History of the Credit Repair Organizations Act
As people become more concerned with their credit, more and more credit repair agencies are being created. You’ve seen the infomercials on television and the banner advertisements on websites. There are numerous companies that claim they can completely erase bad credit, create new credit, and even remove bankruptcies and judgments from your credit report. Legally, these companies cannot remove anything from your credit history that is accurate or timely.
Companies like those mentioned before prey on people that have poor credit histories. They know that people with poor credit might have a hard time cleaning it up. Coupled with the desire for new things like cars and houses, bad credit creates a tough situation. Credit repair companies promise to clean up your credit for good so you can get that auto loan or mortgage that you have been seeking. This is, of course, for a fee. You are charged several hundreds and maybe even thousands of dollars and after a few months your credit hasn’t improved.
Fortunately, there are laws that protect consumers from these kinds of scams. Congress passed the Credit Repair Organizations Act in 1997. The Act limits the claims that credit repair organizations can make about their services. Not only that, the Act helps to make sure that consumers who choose to use these services do not pay until the promised results have been achieved.
In May 2006, Congress passed the Credit Repair Organizations Act Technical Corrections Act in order to clarify the definition of a credit repair organization. This act was passed following several lawsuits against legitimate credit monitoring organizations. A credit repair organization was defined as one that seeks to improve a person’s credit file.
Credit repair organizations are required to give customers a copy of the “Consumer Credit File Rights Under State and Federal Law”. You must be given this document before you sign a contract to work with them. The contract should fully explain your rights and obligations as a consumer. Before signing anything, you should read and understand both of these documents.
There are laws that protect consumers from scams created by credit repair companies. A credit repair company is not allowed to make false claims about the services that they provide. The company should not charge you until they have completed the services promised to you. They also are not allowed to perform any services until you have signed the written contract. Even after you sign the contract, there is still a 3-day waiting period in which you can cancel the contract without incurring any fees.
Several pieces of information must be included in your contract. The contract must include a detailed description of each of the services to be performed and the payment terms for each. A total cost for services should be included. The length of the time that it will take to achieve the results should also be included in the contract. If the company offers any guarantees, these must be listed in the contract. One of the most important aspects of the contract is the company’s name and business address. The Credit Repair Organizations Act requires this information to be included.
Should you find yourself in a situation where a credit repair agency has violated the Credit Repair Organizations Act, you are entitled to file a lawsuit against the company within 5 years of the violation. You are also allowed to report the company to the Federal Trade Commission who enforces laws against habitual violators.
A credit repair company is not allowed to ask you to waive any rights that have been given to you by the Credit Repair Organizations Act. This is against the law. You should not trust any company that asks you to give up these rights. Even if you do waive these rights, either oral or written, the waiver cannot be used in court. Should the company violate your rights given by the Act and you later file suit, the company will not be able to use the waiver as a defense. The company will still be held liable for actions contrary to the law.
The Credit Repair Organizations Act protects consumers from scams by credit repair companies. Before retaining the services of such a company make sure that the company is abiding by these laws.
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