Yes, every credit improvement company is required to have their clients sign a consumer contract per the Credit Repair Organizations Act (CROA).
A credit repair company owner will want to be careful and make sure their contract is in complete compliance with federal law to avoid running into Sections 408, 409, and 410 of CROA.
• Sec. 408 stipulates that if your contract does not meet the criteria outlined within the Credit Repair Organizations Act, then the contract is consider VOID and is not enforceable in any federal or state court.
• Sec. 409 goes over the particulars of civil liability, punitive damages, attorney’s fees, etc…
• Sec. 410 states the investigation rights of the Federal Trade Commission and the state’s authority.
That’s tough … civil liability, punitive damages, attorney’s fees, and administrative enforcement by the Federal Trade Commission. Terms that none of us ever want to hear…unless you’re an attorney of course.
Some of the basic guidelines to a compliant contract are:
• Duplicate forms of cancellation
• A copy of ‘Consumer Credit File Rights Under State and Federal Law’
• Distinct verbiage in bold close to where the client signs the contract stating the right to cancel within three days of signing the contract.
Keep in mind, every credit improvement company is required to keep a copy of that contract on file for two years after the date on which the contract is signed by the client.
Insure you have a contract signed that meet the requirements of CROA, so you can stay in compliance, stay in business, and stay out of trouble.
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