The Credit Repair Industry is a lucrative business. Fortunes can be made while helping consumers change their lives. Regardless of intentions and the results you get for consumers- it is VERY possible that you are breaking the law!!
Even if you are the best and have happy consumers, the rug could be pulled from under you by the regulators!
The Credit Repair Organization (CROA) is Federal legislation that governs ALL credit repair organizations. NO ONE is EXEMPT from the act, including ATTORNEY’S!!!! It has many consumer protections and provisions that could inhibit certain businesses. CROA was born out of necessity – due to the overwhelming amount of complaints from consumers being defrauded by credit repair companies. Most don’t get into credit repair with intentions of defrauding consumers. The “Bad Guys” in credit repair come from ill execution, not ill intention. There are many unknown credit repair business laws, but with the emergence of Credit Boot Camp, information about the industry is being circulated much more!
Here are some of the details of the law:
#1 – Don’t make deceptive claims
There are no guarantees in Credit Repair. Just like in a court of law, an attorney never guarantees a client the judge would find in their favor. If you want to make claims about how successful your services are, give actual statistics and examples of what your clients have experienced. For example, “Our average clients see 4 – 10 items removed in 90 days.” The largest credit repair organizations are still in business because they are truthful.
#2 – Ask your clients which items to dispute
Another CROA violiation is disputing items that are known to be accurate. Although, it is a rare thing to find credit reports “completely accurate” across all three credit bureaus, if the client indicates that “yeah, that is right”, then leave that item alone. As Brad Elbein, Director of the FTC’s Southwest Regional Office says “no credit repair company has the right to remove accurate, current information from a credit report.” Stick with disputing items the client instructs you to. This is as simple as taking 10 minutes to run over the credit report with your client. Using www.DisputeSuite.com, you can input customer instructions, such as “My payment was never late”, into the software for each item.
#3 – Provide consumers with their rights
As a credit repair organization, you must provide a copy of the “Consumer Credit File Rights Under State and Federal Law” before you have your client sign a contract. You must also inform your client that they have a right to cancel your contract. Visit http://www.ftc.gov/os/statutes/croa/croa.shtm for a copy.
#4 – Make sure you have a contract
If you don’t already have one in place, you must get one immediately. Make sure your contract hits these talking points:
- The payment terms for services, including their total cost
- A detailed description of the services to be performed
- Any guarantees or refund policies (if offered)
- Power of attorney
- The estimated time it will take to achieve results
- A copy of the FTC’s “Consumer Credit File Rights”
- A cancellation notice (in bold font). Clients have 3 business days afterwards to legally cancel.
- Your company’s name and business address
If you find a sample agreement online, have a lawyer review the contract to ensure its legality.
#5 – First perform, then collect payment
Perform credit repair services, then collect the money. Seems like a backwards way of billing, but CROA states a credit repair organization cannot collect payment for services that have not been performed. The organization can only collect payment after services were provided. With monthly billing, you are billing for work previously performed.
Watch for upcoming posts on successful habits of legal, ethical credit repair companies. Formore information about compliance, join our Weekly Webinar.
P.S. DisputeSuite provides a variety of solutions for your credit repair business. From engaging custom websites, to dispute processing services, to a robust CRM with automations and portals, DisputeSuite is a One-Stop Shop to making your Credit Repair Business A Success!
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