The Credit Repair Organizations Act, or CROA, is the act that regulates credit repair services.
It is designed to:
(1) to ensure that prospective buyers of the services of credit repair organizations are provided with the information necessary to make an informed decision regarding the purchase of such services; and
(2) to protect the public from unfair or deceptive advertising and business practices by credit repair organizations.
One of the most commonly misunderstood guidelines of the CROA is the following:
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.
Many people incorrectly interpret this to mean that a credit repair service cannot charge for credit repair until their score improves or until they have mailed umpteen dispute letters on their client's behalf. This is inaccurate.
What the statement means is that for each service provided, the credit repair service cannot bill until that action is completed. Now here's the tricky part. Only the credit repair service can dictate when the service is completed.
For example, a credit repair service cannot accept a $199 payment for credit repair up front. They can, however, accept $199 to set up your account once the account has actually been set up.
The terms of the service, and the definition of completion, should be clearly stated in your contract.
There is also a gray area when it comes to credit cards. Let's say you agree to a $199 set up fee. The credit repair service may charge your credit card the $199 before the account is actually set up because it can be argued that it takes the merchant 24-48 hours to process the payment and put the money in the credit repair service's bank account.
From the credit repair service's perspective, the money isn't received until well after the service has been completed, thereby they are in compliance with the CROA.
Terms can vary from company to company, so take your time and read what you're signing. Don't assume each company shares your interpretation of what defines a completed service and how much that service should cost.
So can a credit repair service charge money for credit repair up front? The answer is a definite NO.
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{ 8 comments… read them below or add one }
buyers beware. years ago I used a well known repair company who did a great job but after a medical emergency all went bad again so my wife and myself paid a company for services and nothing was done and we could not get a straight answer from the company ever again so all we had was several hundred dollars less than before!
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That’s why I say pay with a credit card. You can always dispute if they don’t provide the services they advertised. – Brian
Does anyone know of or who is the best cra who accepts no payment until your credit is good enough to get approved for a credit card to pay them with? if you have a good answer please send it to me! i need help!
thanks all
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In a perfect world, Scott. Then again, a perfect world wouldn’t have a need for credit.
I certainly would be open to any finance company who’d take the risk for a discount. If anyone knows of any, let me know. -Brian
There are ads that say they can delete PERMENTLY delete every item on your reports has anyone had this done?? They want a lot of money 1/2 upfront 1/2 when finished and they will have it done in 10 days. Anyone know about this???
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Its a violation of the CROA to advertise the deletion of accurate negative items. Even if the company has good intentions about the service they provide, they obviously don’t know the law. They should be avoided at all cost. – Brian
I beg to differ. it is very possible to have accurate items removed if the furnisher of information either cannot prove what they “claim” to be accurate, or if they fail to respond to an investigation of the accurate item within 30 days. Thus, I do not believe that advertising that accurate items can possibly be removed is in fact a violation. Unverifiable, outdated, or incomplete information can be deleted AND at the same time be considered “accurately reporting”.
Mike,
You should really read the Credit Repair Organizations Act, Section 404 B. Prohibited Practices. To summarize…
In general, no person may make any statement, or counsel or advise any consumer to make any statement, the intended effect of which is to alter the consumer’s identification to prevent the display of the consumer’s credit record, history, or rating for the purpose of concealing adverse information that is accurate and not obsolete to–
(A) any consumer reporting agency;
(B) any person–
(i) who has extended credit to the consumer; or (ii) to whom the consumer has applied or is applying for an extension of credit; etc.
Hey, if you really believe you’re right, then go for it. Just don’t be surprised when the FTC takes you down.
-Brian
I have read it, and know it well. What you’re citing in sec 404B is the prohibited act of stating a falsehood…that is, a “knowingly false statement of the consumer’s identification”. This differs from claiming unverifiable items can be deleted.You can certainly advertise the deletion of unverifiable items and be within the law. Where is this interpreted as lying about the consumer’s identification? Credit repair agencies will tell consumers that there is nothing they (or credit repair companies) can do to remove items that are accurately reporting. This is outright false, and an obvious attempt to discourage consumers from taking advantage of what the FCRA allows them to do…request that proof is provided for any reported item. If they fail to respond to the investigation request, they are required to DELETE the item, accurate or not.
I will also point out that I won a multi- creditor lawsuit in Circuit Court here in Michigan which documents and backs up my assertion. 05-068322-CZ Geraghty v Platinum Financial. Anyone interested can read more about it at my website.
Mike,
Advertising the removal of unverifiable items is not the same as advertising the removal of accurate items. I agree that you can advertise the removal of inaccurate or unverifiable items, but that’s not what you said. You specifically said accurate items.
It looks like we’re in agreement now.
-Brian
I was told the that I didn’t have to pay for credit repair services until it was done. I am glad that you cleared that up for me.