Keeping into view the complexities involved in reading, understanding and implementing the law, I decided to give you an easy guide to one of the laws which is a need of the time to be understood in order to make sure that consumers are protected in every possible manner from being exploited. So here we come with an easy guide to the Credit Repair law. This guide will give you an overview of the purpose of Credit Repair law, restrictions imposed on credit repair companies, rights of consumers, terms of a credit repair contract and the disclosures required to be given by the organization to its consumers. In legal terms the credit repair law is known as Credit Repair Organizations Act.
Purpose:
Firstly, we need to shed some light onto the reasons that existed for the formulation of the credit repair law. The credit repair law was enacted in order to protect the consumers from the fraudulent activities of the credit rating companies. As a majority of people were unaware of their rights while dealing with the credit rating companies, these people were consequently exploited by these companies and as a result they were deprived of their hard earned money. The purpose of this law also covers up the protection of consumers from being exploited through deceptive advertising. Now we move on to the restrictions imposed on the credit repair companies.
Restrictions:
The restrictions that a credit repair organization must abide by are as follows:
1. The company shall not involve in practices which requires its client to deceive its creditors regarding its credit history. As this would indirectly harm a third person through the practices of the organization.
2. The organization shall not even advise its clients to change their EIN (Employer Identification number) as this would again be subject to a third party loss as it would be unaware of the individual’s real credit history.
3. The Organization shall not represent itself as providing services which it actually does not provide or is not going to provide to its customers.
4. Lastly, the organization is bound to receive payment from its client only after the provision of services to its client in order to make sure that the customer is making payment after it is has achieved the terms committed to be fulfilled by the organization.
Rights of consumers:
The law makes the organization bound to provide its customers with a disclosure called the “Consumer Credit File Rights under State and Federal law”. The report makes a consumer aware of its rights to obtain a credit report and to file disagreement on any inaccurate information. The consumer is equipped with the right to sue the organization in case it does not respect the terms of the CROA. Additionally, the organization cannot ask its customer to sign any document which has the effect of waiving or surrendering the consumer’s rights. In case the consumer signs any such document, than it would have the status of being null and void. The consumer also has the right cancel a signed contract within 3 business days and in this case the consumer would not be required to pay any fee. Additionally, if the organization violates any law than in that case the consumer has within its arsenal, the rights to sue the credit repair firm for actual damages, attorney’s fees and punitive damage.
Terms of contract:
The contract which shall be received and signed by the consumer before the commencement of provision of services shall include the following terms:
1) The payment amount required to be paid by the consumer to the credit repair company.
2) The services that would be provided by the company in order to repair the credit of its customer.
3) The time required by the company to repair the credit rating or the date by which the credit would be repaired or the provision of services completed.
4) A statement that equips the consumer with the right to cancel the contract within 3 business days.
Disclosures:
The following disclosures are required to be provided by the organization to its consumers:
1) Consumer credit file rights under state and federal law: The organization shall provide its clients with this disclosure and in case of non-compliance it can be sued by the client.
2) Statement for entitlement to cancel the contract within three business days: The customer would be able to cancel the contract within three business days through this statement, which it would receive at the time of signing of contract.
3) Statement of contract: The last and the most important one is the statement of contract which is the essence of the whole credit recovery procedures and describes the amount, time and extent of services provided by the organization. This statement helps to make the organization committed to its customers and make sure they are getting what they are paying for.
Always remember that credit repair law is made to facilitate both the facilitator and the loan acquirer, it is important for both of them equally.
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