Understanding CROA

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How the Credit Repair Organizations Act Protects You

Bills Bottom Line

The Credit Repair Organizations Act (CROA) is a federal law that regulates the behavior of companies like and other credit repair companies. The law is designed to protect consumers from unfair or deceptive advertising and business practices. CROA also exists to warn consumers not to hire credit repair organizations to remove accurate information. Save money by disputing credit report inaccuracies yourself. 

The Credit Repair Organizations Act (CROA) is a great law. It helps consumers who want credit repair understand they do not need to pay a credit repair company to accomplish something the consumer can do themselves with little time or skill.

Let’s look at the parts of CROA most important to you and how credit repair organizations work to get around these rules.

A key passage in CROA states:

You have a right to dispute inaccurate information in your credit report by contacting the credit bureau directly. However, neither you nor any ‘credit repair’ company or credit repair organization has the right to have accurate, current, and verifiable information removed from your credit report...

This means:

Some consumers hire credit repair companies in hopes they can remove accurate derogatory information that is dragging down their credit scores. Bills.com readers report credit repair companies have spotty success in removing accurate derogatories. 

Do not expect a miracle if you have accurate derogatories on your credit report. Do not hire a credit repair company if you have unpaid debt accounts you want removed from your credit score. Instead, , and then later cross your fingers and attempt to remove the accurate derogatory on your own.

CROA’s Consumer Protections

CROA has five main parts that impact consumers:

  • Companies may not charge advance fees
  • Consumers have three business days to cancel a contract
  • Credit repair organizations must disclose consumers can accomplish credit repair themselves
  • Credit repair organizations must tell the truth
  • CROA gives consumers the right to file a lawsuit against a credit repair organization that violates the law.

Credit Repair & Advance Fees

A credit repair company cannot charge a fee until it starts to work on your file. CROA states:

No credit repair organization may charge or receive any money or other valuable consideration for the performance of any service which the credit repair organization has agreed to perform for any consumer before such service is fully performed.

Credit repair organizations will dodge this rule by insisting on pulling a copy of your credit reports from Equifax, Experian, and TransUnion. The fee is $13, and is due immediately. Some insist on a $100 "retainer fee," payable in advance. Collecting this fee is in violation of CROA, and it is unclear how the credit repair firms insisting on collecting this fee can do so and remain in compliance with the law.

Three Business Days to Cancel a Contract

CROA requires that credit repair companies must allow consumers the right to cancel the contract three business days from the date they sign the contract.

In reality, canceling a contract is a difficult, time-consuming chore requiring persistence. According to Bills.com readers, credit repair companies train their sales staff to argue with consumers who call to cancel. The law requires credit repair companies to allow cancelation before three business days pass, but the law doesn’t say they have to make it easy.

Under CROA, you are allowed to mail a cancelation notice. Do so using Certified Mail with return receipt requested so you can prove you mailed the cancelation before midnight on the third business day after you signed the contract.

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Credit Repair Companies Must Disclose You Can Do This Yourself

CROA requires credit repair organizations to include two brief disclosures. The first is a three-day cancellation notice. The other is an eight-paragraph notice that says you don’t need to hire a credit repair organization to fix errors in your credit report. Read both disclosures carefully, and the Bills.com .

Credit Repair Cost & Value

Is it worth hundreds of dollars to hire a credit repair company when you can do it yourself for the cost of your time?

A consumer who hires a credit repair company usually has several errors and items they hope the credit repair company can remove from their credit reports. The credit repair company will space out the disputes so that the consumer credit reporting agency will not consider the disputes frivolous, and dismiss them out of hand. Expect to hire a credit repair company for 6 months or more, especially if your credit report is rife with errors.

Lexington Law Firm, a large credit repair company, charges $60 to $100 per month for its service. That means the total cost of its services will be $360 to $600 if you hire the company to work on your credit reports for 6 months. Compare that to the cost of your time to to decide if hiring a credit repair company offers a good value.

The Credit Repair Organizations Act is part of the Consumer Credit Protection Act. CROA is a short, clearly written law with the formal legal title .

Credit Repair Organizations Must Tell the Truth

Credit repair organizations are prohibited from lying to credit reporting agencies (the credit bureaus), creditors, and consumers. Under CROA § 1679b:

No person may –
...

  1. make or use any untrue or misleading representation of the services of the credit repair organization; or
  2. engage, directly or indirectly, in any act, practice, or course of business that constitutes or results in the commission of, or an attempt to commit, a fraud or deception on any person in connection with the offer or sale of the services of the credit repair organization.

This means credit repair organizations cannot promise or guarantee to remove accurate information from your credit report. That is because the FCRA does not require credit reporting agencies and creditors to remove accurate information from a consumer's credit report. A credit repair organization violates the law when it makes a promise it can remove accurate — but damaging and inconvenient — information from your credit report.

File a Lawsuit

CROA gives you the right to file a lawsuit a collect damages when a credit repair company violates the law.

Unfortunately, the amount the law allows is either a consumer’s actual damages or the amount the consumer paid the company, plus attorneys’ fees. Similar consumer protection acts spell out exactly how much a consumer can collect for violations, which makes the amount a consumer will collect easier to determine in advance. CROA is much weaker in that regard. However, punitive damages are possible, depending on how badly the company acted.

Consult with a lawyer who has consumer rights experience if you believe a credit repair organization violated CROA.

Bills Action Plan
Hiring a credit repair organization is an expensive alternative to fixing errors on your credit report yourself. In the limited circumstances where it makes sense to hire a credit repair company, then use CROA as a guideline for protecting yourself.
  1. Think twice before you hire a credit repair organization. Credit repair is designed to fix errors, and not remove accurate information that’s inconvenient.
  2. Credit repair organizations must follow federal rules on disclosures and service cancellation.
  3. Learn how to repair your credit yourself before hiring a credit repair organization, and think twice before spending hundreds of dollars to do something you can do yourself for little cost and time.
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