Credit Repair Companies

There have always been companies marketing themselves to consumers as the path to improve a individual’s credit score. Lending standards are become more stringent for all avenues of borrowing. This has increased the number of credit repair companies as well as the amount of advertising they are doing.

Despite the phenomenal claims made by most credit repair companies, all they do is dispute tradelines in the name of the consumer. The “Tradeline” is the specific status and payment history that is reported by a creditor to a credit bureau on a particular mortgage, loan or credit card. There are 3 credit bureaus and the majority of creditors report to all 3 bureaus. A dispute with one creditor will need to be filed with each credit bureau.

The filing of a consumer dispute is the only method anyone other than the creditor, a credit-reporting agency or the repository itself has to affect change in any repository file. A credit repair company cannot do anything the consumer cannot do themselves for free and faster, in fact – they cannot even obtain a copy of the consumers’ credit report as credit repair companies are prohibited access to the credit bureaus, Experian, Trans Union and Equifax.

In response to the growth of this industry the Federal Trade Commission has addressed the needs for consumer protection. On September 30, 1996 the President signed into law Title IV of the Consumer Credit Protection Act (Public Law 90-321, 82 Stat. 164) the most recent revision of these protections. I’ll highlight some of the more important sections here but the complete text can be found at http://www.ftc.gov/os/statutes/croa/croa.shtm.

Sec. 402. FINDINGS AND PURPOSES

(a) Findings.--The Congress makes the following findings:

(1) Consumers have a vital interest in establishing and maintaining their credit worthiness and credit standing in order to obtain and use credit. As a result, consumers who have experienced credit problems may seek assistance from credit repair organizations which offer to improve the credit standing of such consumers.

(2) Certain advertising and business practices of some companies in the business of credit repair services have worked a financial hardship upon consumers, particularly those of limited means and who are inexperienced in credit matters.

(b) Purposes.--The purposes of this title are:

(1) to ensure that prospective buyers of the services of credit repair organizations are provides with the information  necessary to make an informed decision regarding the purpose of such services; and

(2) to protect the public from unfair or deceptive advertising and business practices by credit repair organizations.

Sec. 405. DISCLOSURES

Disclosure Required .--Any credit repair organization shall provide and consumer with the following written statement before any contract or agreement between the consumer and the credit repair organization is executed:

Consumer Credit File Rights Under State and Federal Law

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. The credit bureau must remove accurate, negative information from your report only if it is over 7 years old. Bankruptcy information can be reported for 10 years.

You have a right to obtain a copy of your credit report from a credit bureau. You may be charged a reasonable fee. There is no fee, however, if you have been turned down for credit, employment, insurance, or a rental dwelling because of information in your credit report within the preceding 60 days. The credit bureau must provide someone to help you interpret the information in your credit file. You are entitled to receive a free copy of your credit report if you are unemployed and intend to apply for employment in the next 60 days, if you are a recipient of public welfare assistance, or if you have reason to believe that there is inaccurate information in your credit report due to fraud.

You have a right to sue a credit repair organization that violates the Credit Repair Organization Act. This law prohibits deceptive practices by credit repair organization.

You have the right to cancel your contract with any credit repair organization for any reason within 3 business days from the date you signed it.

Credit bureaus are required to follow reasonable procedures to ensure that the information they report is accurate. However, mistakes may occur.

You may, on your own, notify a credit bureau in writing that you dispute the accuracy of information in your credit file. The credit bureau must then reinvestigate and modify or remove inaccurate or incomplete information. The credit bureau may not charge any fee for this service. Any pertinent information and copies of all documents you have concerning an error should be given to the credit bureau.

If the credit bureau's reinvestigation does not resolve the dispute to your satisfaction, you may send a brief statement to the credit bureau, to be kept in your file, explaining why you think the record is inaccurate. The credit bureau must include a summary of your statement about disputed information with any report it issues about you.

The Federal Trade Commission regulates credit bureaus and credit repair organizations. For more information contact:

The Public Reference Branch
Federal Trade Commission
Washington, D.C. 20580

Sec. 407. RIGHT TO CANCEL CONTRACT.

(a) In General. -- Any consumer may cancel any contract with any credit repair organization without penalty or obligation by notifying the credit repair organization of the consumer's intention to do so at any time before midnight of the 3rd business day which begins after the date on which the contract or agreement between the consumer and the credit repair organization is executed or would, but for this subsection, become enforceable against the parties.

(b) Cancellation Form and Other Information. -- Each contract shall be accompanied by a form, in duplicate, which has the heading 'Notice of Cancellation' and contains in bold face type the following statement:

You may cancel this contract, without any penalty or obligation, at any time before midnight of the 3rd day which begins after the date the contract is signed by you.

To cancel this contract, mail or deliver a signed, dated copy of this cancellation notice, or any other written notice to (name of credit repair organization) at (address of credit repair organization) before midnight on

(date)

 I hereby cancel this transaction,

(date)

 (purchaser’s signature)

(c) Consumer Copy of Contract Required.--Any consumer who enters into any contract with any credit repair organization shall be given, by the organization—

(1) a copy of the completed contract and the disclosure statement required under section 405; and  

(2) a copy of any other document the credit repair organization requires the consumer to sign, at the time the contract or the other document is signed.

Should you choose to utilize the services of a credit repair company be aware of your rights:

• You are hiring the company out of convenience, not necessity.

• They cannot require any upfront payments.

• Be sure to visit the Federal Trade Commission’s website. 

• Check out the references of the company.