When running a credit repair business, it is important to understand and comply with the laws that govern the credit repair industry in the United States, as well as in your particular state.
Running a credit repair business is a serious business and you risk losing it all if you don’t follow applicable state and federal regulations. We cannot give you legal advice. We have gathered information that is readily available on federal and state laws and compiled them for you here. This content is general information only, not legal advice or legal opinion based on any specific facts or circumstances. For your company’s compliance, please seek legal advice.
Starting a credit repair business is simple, but you risk losing it all if you don’t follow the rules and regulations. We can’t offer you legal advice, so we’ve simply gathered all the information that is readily available on federal and state laws and compiled them for you here. To learn the basics of starting a credit repair business, read on.
The Credit Repair Organizations Act (CROA) is a federal law that regulates credit repair organizations in the United States. One of the most important things the CROA did is make it illegal for credit repair organizations to make false claims. Apart from CROA, credit repair businesses that sign up out-of-state consumers over the phone or by text must comply with applicable telemarketing laws, such as the Telemarketing Sales Rule (TSR), which prohibits collecting advance fees for credit repair services.
Some states have state laws regulating credit repair organizations in addition to the federal laws. You should always know where your consumers reside to make sure you comply with the state laws of where consumers are located in. Many states prohibit any payment by a consumer prior to the credit repair organization rendering services. Some state laws define terms and reiterate business and financial industry laws as they relate to the credit repair organizations operating within their state. You should become familiar with the state laws for each state within which your credit repair organization operates. If you solicit or service consumers outside the state where you reside, you must comply with federal laws in addition to state laws.
You, and not CRC, will have sole responsibility to review your marketing and collection efforts relating to the services you provide. Also, you, and not CRC, must confirm that your marketing and receipt of fees are compliant with applicable state and federal laws.
The Credit Repair Organizations Act (CROA) is a federal law passed in September 1996 that regulates organizations whose purpose is increasing consumer’s credit score through credit repair. This law is moderated and enforced by the Federal Trade Commission (FTC), so the FTC has the authority to close down any credit repair organizations that are operating outside the parameters of these laws (like fraudulent or illegal activities).
The main sections include mandates that:
Simply put, these laws were put in place to protect people from credit repair companies using scammy business practices.
To read the Credit Repair Organizations Act in full, visit the United States House of Representatives’ record of the act here.
If you solicit from or service customers outside of the state where you reside, you must comply with the Telemarketing Sales Rule (“TSR”). For more information, regarding the TSR you can visit the FTC’s website: https://www.ftc.gov/business-guidance/resources/complying-telemarketing-sales-rule. CRC’s statements are not legal advice. You should seek legal advice to ensure compliance.
Credit Repair Cloud requires that all customers comply with the TSR and any other applicable laws and regulations to continue using its software.
A surety bond is a three-party agreement that legally binds your credit repair company (who needs the bond), the state (who requires the bond) and a surety company that sells the bond. If you fail to perform or cause consumers harm, the bond will cover resulting damages or losses. Choose the state you are considering doing business in and find out if a bond is required.
Some states have specific license and/or registration requirements. For example, depending on your city and county you may be required to obtain a local tax receipt, permit, or local professional license. Click on the state you are considering doing business in to find more information.
Legal disclaimer: Our software products and resources offer credit information, not legal advice. We make every effort to ensure the accuracy of the information and to clearly explain your options. However, we do not provide legal advice (i.e.; the application of the law to your individual circumstances). For legal advice, please consult an attorney, your city or your state.
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