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Consumer fraud and credit repair companies

On Behalf of | Oct 21, 2022 | Firm News

Having a poor credit history can make it even more difficult to get by when you are struggling financially. You may have seen advertisements for credit repair companies offering to eliminate bad credit, and you may wonder whether their claims are too good to be true.

Unfortunately, many of these businesses promise services that are illegal or that they never intended to provide. To help protect consumers, state and federal laws require these companies to follow specific rules when offering credit repair assistance.

Deceptive or illegal promises

Two common tactics that illegitimate companies may use include:

  • Promising to erase all negative credit information
  • Offering to hide negative credit information by creating a new credit identity

Keep in mind that it is impossible to erase negative credit information that is accurate, and it is a crime to claim a false identity.

Federal protections for consumer credit repair

The federal Credit Repair Organizations Act offers certain protections for those seeking credit repair services. Under the CROA, companies must:

  • Provide a written contract containing all terms and conditions of payment, detailed information about promised services and a timeline for completion of those services
  • Explain your legal rights in writing before you sign the contract
  • Allow you three days to cancel the contract

Additionally, credit repair companies cannot accept payment before completing services or make deceptive claims about the services they provide.

Finally, if you sign a contract that does not follow the law, that contract is automatically void.

While poor credit may be a result of financial setbacks, it may also be the result of inaccuracies on your report. Make sure to examine negative information carefully. If you find inaccuracies, the credit bureau must investigate and correct your report within a certain period of time.