Credit Repair Organizations Act rights

The Credit Repair Organizations Act is a federal law that sets rules for companies that sell credit repair services. It covers what they can’t do, what they must tell you, what their contracts must include, and how you can cancel.

This post explains what the law’s text says. It’s general information, not legal advice for your situation.

What credit repair organizations can’t do

Section 1679b of the law lists prohibited practices. No one may:

Make, or advise you to make, any untrue or misleading statement about your creditworthiness, credit standing or credit capacity to a credit bureau or to a lender you have credit with or have applied to.
Make statements meant to change your identification in order to hide accurate adverse credit information that isn’t obsolete.
Make or use an untrue or misleading representation of a credit repair organization’s services.
Engage in any act or practice that amounts to fraud or deception in offering or selling those services.

No payment before the work is done

The same section says a credit repair organization can’t charge or receive payment for any service it has agreed to perform before that service is fully performed.

The disclosure you must get before signing

Under section 1679c, a credit repair organization must give you a written statement before you sign any contract. It’s titled “Consumer Credit File Rights Under State and Federal Law.” The statement covers rights including:

Disputing inaccurate information directly with the credit bureau.
Getting a copy of your credit report.
Asking the credit bureau to reinvestigate, and adding a brief statement to your file if a dispute isn’t resolved.
Suing a credit repair organization that violates the law.
Canceling your contract for any reason within three business days of signing.
Contacting the Federal Trade Commission.

This statement has to be a document separate from the contract and any other written material. The company must also keep a copy of your signed acknowledgment that you received it, and keep that copy for two years.

What the contract must include

Section 1679d says a credit repair organization can’t provide services unless you’ve signed a written, dated contract. That contract must spell out:

The payment terms, including the total amount of all payments you’ll make to the organization or to anyone else.
A full and detailed description of the services, along with either an estimated completion date or how long the services will take.
The organization’s name and principal business address.
A cancellation statement, in bold type, placed next to the space where you sign.

Any promise the company makes about how its services will perform has to be written into that description of services.

Your right to cancel

Section 1679e lets you cancel any contract with a credit repair organization without penalty or obligation. You have until midnight of the third business day after you sign.

The contract has to come with a cancellation form, in duplicate, headed “Notice of Cancellation.” The company must also give you copies of the completed contract, the disclosure statement, and any other document you’re asked to sign, at the time you sign them.

If the law is broken

Section 1679g makes a person who violates the law liable to you. A court can award:

Actual damages: the greater of the actual damage you suffered or any amount you paid the credit repair organization.
Punitive damages: an additional amount the court allows. Class actions have their own rules.
Costs and attorneys’ fees: in a successful action, the costs of the case plus reasonable attorneys’ fees.

In deciding punitive damages, the court considers factors such as how often and how persistently the law was broken, the nature of the violation, and how far it was intentional.

States can have their own laws on credit repair as well, so check with your state attorney general. For a list of red flags, see credit repair scam warning signs. If you have questions about your own case, you may want to talk with a lawyer.

The short version

A credit repair organization can’t charge you before it fully performs the services it agreed to.
Before you sign, you must get a separate written statement of your credit file rights.
The contract must be written and dated and list the total cost, the services, the timeline and the company’s address.
You can cancel without penalty until midnight of the third business day after signing.
If the law is violated, you can sue for damages, costs and attorneys’ fees.

Sources

General information, not legal or financial advice. Laws and government guidance change, so check the sources above for the latest.

Your rights under the Credit Repair Organizations Act