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Credit Repair Laws: How to Operate a Credit Repair Business in Your State

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.

Please select your state below, or use the map below

Federal Credit Repair Laws

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.

State Credit Repair Laws

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.

Credit Repair Cloud compiled a list of readily available federal and state laws. However, laws often change and this list is not intended to be inclusive of all applicable federal and state regulations on credit repair. We cannot offer legal advice. To run your business legally, you must comply with all applicable federal and state regulations regardless of what you find in this page. You should seek legal advice if you are unsure of how to run and maintain a compliant credit repair business.
Read on to explore the federal credit repair laws that may affect your new business.

Compliance with Federal and State Regulations

You, and not CRC, will have sole responsibility to review your marketing and collection efforts relating to 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.

Federal Laws Governing Credit Repair

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:

  • You can’t misrepresent your services (no false claims about what you will do for the client and definitely no promise of working and then not doing the work).
  • You must provide a written contract between you and the client that the client signs.
    Your clients have three days to cancel the contract.
  • You can’t charge until services are rendered (most companies will do some initial document processing and then charge the client for the work they have just done).
  • Consumers can sue and get refunded all money paid (plus legal fees and damages) if the credit repair organization is found to have violated the CROA with that consumer.
  • State laws can’t change or render any of the CROA ineffective.

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 SERVICE OR SOLICIT CUSTOMERS IN MORE THAN ONE STATE, YOU MUST ADHERE TO THE TSR.
The TSR prohibits requesting or receiving payment for credit repair services any time before 1) the seller provides the customer a report from a consumer reporting agency showing achievement of the promised result; and 2) such report is issued more than six months after the positive results were achieved. You must comply with all the applicable federal laws. You must also comply with the laws of the state where you market and operate. CRC’s statements are not legal advice. You should seek legal advice to assure compliance. For more information, you can visit the FTC’s website: https://www.ftc.gov/business-guidance/resources/complying-telemarketing-sales-rule

IF YOU SOLICIT FROM OR SERVICE CUSTOMERS OUTSIDE OF THE STATE WHERE YOU RESIDE, YOU MUST ADHERE TO THE TSR. CREDIT REPAIR CLOUD REQUIRES THAT ALL CUSTOMERS COMPLY WITH THE TSR AND ANY OTHER APPLICABLE LAWS AND REGULATIONS TO CONTINUE USING ITS SOFTWARE.

Legal disclaimer: The information contained on this site and our guides are for educational and informational purposes only. It does not constitute legal advice, nor does it substitute for legal advice. Persons seeking legal advice should consult with legal counsel familiar with their particular situation as consumer credit laws vary by state.

What is a surety bond?

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.

Licenses

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. 

Consumer Credit in the United States

 

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# of Americans with bad credit

10 million

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Average Americans’ debt in collections

$5,049

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Average debt on credit report

$39,216

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Percent of population with credit scores below 700

44.3%

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Percent of home buyers getting a mortgage for their home purchase

88%

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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