What Is The Credit Report Organizations Act?

credit report

For many people, one of the most frustrating situations they encounter is having bad credit. When this is the case, many things that seemed easy become difficult if not impossible. Obtaining a loan for a car, gaining approval for a mortgage to buy a new house and obtaining new credit cards can become acts of futility to a person whose credit has been damaged. As a result, many consumers turn to credit repair companies that advertise their services can help restore a person's credit. However, in today's world there have been many companies that have chosen to take advantage of those who were down on their luck. In these cases, companies would often require high upfront fees from customers then do little or nothing to help them. Because of this, a federal law was passed by Congress to help guard against this.

Signed into law in 1996 by President Clinton, the Credit Repair Organizations Act, also known as CROA, is actually part of the Consumer Credit Protection Act. It requires companies offering credit repair services to consumers to advertise and communicate with consumers in a transparent and honest manner. The law was passed to force businesses to stop taking large amounts of money from their clients while promising to do things they either could not do or had no intention of doing while working with the client.

Prior to this act, companies would tell their clients they could remove negative items from credit reports and thus dramatically improve a person's credit score. However, what often occurred was the company making many false promises while charging hundreds or thousands of dollars for their services. When the Credit Repair Organizations Act was passed, it then became illegal for these companies to promise their customers they could give them a fresh start with their credit by creating a new credit profile. It also forced companies to eliminate the practice of obtaining large upfront fees for their services, instead letting customers pay only after services have been rendered.

One important aspect of the CROA has been requiring companies to let their customers know they themselves can take action to repair their own credit reports, without using the services of a credit repair company. The decision to use or not use a credit repair company depends on many factors for each customer, such as how confident they are in their ability to handle the process or if they feel they have enough patience to see it through to the end. Unfortunately, for people who have been the victims of identity theft, the process of credit repair can sometimes take several years. Therefore, anyone whose credit is in need of repair needs to take these possibilities into consideration.

Since this law was passed, consumers have reaped many benefits. Gone are high upfront costs, hidden fees and penalties and other questionable practices. For those who need credit repair and choose to use the services of a company, they are protected much more today than in years past.

Please follow and like us:

Leave a Comment

Your email address will not be published. Required fields are marked *

*

  1. Jennifer

    July 24th, 2015

    I was just told by a debt collector that it is illegal under Federal Law for them to delete an item from my credit report or accept a pay for deletion request according to the Credit Repair Organization Act. I don't see anything in this act that makes this practice illegal. Is the debt collector just lying?

  2. admin

    July 28th, 2015

    Hey Jennifer...

    We're not legal experts, so you'll probably want to consult an attorney if you're really worried about this.

    That being said, it sounds like the debt collector was trying to use a fear tactic to get you to do follow their direction. In our experience, a pay for deletion is common practice among people repairing their credit. Keep in mind, though, that the creditor has no legal obligation to accept your pay for deletion request.

    Hope this helps!