Given the questionable lending practices of many financial institutions over the last few decades, it’s not surprising that so many people are finding themselves in poor shape when it comes to their credit rating. If you have a FICO credit score of 640 or below, you may be tempted to hire a credit repair company to help you fix your credit. Unfortunately, many of these organizations engage in unfair and illegal practices and you may find yourself paying more than you should or even being charged with a crime. Understanding your consumer rights when it comes to credit repair organizations can ensure that you are not scammed by a disreputable company.

The Credit Repair Organizations Act Is Designed to Protect You

Signed by President Clinton in 1996, the Credit Repair Organizations Act (CROA) lays out the rules and regulations for credit repair companies. Since most consumers are not aware of these requirements, they don’t even know when they are being scammed. Included in the CROA are specific restrictions and requirements for credit repair organizations (CROs). Under the act, CROs:

  • May not misrepresent a consumer’s credit standing to a creditor, lender, or credit reporting agency.

  • May not alter a consumer’s identification to conceal poor credit from a creditor, lender, or credit reporting agency.

  • May not charge a consumer any fees before performing promised services.

  • Must provide a disclosure statement to consumers informing them of their rights under the Fair Credit Reporting Act and guaranteeing consumers the right to cancel their contract with the CRO for any reason within three days of signing it.

  • Must provide a contract for services which outlines the terms and conditions of service, a detailed description of the services to be performed, and an estimate of the timeframe for completing the services.

  • Gives consumers the right to sue for actual and punitive damages, or join a class action lawsuit, if the CRO fails to comply with the provisions of the CROA.

The Consumer Law Group Protects Consumers

While reputable credit repair companies can provide the structure you may need to repair your credit, there is nothing they can do for you that you can’t do for yourself for free. Be very wary of what you’re agreeing to when you sign a contract with one of these companies and if you feel that your rights have been violated, contact our office at 804-282-7900. We are here to help.