The Credit Repair Organizations Act (CROA) ensures that companies offering credit repair services comply with specific rules. The Act requires that certain disclosures be made prior to signing a credit repair contract, that any contract be in writing and that a credit repair companies may not charge any fees prior to performing any work.
Who Is Regulated?
CROA applies to credit repair companies. These are companies that promise to improve a consumer’s credit report, credit history or credit rating.
When Does The Law Apply?
CROA requires credit repair companies to provide disclosures to consumers prior to signing a credit repair contract, allows for a 3-day right to cancel the contract and prohibits up front fees.
- If a company promises to improve a consumer’s credit score, it must provide the consumer with certain information about CROA and credit reporting prior to the consumer signing a contract for credit repair services.
- If a consumer signs a credit repair service contract, that contract must include the option to cancel within 3 business days of signing.
- If a company promises to improve a consumer’s credit score or credit history, it cannot charge any fee until it has performed work – no prepayment is allowed.