Credit Repair Organizations Act (CROA)
Understanding your right to legal credit restoration assistance.
Although credit reports are generated by non-government organizations, Congress recognizes the significant impact a person’s credit report can have on their life and livelihood. As such, they’ve put a number of laws in place to help ensure consumers are treated fairly when it comes to their credit profile.
The information below is designed to help you understand one of these key laws – the Credit Repair Organizations Act (CROA). If you have questions about how credit counseling impacts your credit or how a debt management program is reflected on your credit report, call Consolidated Credit today at or fill out an online application to request a free confidential consultation with a certified credit counselor.
How CROA relates to you and other laws
The Fair Credit Reporting Act was put in place to ensure credit bureaus are regulated to ensure report accuracy and to not violate people’s right to privacy. As a result, only certain things can be reported for certain lengths of time and reports can only be disclosed outside each bureau for specific reasons. It also protects your right to ensure the accuracy of the information contained in your report and outlines the process you can follow to dispute information that you believe is inaccurate or incorrect.
The Credit Repair Organizations Act is a followup piece of legislation that outlines how and when a consumer can use a third party to make those kinds of disputes on the consumer’s behalf. It ensures that services intended to help consumers correct their credit reports follow legal guidelines.
Why do we need CROA?
Effectively, credit repair services are intended to do the work of ensuring credit report accuracy for you. That means they review your credit report, identify negative information that may be inaccurate or unverifiable, and then to make disputes on your behalf in order to have that information removed.
Making disputes takes time and has to be done in a certain way to ensure unverifiable information can be removed. Consumers who aren’t familiar with reading credit reports and communicating with the credit bureaus to correct information that may be inaccurate might not feel comfortable making disputes on their own.
With that in mind, the government understands consumers should also have a right to have someone do that work on their behalf. Either for convenience or to enlist the help of someone with more expertise. CROA ensures that anyone who offers these kinds of services does so legally within the confines of some understandably strict regulations.
So the Credit Repair Organizations Act serves two basic purposes:
- To ensure consumer who retain paid credit repair services to act on their behalf have the information necessary to make informed purchasing decisions.
- To ensure that companies who offer these services do so free of unfair or deceptive business practices.
What CROA protects and prohibits
First and foremost, the Credit Repair Organizations prohibits five unfair or deceptive practices that could violate your rights or even get you into legal trouble if the company convinces you to follow their guidance:
- They can’t make false statements regarding your credit profile and/or credit scores to the credit bureaus or other financial institutions like your creditors and lenders. They also can’t advise you to make those false statements.
- They can’t alter your identity or advise you to seek a new identity – by obtaining a new Social Security number, for instance – in order to avoid a negative, but accurate, credit rating.
- They can’t make promises or false claims about the kind of service their company can provide – i.e. claims that guarantee to improve your credit score by a certain number of points are expressly prohibited.
- They can’t engage in practices that would legally be construed as fraud.
- They can’t charge upfront fees and must fully perform any and all services that they were paid to execute.
There is also a stipulation that services must be performed within the letter of the law – not just this one, but all laws related to credit reporting and consumer representation. As a result of this clause, the only people who can legally be authorized to make credit disputes on your behalf are actually state-licensed attorneys.
Contract and required disclosures
To further ensure that services retained follow a laws and required regulations, the Credit Repair Organizations Act also outlines what your service contract must contain and what it can and cannot state about the services you’re retaining.
- First, by law, your contract must include this disclosure in its entirety, so if you don’t get a copy of this disclosure it may be a sign you should use a different service.
- The contract must include all of the company’s information, plus a full disclosure of the exact services that will be provided, an estimated timeline for completion, and a complete outline of associated charges and fees.
- You should also receive a cancellation policy that cannot contain any penalties for cancellation of services.
Finally, the contract can’t be written in such a way that it deceives you into waiving your rights. In other words, they can’t make you agree to anything illegal and can’t write it into the contract that they’re protected if they violate your rights.
Rights to file suit and seek damages
The final thing that CROA does is to protect your rights to file suit for fraudulent services that violated your rights as outlined by the rest of the law. If a company doesn’t follow CROA and other credit regulations to the letter while providing services, you have a right to file a complaint with the FTC or your State Attorney General and to sue the company directly for damages.
You should note that like any suit, you must file it in a timely matter, so if you believe you have a legal complaint against a credit repair service that violated your rights, do not wait to make your complaint or open your case.