present you with a contract upfront, go over what they are able to do to legitimately repair your credit, and never charge a dime until services are rendered (as well as allow a reasonable cancellation period).
For a free consultation with Lexington Law, a credit repair company with over 20 years of experience, call 1-(855) 620-5875 today.