In most cases, our articles about credit repair are directed toward consumers that are looking for a credit repair company or individuals that are looking to start a credit repair business. This article is directed toward both. Consumers should know some basic credit repair laws when searching for the best credit repair company. Prospective credit repair business owners certainly need to be aware of credit repair laws before they decide to start a credit repair company. or to determine what type of credit repair business model is best for them.
The Fair Credit Reporting Act
The Fair Credit Reporting Act, or FCRA, is a consumer protection law governing what is reported on consumer credit reports and the privacy of that information. It also ensures the accuracy of the information listed on credit reports by creditors and how inaccurate and outdated information can be corrected. The FCRA was passed in 1970 yet most consumers do not know their rights under this law. There are many aspects of this law, but there are two main components of the Fair Credit Reporting Act that benefit consumers most often.
Right to Your Credit Report Once a Year
Consumers have the right to receive a free credit report from each of the 3 main credit bureaus, or credit reporting agencies (Experian, Equifax, and Transunion) once a year. However, the credit bureaus do not need to provide a credit score. They can charge a fee if the consumer also requests a credit score.
To get a free credit report annually from each of the 3 credit bureaus go to www.AnnualCredit Report.com. Here consumers will be able to see and download a copy of any or all 3 credit reports. However, consumers should be careful as this website will charge for items such as a credit score.
Due to COVID-19, the credit bureaus are allowing consumers to view their credit reports online weekly for free through April 2021.
Right to Challenge or Dispute Inaccurate Items
The other most used component of the FCRA is the right to challenge or dispute inaccurate or outdated items on a credit report. If a consumer concludes that the information listed on their credit report is not correct, they have the right to ask that this information be verified by the creditor.
Each of the credit reporting agencies or credit bureaus gives consumers a way to do this online. However, consumers need to be aware that there are only a few reasons that the credit bureaus consider legitimate for information to be disputed. If not listed correctly the dispute will be dismissed.
Even though the credit bureaus by law must allow consumers this right they don’t have to make it easy. That is why, in most cases, it is advisable for consumers to enlist the help of a reputable credit restoration company to assist them in the process. Otherwise, consumers can spend the time to learn how to do this themselves. Some can and will do this. It’s similar to changing the oil on a car. Some will buy the tools and learn how to do it themselves. Others will go to Jiffy Lube.
The Credit Repair Organizations Act
The Credit Repair Organizations Act, or CROA, is a set of laws governing credit restoration or credit repair companies. There are several aspects of CROA that individuals wanting to start a credit repair business must know. But there are 2 key components that must be addressed. And, that most individuals that desire to be in the credit repair business will find it difficult to satisfy.
Charging Upfront Fees for Credit Repair Services
The Credit Repair Organizations Act makes it illegal for a credit repair company to charge upfront fees to provide credit repair services before the services are provided. However, a credit repair company can charge a nominal account setup fee. The purpose of this law is to prevent unscrupulous credit repair companies from charging large fees and not providing services at all which has happened in this industry. The details of ‘when services are rendered’ are difficult to interpret. But for individuals starting a credit repair business, this will affect their cash flow for a period of time. They will not be able to get paid right away. This can prevent well-intended people from starting a credit repair business.
Surety Bonds to Provide Credit Repair Services
The other key component that affects individuals that want to start a credit repair business is the requirement of a surety bond. Surety bonds are also known as credit service organization bonds or credit repair company bonds. Surety bonds are like insurance policies with the consumer as beneficiary. If the credit repair company does not provide services after collecting fees from the consumer, the consumer can be reimbursed. Surety bonds basically ensure that the credit repair company will do what it says it will do.
The requirement for a surety bond and the amount of the surety bond is dictated by each state. Some states do not require them while others require different amounts up to $100,000. Surety bonds are purchased through private companies and fees range greatly. If a credit repair company has a surety bond in a particular state, they may conduct business only in that state. To do business in other states they must meet the requirements of those states.
Exemptions from the Credit Restoration Organizations Act
Written into CROA are exemptions for specific types of organizations or entities. If an entity that provides credit repair services is a bank, credit union, attorney, or 501(c)3 organization, they are exempt from CROA. This means they do not need to have a surety bond and can legally conduct business in any state if they fulfill other requirements in those states.
Understanding Credit Repair Laws
Understanding a few basics of credit repair law is helpful for consumers. But it is imperative for anyone that wants to start a credit repair business to understand these laws completely. Unfortunately, people spend a significant amount of time and money getting a credit repair business set up only to learn about these laws after the fact. Many either abandon their efforts and money or decide to continue and provide illegal credit repair services. This opens them up to a great deal of liability.
Provide Credit Repair Services Legally in All 50 States
For prospective credit repair business owners that want to provide services legally in all 50 states, there is a solution. There is a business model that is set up with all the infrastructure provided and all credit repair laws satisfied. And it costs less than $300 to get started. This is the business model we got started with back in 2012. If you’d like to know more visit Credit Repair Business Opportunity. Watch a business overview video. If you like what you see you can then book a phone appointment with me, Dale Guiducci, to learn more and get your questions answered. Ultimately our goal is to see if our business model is the right fit for you.
This article which was originally posted in 2020 is updated regularly and was last updated in July 2023.