The Credit Repair Organizations Act ("CROA") is not
actually an Act, it is actually Title IV of The Consumer Credit Protection Act.
Section 401 states, however, it can be referred to as "CreditRepair
Organizations Act".
Now more than ever consumers must establish and maintain
strong credit worthiness and standing in order to obtain more credit. As a
result many consumers who have experienced credit problems seek assistance from
credit repair organizations. Some credit repair organizations, however,
advertise and engage in unfair business practices which result in financial
hardship for consumers, particularly those of limited economic means or are
uneducated.
The purposes of the Credit Repair Organizations Act is to
ensure that prospective buyers credit repair services from credit repair organizations
are provided with the information necessary to make an informed decision. It
intends to protect the public from unfair or deceptive advertising and business
practices by credit repair organizations. It enumerates prohibited practices,
required disclosures, contract requirements, liability, and penalties for
non-compliance and procedure to report non-compliance. The statute was signed
by the President on September 30, 1996.
One of the more important areas covered by CROA is how credit
repair organizations can get paid. It is the general consensus that a
creditrepair company can only be paid after services have been rendered. This
can be done using a monthly fee model where companies charge clients on a
monthly basis after services are rendered or on the more modern pay after
deletion model where clients only pay after items are deleted from the credit
report. Companies that charge excess "setup" fees or all of their
fees upfront violate the provisions of CROA,
