The Credit Repair Organizations Act
The 'Credit Repair Organizations Act' was created to
regulate the operations of credit repair organizations. The Act is also known as
Title IV of the Consumer Credit
Protection Act (Public Law 90-321, 82 Stat. 164). The CROA was
designed to protect consumers and businesses that provide credit repair
services. The full text of the Act can be found below.
TITLE IV--CREDIT REPAIR ORGANIZATIONS''
Sec.
401. Short title.
402. Findings and purposes.
403. Definitions.
404. Prohibited practices.
405. Disclosures.
406. Credit repair organizations contracts.
407. Right to cancel contract.
408. Noncompliance with this title.
409. Civil liability.
410. Administrative enforcement.
411. Statute of limitations.
412. Relation to State law.
413. Effective date.
SEC. 401. SHORT TITLE.(2)
This title may be cited as the 'Credit Repair Organizations Act'.
SEC. 402. FINDINGS AND PURPOSES.(3)
(a) Findings.--The Congress makes the following findings:
(1) Consumers have a vital interest in establishing and maintaining
their credit worthiness and credit standing in order to obtain and
use credit. As a result, consumers who have experienced credit
problems may seek assistance from credit repair organizations which
offer to improve the credit standing of such consumers.
(2) Certain advertising and business practices of some companies
engaged in the business of credit repair services have worked a
financial hardship upon consumers, particularly those of limited
economic means and who are inexperienced in credit matters.
(b) Purposes.--The purposes of this title are--
(1) to ensure that prospective buyers of the services of credit
repair organizations are provided with the information necessary to
make an informed decision regarding the purchase of such services;
and
(2) to protect the public from unfair or deceptive advertising and
business practices by credit repair organizations.
SEC. 403. DEFINITIONS.(4)
For purposes of this title, the following definitions apply:
(1) Consumer. -- The term 'consumer' means an individual.
(2) Consumer credit transaction. -- The term 'consumer credit
transaction' means any transaction in which credit is offered or
extended to an individual for personal, family, or household
purposes.
(3) Credit repair organization. -- The term 'credit repair
organization'--
(A) means any person who uses any instrumentality of interstate
commerce or the mails to sell, provide, or perform (or represent
that such person can or will sell, provide, or perform) any service,
in return for the payment of money or other valuable consideration,
for the express or implied purpose of--
(i) improving any consumer's credit record, credit history, or
credit rating; or
(ii) providing advice or assistance to any consumer with regard to
any activity or service described in clause (i); and
(B) does not include--
(i) any nonprofit organization which is exempt from taxation under
section 501(c)
(3) of the Internal Revenue Code of 1986;
(ii) any creditor (as defined in section 103 of the Truth in Lending
Act),(5) with respect to any consumer, to the extent the creditor is
assisting the consumer to restructure any debt owed by the consumer
to the creditor; or
(iii) any depository institution (as that term is defined in section
3 of the Federal Deposit Insurance Act) or any Federal or State
credit union (as those terms are defined in section 101 of the
Federal Credit Union Act), or any affiliate or subsidiary of such a
depository institution or credit union.
(4) Credit.--The term 'credit' has the meaning given to such term in
section 103(e) of this Act.(6)
SEC. 404. PROHIBITED PRACTICES.(7)
(a) In General.--No person may--
(1) make any statement, or counsel or advise any consumer to make
any statement, which is untrue or misleading (or which, upon the
exercise of reasonable care, should be known by the credit repair
organization, officer, employee, agent, or other person to be untrue
or misleading) with respect to any consumer's credit worthiness,
credit standing, or credit capacity to-- (A) any consumer reporting
agency (as defined in section 603(f) of this Act);(8) or
(B) any person--
(i) who has extended credit to the consumer; or
(ii) to whom the consumer has applied or is applying for an
extension of credit;
(2) make any statement, or counsel or advise any consumer to make
any statement, the intended effect of which is to alter the
consumer's identification to prevent the display of the consumer's
credit record, history, or rating for the purpose of concealing
adverse information that is accurate and not obsolete to--
(A) any consumer reporting agency;
(B) any person--
(i) who has extended credit to the consumer; or (ii) to whom the
consumer has applied or is applying for an extension of credit;
(3) make or use any untrue or misleading representation of the
services of the credit repair organization; or
(4) engage, directly or indirectly, in any act, practice, or course
of business that constitutes or results in the commission of, or an
attempt to commit, a fraud or deception on any person in connection
with the offer or sale of the services of the credit repair
organization.
(b) Payment in Advance.--No credit repair organization may charge or
receive any money or other valuable consideration for the
performance of any service which the credit repair organization has
agreed to perform for any consumer before such service is fully
performed.
SEC. 405. DISCLOSURES.(9)
(a) Disclosure Required.--Any credit repair organization shall
provide any consumer with the following written statement before any
contract or agreement between the consumer and the credit repair
organization is executed:
Consumer Credit File Rights Under State and Federal Law
You have a right to dispute inaccurate information in your credit
report by contacting the credit bureau directly. However, neither
you nor any ''credit repair'' company or credit repair organization
has the right to have accurate, current, and verifiable information
removed from your credit report. The credit bureau must remove
accurate, negative information from your report only if it is over 7
years old. Bankruptcy information can be reported for 10 years.
You have a right to obtain a copy of your credit report from a
credit bureau. You may be charged a reasonable fee. There is no fee,
however, if you have been turned down for credit, employment,
insurance, or a rental dwelling because of information in your
credit report within the preceding 60 days. The credit bureau must
provide someone to help you interpret the information in your credit
file. You are entitled to receive a free copy of your credit report
if you are unemployed and intend to apply for employment in the next
60 days, if you are a recipient of public welfare assistance, or if
you have reason to believe that there is inaccurate information in
your credit report due to fraud.
You have a right to sue a credit repair organization that violates
the Credit Repair Organization Act. This law prohibits deceptive
practices by credit repair organizations.
You have the right to cancel your contract with any credit repair
organization for any reason within 3 business days from the date you
signed it.
Credit bureaus are required to follow reasonable procedures to
ensure that the information they report is accurate. However,
mistakes may occur.
You may, on your own, notify a credit bureau in writing that you
dispute the accuracy of information in your credit file. The credit
bureau must then reinvestigate and modify or remove inaccurate or
incomplete information. The credit bureau may not charge any fee for
this service. Any pertinent information and copies of all documents
you have concerning an error should be given to the credit bureau.
If the credit bureau's reinvestigation does not resolve the dispute
to your satisfaction, you may send a brief statement to the credit
bureau, to be kept in your file, explaining why you think the record
is inaccurate. The credit bureau must include a summary of your
statement about disputed information with any report it issues about
you.
The Federal Trade Commission regulates credit bureaus and credit
repair organizations. For more information contact:
The Public Reference Branch
Federal Trade Commission
Washington, D.C. 20580'.
(b) Separate Statement Requirement.--The written statement required
under this section shall be provided as a document which is separate
from any written contract or other agreement between the credit
repair organization and the consumer or any other written material
provided to the consumer.
(c) Retention of Compliance Records.--
(1) In general.--The credit repair organization shall maintain a
copy of the statement signed by the consumer acknowledging receipt
of the statement.
(2) Maintenance for 2 years.--The copy of any consumer's statement
shall be maintained in the organization's files for 2 years after
the date on which the statement is signed by the consumer.
SEC. 406. CREDIT REPAIR ORGANIZATIONS CONTRACTS.(10)
(a) Written Contracts Required.--No services may be provided by any
credit repair organization for any consumer--
(1) unless a written and dated contract (for the purchase of such
services) which meets the requirements of subsection
(b) has been signed by the consumer; or
(2) before the end of the 3-business-day period beginning on the
date the contract is signed.
(b) Terms and Conditions of Contract.--No contract referred to in
subsection
(a) meets the requirements of this subsection unless such contract
includes (in writing)--
(1) the terms and conditions of payment, including the total amount
of all payments to be made by the consumer to the credit repair
organization or to any other person;
(2) a full and detailed description of the services to be performed
by the credit repair organization for the consumer, including--
(A) all guarantees of performance; and
(B) an estimate of-- (i) the date by which the performance of the
services (to be performed by the credit repair organization or any
other person) will be complete; or (ii) the length of the period
necessary to perform such services;
(3) the credit repair organization's name and principal business
address; and
(4) a conspicuous statement in bold face type, in immediate
proximity to the space reserved for the consumer's signature on the
contract, which reads as follows: 'You may cancel this contract
without penalty or obligation at any time before midnight of the 3rd
business day after the date on which you signed the contract. See
the attached notice of cancellation form for an explanation of this
right.'.
SEC. 407. RIGHT TO CANCEL CONTRACT.(11)
(a) In General. -- Any consumer may cancel any contract with any
credit repair organization without penalty or obligation by
notifying the credit repair organization of the consumer's intention
to do so at any time before midnight of the 3rd business day which
begins after the date on which the contract or agreement between the
consumer and the credit repair organization is executed or would,
but for this subsection, become enforceable against the parties.
(b) Cancellation Form and Other Information. -- Each contract shall
be accompanied by a form, in duplicate, which has the heading
'Notice of Cancellation' and contains in bold face type the
following statement:
'You may cancel this contract, without any penalty or obligation, at
any time before midnight of the 3rd day which begins after the date
the contract is signed by you.
To cancel this contract, mail or deliver a signed, dated copy of
this cancellation notice, or any other written notice to (name of
credit repair organization) at (address of credit repair
organization) before midnight on (date)
I hereby cancel this transaction,
( date )
( purchaser's signature ).'.
(c) Consumer Copy of Contract Required.--Any consumer who enters
into any contract with any credit repair organization shall be
given, by the organization--
(1) a copy of the completed contract and the disclosure statement
required under section 405; and (2) a copy of any other document the
credit repair organization requires the consumer to sign, at the
time the contract or the other document is signed.
SEC. 408. NONCOMPLIANCE WITH THIS TITLE.(12)
(a) Consumer Waivers Invalid.--Any waiver by any consumer of any
protection provided by or any right of the consumer under this
title--
(1) shall be treated as void; and
(2) may not be enforced by any Federal or State court or any other
person.
(b) Attempt To Obtain Waiver.--Any attempt by any person to obtain a
waiver from any consumer of any protection provided by or any right
of the consumer under this title shall be treated as a violation of
this title.
(c) Contracts Not in Compliance.--Any contract for services which
does not comply with the applicable provisions of this title--
(1) shall be treated as void; and
(2) may not be enforced by any Federal or State court or any other
person.
SEC. 409. CIVIL LIABILITY.(13)
(a) Liability Established.--Any person who fails to comply with any
provision of this title with respect to any other person shall be
liable to such person in an amount equal to the sum of the amounts
determined under each of the following paragraphs:
(1) Actual damages.--The greater of--
(A) the amount of any actual damage sustained by such person as a
result of such failure; or
(B) any amount paid by the person to the credit repair organization.
(2) Punitive damages.--
(A) Individual actions.--In the case of any action by an individual,
such additional amount as the court may allow.
(B) Class actions.--In the case of a class action, the sum of--
(i) the aggregate of the amount which the court may allow for each
named plaintiff; and
(ii) the aggregate of the amount which the court may allow for each
other class member, without regard to any minimum individual
recovery.
(3) Attorneys' fees.--In the case of any successful action to
enforce any liability under paragraph (1) or (2), the costs of the
action, together with reasonable attorneys' fees.
(b) Factors to Be Considered in Awarding Punitive Damages.--In
determining the amount of any liability of any credit repair
organization under subsection (a)(2), the court shall consider,
among other relevant factors--
(1) the frequency and persistence of noncompliance by the credit
repair organization;
(2) the nature of the noncompliance;
(3) the extent to which such noncompliance was intentional; and
(4) in the case of any class action, the number of consumers
adversely affected.
SEC. 410. ADMINISTRATIVE ENFORCEMENT.(14)
(a) In General.--Compliance with the requirements imposed under this
title with respect to credit repair organizations shall be enforced
under the Federal Trade Commission Act by the Federal Trade
Commission.
(b) Violations of This Title Treated as Violations of Federal Trade
Commission Act.--
(1) In general. -- For the purpose of the exercise by the Federal
Trade Commission of the Commission's functions and powers under the
Federal Trade Commission Act, any violation of any requirement or
prohibition imposed under this title with respect to credit repair
organizations shall constitute an unfair or deceptive act or
practice in commerce in violation of section 5(a) of the Federal
Trade Commission Act.
(2) Enforcement authority under other law. -- All functions and
powers of the Federal Trade Commission under the Federal Trade
Commission Act shall be available to the Commission to enforce
compliance with this title by any person subject to enforcement by
the Federal Trade Commission pursuant to this subsection, including
the power to enforce the provisions of this title in the same manner
as if the violation had been a violation of any Federal Trade
Commission trade regulation rule, without regard to whether the
credit repair organization--
(A) is engaged in commerce; or
(B) meets any other jurisdictional tests in the Federal Trade
Commission Act.
(c) State Action for Violations.--
(1) Authority of states. -- In addition to such other remedies as
are provided under State law, whenever the chief law enforcement
officer of a State, or an official or agency designated by a State,
has reason to believe that any person has violated or is violating
this title, the State--
(A) may bring an action to enjoin such violation;
(B) may bring an action on behalf of its residents to recover
damages for which the person is liable to such residents under
section 409 as a result of the violation; and
(C) in the case of any successful action under subparagraph (A) or
(B), shall be awarded the costs of the action and reasonable
attorney fees as determined by the court.
(2) Rights of commission.--
(A) Notice to commission.--The State shall serve prior written
notice of any civil action under paragraph
(1) upon the Federal Trade Commission and provide the Commission
with a copy of its complaint, except in any case where such prior
notice is not feasible, in which case the State shall serve such
notice immediately upon instituting such action.
(B) Intervention.--The Commission shall have the right--
(i) to intervene in any action referred to in subparagraph (A);
(ii) upon so intervening, to be heard on all matters arising in the
action; and
(iii) to file petitions for appeal.
(3) Investigatory powers. -- For purposes of bringing any action
under this subsection, nothing in this subsection shall prevent the
chief law enforcement officer, or an official or agency designated
by a State, from exercising the powers conferred on the chief law
enforcement officer or such official by the laws of such State to
conduct investigations or to administer oaths or affirmations or to
compel the attendance of witnesses or the production of documentary
and other evidence.
(4) Limitation. -- Whenever the Federal Trade Commission has
instituted a civil action for violation of this title, no State may,
during the pendency of such action, bring an action under this
section against any defendant named in the complaint of the
Commission for any violation of this title that is alleged in that
complaint.
SEC. 411. STATUTE OF LIMITATIONS.(15)
Any action to enforce any liability under this title may be brought
before the later of-- (1) the end of the 5-year period beginning on
the date of the occurrence of the violation involved; or (2) in any
case in which any credit repair organization has materially and
willfully misrepresented any information which-- (A) the credit
repair organization is required, by any provision of this title, to
disclose to any consumer; and (B) is material to the establishment
of the credit repair organization's liability to the consumer under
this title, the end of the 5-year period beginning on the date of
the discovery by the consumer of the misrepresentation.
SEC. 412. RELATION TO STATE LAW.(16)
This title shall not annul, alter, affect, or exempt any person
subject to the provisions of this title from complying with any law
of any State except to the extent that such law is inconsistent with
any provision of this title, and then only to the extent of the
inconsistency.
SEC. 413. EFFECTIVE DATE.(17)
This title shall apply after the end of the 6-month period beginning
on the date of the enactment of the Credit Repair Organizations
Act,(18) except with respect to contracts entered into by a credit
repair organization before the end of such period.''.
1. Pub. L. No. 104-208, 110 Stat. 3009 (Sept. 30, 1996). The
amendments to the credit statutes are in Title II of the Act,
entitled "Economic Growth and Regulatory Paperwork Reduction." The
footnotes in this copy of the Act are not part of the Act, but are
cross-references inserted by the FTC staff for the convenience of
the reader.
2. To be codified as 15 U.S.C. § 1679.
3. To be codified as 15 U.S.C. § 1679a.
4. To be codified as 15 U.S.C. § 1679b.
5. Truth in Lending Act § 103(f) states in pertinent part: "The term
'creditor' refers only to creditros who regularly extend, or arrange
for the extension of, credit which is payable by agreement in more
than four installments or for which the payment of a finance charge
is or may be required, whether in connection with loans, sales pf
property or services, or otherwise. . . ."
6. TILA § 103(e) states: "The term 'credit' means the right granted
by a creditor to a debtor to defer payment of debt or to incur debt
and defer its payment."
7. To be codified as 15 U.S.C. § 1679c.
8. Fair Credit Reporting Act (FCRA) § 603(f) states: "The term
'consumer reporting agency' means any person which, for monetary
fees, dues, or on a cooperative nonprofit basis, regularly engages
in whole or in part in the practice of assembling or evaluating
consumer credit information or other information on consumers for
the purpose of furnishing consumer reports to third parties, and
which uses any means or facility of interstate commerce for the
purpose of preparing or furnishing consumer reports."
9. To be codified as 15 U.S.C. § 1679d.
10. To be codified as 15 U.S.C. § 1679e.
11. To be codified as 15 U.S.C. § 1679f.
12. To be codified as 15 U.S.C. § 1679g.
13. To be codified as 15 U.S.C. § 1679h.
14. To be codified as 15 U.S.C. § 1679i.
15. To be codified as 15 U.S.C. § 1679j.
16. To be codified as 15 U.S.C. § 1679k.
17. To be codified as 15 U.S.C. § 1679l.
18. The statute was signed by the President on September 30, 1996.
The Credit Repair Organizations Act (CROA)
protects consumers from deceptive and unrealistic promises by
setting out regulations that businesses and individuals must follow
when offering credit repair services.
Trust professional paralegals who understand the letter of the law.
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Credit Repair Organizations Act
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