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Credit Repair Organizations Act & Laws By State

The Credit Repair Organizations Act is a federal law that regulates the credit repair industry, including the requirement for credit repair permits and licenses. It is important for entrepreneurs to understand the Act and the applicable laws in the 5 most common states (California, Texas, Florida, Illinois, and Ohio), as it relates to starting a credit repair company in these states.

 

Credit Repair Services Fall Under the Federal Credit Repair Organizations Act

Under the CROA, credit repair companies are prohibited from:

  • Charging advance fees for services before they are performed.
  • Making false or misleading statements about their services.
  • Failing to perform promised services.

In California, credit repair companies are regulated by the California Consumer Credit Reporting Agencies Act. This Act prohibits credit repair companies from making false or misleading statements, engaging in unfair or deceptive practices, and charging advance fees for services.

Starting a credit repair company in California requires a surety bond in the amount of $100,000.

In Texas, credit repair companies are regulated by the Credit Services Organizations Act. This Act prohibits credit repair companies from making false or misleading statements, engaging in unfair or deceptive practices, and charging advance fees for services. 

Starting a credit repair company in Texas requires a surety bond in the amount of $10,000.

Starting a credit repair company in Texas also requires a credit services organization license from the Texas Secretary of State.

In Florida, credit repair companies are regulated by the Florida Credit Services Organizations Act. This Act prohibits credit repair companies from making false or misleading statements, engaging in unfair or deceptive practices, charging advance fees for services, and failing to perform promised services.

Starting a credit repair company in Florida requires a surety bond in the amount of $5,000.

In Illinois, credit repair companies are regulated by the Illinois Credit Services Organizations Act. This Act prohibits credit repair companies from making false or misleading statements, engaging in unfair or deceptive practices, charging advance fees for services, and failing to perform promised services.

Starting a credit repair company in Illinois requires a surety bond in the amount of $5,000.

In Ohio, credit repair companies are regulated by the Ohio Credit Services Organization Act. This Act prohibits credit repair companies from making false or misleading statements, engaging in unfair or deceptive practices, charging advance fees for services, and failing to perform promised services.

Starting a credit repair company in Ohio requires a surety bond in the amount of $25,000.

 

Credit Repair Companies

While the Credit Repair Organizations Act and state laws provide some guidance on starting a credit repair company, it is still advisable to consult with an attorney to ensure compliance with all applicable laws.

 

Federal Trade Commission

The Federal Trade Commission (FTC) is the primary federal regulator of credit repair companies. The FTC has published a Consumer’s Guide to Credit Repair, which outlines the credit repair process and provides consumers with information on how to avoid scams.

 

State Attorneys General

The state attorneys general have the authority to investigate and prosecute credit repair companies that violate state laws. Many states have their own credit repair laws that parallel the federal Credit Repair Organizations Act.

Consumers should contact their state attorney general’s office if they have been the victims of credit repair scams.

 

Credit Report

All consumers are entitled to one free credit report from each of the three major credit reporting agencies (Equifax, Experian, and TransUnion) every year. Consumers can request their free credit report online, by phone, or by mail.

 

Credit Repair Agency

There are many credit repair agencies that can help repair consumer credit. However, before choosing a credit repair agency, it is important to research to ensure the agency is reputable and will help improve credit scores.

 

Credit Bureaus

There are three major credit bureaus in the United States: Experian, Equifax, and TransUnion. These credit bureaus maintain consumer credit files that contain information about each consumer’s credit history.

 

Credit Reports

A credit report is a record of a consumer’s credit history that is maintained by the three major credit bureaus. The credit report includes information about payment history, outstanding debt, and other factors that can impact a consumer’s credit score.

 

Credit Score

The credit score is a numerical representation of a consumer’s creditworthiness. Credit scores are used by lenders to determine whether consumers qualify for loans and what interest rate they will be charged.

 

Improving a Credit Score

There are a number of things consumers can do to improve a credit score. Some of the most effective methods include paying your bills on time, maintaining a good credit history, and using a credit monitoring service.

 

Conclusion

The Credit Repair Organizations Act and state laws provide some guidance on starting a credit repair company. However, it is still advisable to consult with an attorney to ensure compliance with all applicable laws. Additionally, consumers should be aware of credit repair scams and should contact their state attorney general’s office if they have been the victims of such a scam. Finally, there are a number of things consumers can do to improve credit scores.