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Credit Repair Organizations Act

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If you’ ‘re an individual with a poor credit score, you know how stressful it can be. A low credit score can impact you in almost every financial situation of your life, and we understand how badly you may want to repair it. To help protect those in need of credit repair from unlawful or vague practices, the Credit Repair Organizations Act (CROA) was passed.
Out of all legislation in the United States that protects debtors and ensures that they aren’t unjustly persuaded to pay off their debts (and in some cases, more than what they owe), the Credit Repair Organizations Act (CROA) is up there as one of the most integral and relevant.
Here’ ‘s everything you need to know about the law and how it can protect you from unlawful practices.

What Is the Credit Repair Organizations Act (CROA)?

The Credit Repair Organizations Act is a consumer protection law that enforces the behavior of companies that offer credit repair services. These firms usually charge consumers a fee to improve their credit scores. Although credit repair services can be helpful for consumers, the law aims to prevent companies from misleading their customers.

How The Act Works

The act is one of the many consumer protection laws that were created in the US to safeguard consumers. It was drafted in response to the activities of credit repair companies. For consumers, credit repair companies help them get rid of negative information from their credit reports. These firms also try to convince the agencies to remove unfavorable information from their reports.

Sometimes, consumers can also get help from a credit repair company to resolve their issues with the agencies. This can help them avoid experiencing negative consequences from their reports. Unfortunately, there are instances when credit repair companies can mislead their customers. For instance, they might overstate the scope of their services or misrepresent their prices.

An unethical company could also misrepresent the services it provides and claim that it can improve a customer’s score even if the items on their report are not true. Although credit repair companies can sometimes help their customers resolve their credit issues, they have no special powers that other agencies have. This means they can’t force the credit reporting agencies to remove unfavorable information from their reports.
The purpose of the CROA is to make sure that credit repair companies transparently advertise their services. This ensures that consumers can easily identify which one is the best.

Understanding CROA Through An Example

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To better understand how the CROA is critical in protecting debtor rights and ensuring they’re treated fairly, here’s an example:

Adam has been struggling with his credit card debts for a long time. Due to his problems, his credit score has declined significantly. After looking at his card usage and not recognizing many of the transactions processed under his name, he suspects identity theft as the reason for his score going considerably down.
He contacts a credit repair company to ask them to look into his report to see if any issues could affect his credit score. The company then contacted the credit reporting agency to cross-check whether the activity on his credit card matched his usage.
The company’s agent told Adam that he could still get his report resolved on his own. However, he made it clear that they did not have any special powers and could not guarantee that his score would improve.
Adam was satisfied with the transparency of the company’s services and the fact that it was upfront about its findings. However, he didn’t realize that the company had to be as transparent as it was in its disclosure. The credit for this transparency goes to the CROA, which mandates all credit score uplifting agencies to provide their clients with all the information they need to understand their situation and possible resolutions they may avail.

If you are looking for a licensed credit counselor, fill out the free credit consultation form below or get in touch with us.

For more information on the Credit Repair Organizations Act, readers are encouraged to check these resources.

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Consumer Protection Law:

http://uscode.house.gov/view.xhtml

This Act, Title IV of the Consumer Credit Protection Act, prohibits untrue or misleading representations and requires certain affirmative disclosures in the offering or sale of “credit repair” services. The Act bars companies offering credit repair services from demanding advance payment, requires that credit repair contracts be in writing, and gives consumers certain contract cancellation rights.

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