If you want to start your profitable credit repair business in [STATE], you need to understand [STATE] state credit repair laws, bond requirements, licensing, and statute of limitations. Read this book to understand the basics of credit repair and then scroll down below for important details on [STATE] state credit repair laws and regulations.
There are federal and state
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. One of the most important things the CROA did is make it illegal for credit repair organizations to make false claims. Don’t worry though, staying compliant is pretty easy after you get familiar with the law! 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. As long as you’re not trying to be sketchy and scam people, you should be able to stay compliant easily!
To read the Credit Repair Organizations Act in full, visit the United States House of Representatives’ record of the act here.
Washington has laws that govern how to start (and run!) a credit repair business in Washington. Here are the relevant regulations and Washington laws governing credit repair businesses that you need to be aware of:
As used in this chapter:
(1) "Buyer" means any individual who is solicited to purchase or who purchases the services of a credit services organization.
(2)(a) "Credit services organization" means any person who, with respect to the extension of credit by others, sells, provides, performs, or represents that he or she can or will sell, provide, or perform, in return for the payment of money or other valuable consideration any of the following services:
(i) Improving, saving, or preserving a buyer's credit record, history, or rating;
(ii) Obtaining an extension of credit for a buyer;
(iii) Stopping, preventing, or delaying the foreclosure of a deed of trust, mortgage, or other security agreement; or
(iv) Providing advice or assistance to a buyer with regard to either (a)(i), (a)(ii), or (a)(iii) of this subsection.
(b) "Credit services organization" does not include:
(i) Any person authorized to make loans or extensions of credit under the laws of this state or the United States who is subject to regulation and supervision by this state or the United States or a lender approved by the United States secretary of housing and urban development for participation in any mortgage insurance program under the national housing act;
(ii) Any bank, savings bank, or savings and loan institution whose deposits or accounts are eligible for insurance by the federal deposit insurance corporation or the federal savings and loan insurance corporation, or a subsidiary of such bank, savings bank, or savings and loan institution;
(iii) Any credit union, federal credit union, or out-of-state credit union doing business in this state under chapter 31.12 RCW;
(iv) Any nonprofit organization exempt from taxation under section 501(c)(3) of the internal revenue code;
(v) Any person licensed as a real estate broker by this state if the person is acting within the course and scope of that license;
(vi) Any person licensed as a collection agency pursuant to chapter 19.16 RCW if acting within the course and scope of that license;
(vii) Any person licensed to practice law in this state if the person renders services within the course and scope of his or her practice as an attorney;
(viii) Any broker-dealer registered with the securities and exchange commission or the commodity futures trading commission if the broker-dealer is acting within the course and scope of that regulation;
(ix) Any consumer reporting agency as defined in the federal fair credit reporting act, 15 U.S.C. Secs. 1681 through 1681t; or
(x) Any mortgage broker as defined in RCW 19.146.010 if acting within the course and scope of that definition.
(3) "Extension of credit" means the right to defer payment of debt or to incur debt and defer its payment offered or granted primarily for personal, family, or household purposes.
19.134.020. Prohibited conduct
A credit services organization, its salespersons, agents, and representatives, and independent contractors who sell or attempt to sell the services of a credit services organization may not do any of the following:
(1) Charge or receive any money or other valuable consideration prior to full and complete performance of the services the credit services organization has agreed to perform for the buyer, unless the credit services organization has obtained a surety bond of ten thousand dollars issued by a surety company admitted to do business in this state and established a trust account at a federally insured bank or savings and loan association located in this state. The surety bond shall run to the state of Washington and the buyers. The surety bond shall be issued on the condition that the principal comply with all provisions of this chapter and fully perform on all contracts entered into with buyers. The surety bond shall be continuous until canceled and shall remain in full force and unimpaired at all times to comply with this section. The surety's liability for all claims in the aggregate against the continuous bond shall not exceed the penal sum of the bond. An action on the bond may be brought by the state or by any buyer by filing a complaint in a court of competent jurisdiction, including small claims court, within one year of cancellation of the surety bond. A complaint may be mailed by registered or certified mail, return receipt requested, to the surety and shall constitute good and sufficient service on the surety;
(2) Charge or receive any money or other valuable consideration solely for referral of the buyer to a retail seller who will or may extend credit to the buyer if the credit that is or will be extended to the buyer is upon substantially the same terms as those available to the general public;
(3) Make or counsel or advise any buyer to make any statement that is untrue or misleading or that should be known by the exercise of reasonable care to be untrue or misleading, to a credit reporting agency or to any person who has extended credit to a buyer or to whom a buyer is applying for an extension of credit with respect to a buyer's credit worthiness, credit standing, or credit capacity;
(4) Make or use any untrue or misleading representations in the offer or sale of the services of a credit services organization or engage, directly or indirectly, in any act, practice, or course of business that operates or would operate as fraud or deception upon any person in connection with the offer or sale of the services of a credit services organization.
19.134.030. Surety bond and trust account--Exception to requirement
If a credit services organization is in compliance with RCW 19.134.020(1), the salesperson, agent, or representative who sells the services of that organization is not required to obtain a surety bond and establish a trust account.
19.134.040. Information statement--Prerequisite to contract or payment--File maintained
Before the execution of a contract or agreement between the buyer and a credit services organization or before the receipt by the credit services organization of any money or other valuable consideration, whichever occurs first, the credit services organization shall provide the buyer with a statement in writing, containing all the information required by RCW 19.134.050. The credit services organization shall maintain on file for a period of two years an exact copy of the statement, personally signed by the buyer, acknowledging receipt of a copy of the statement.
19.134.050. Information statement--Contents
The information statement required under RCW 19.134.040 shall include all of the following:
(1)(a) A complete and accurate statement of the buyer's right to review any file on the buyer maintained by any consumer reporting agency, as provided under the federal Fair Credit Reporting Act, 15 U.S.C. Secs. 1681 through 1681t;
(b) A statement that the buyer may review his or her consumer reporting agency file at no charge if a request is made to the consumer credit reporting agency within thirty days after receiving notice that credit has been denied; and
(c) The approximate price the buyer will be charged by the consumer reporting agency to review his or her consumer reporting agency file;
(2) A complete and accurate statement of the buyer's right to dispute the completeness or accuracy of any item contained in any file on the buyer maintained by any consumer reporting agency;
(3) A complete and detailed description of the services to be performed by the credit services organization for the buyer and the total amount the buyer will have to pay, or become obligated to pay, for the services;
(4) A statement asserting the buyer's right to proceed against the bond or trust account required under RCW 19.134.020; and
(5) The name and address of the surety company that issued the bond, or the name and address of the depository and the trustee and the account number of the trust account.
19.134.060. Contract for purchase of services--Contents--Notice of cancellation--Buyer's copy
(1) Each contract between the buyer and a credit services organization for the purchase of the services of the credit services organization shall be in writing, dated, signed by the buyer, and include all of the following:
(a) A conspicuous statement in bold face type, in immediate proximity to the space reserved for the signature of the buyer, as follows: "You, the buyer, may cancel this contract at any time prior to midnight of the fifth day after the date of the transaction. See the attached notice of cancellation form for an explanation of this right";
(b) The terms and conditions of payment, including the total of all payments to be made by the buyer, whether to the credit services organization or to some other person;
(c) A full and detailed description of the services to be performed by the credit services organization for the buyer, including all guarantees and all promises of full or partial refunds, and the estimated date by which the services are to be performed, or estimated length of time for performing the services;
(d) The credit services organization's principal business address and the name and address of its agent in the state authorized to receive service of process;
(2) The contract shall be accompanied by a completed form in duplicate, captioned "Notice of Cancellation" that shall be attached to the contract, be easily detachable, and contain in bold face type the following statement written in the same language as used in the contract.
"Notice of Cancellation
You may cancel this contract, without any penalty or obligation within five days from the date the contract is signed.
If you cancel any payment made by you under this contract, it will be returned within ten days following receipt by the seller of your cancellation notice.
To cancel this contract, mail or deliver a signed dated copy of this cancellation notice, or any other written notice to
(name of seller) at (address of seller) (place of business) not later than midnight (date)
I hereby cancel this transaction, (date) (purchaser's signature) "
The credit services organization shall give to the buyer a copy of the completed contract and all other documents the credit services organization requires the buyer to sign at the time they are signed.
19.134.070. Waiver of rights--Violations--Enforcement--Unfair business practice
(1) Any waiver by a buyer of any part of this chapter is void. Any attempt by a credit services organization to have a buyer waive rights given by this chapter is a violation of this chapter.
(2) In any proceeding involving this chapter, the burden of proving an exemption or an exception from a definition is upon the person claiming it.
(3) Any person who violates this chapter is guilty of a gross misdemeanor. Any district court of this state has jurisdiction in equity to restrain and enjoin the violation of this chapter.
(4) This section does not prohibit the enforcement by any person of any right provided by this or any other law.
(5) A violation of this chapter by a credit services organization is an unfair business practice as provided in chapter 19.86 RCW.
19.134.080. Damages--Attorney's fees
(1) Any buyer injured by a violation of this chapter may bring any action for recovery of damages. Judgment shall be entered for actual damages, but in no case less than the amount paid by the buyer to the credit services organization, plus reasonable attorney's fees and costs. An award may also be entered for punitive damages.
(2) The remedies provided under this chapter are in addition to any other procedures or remedies for any violation or conduct provided for in any other law.
19.134.900. Short title
This chapter may be known and cited as the "credit services organizations act."
I identified no significant cases construing the Act.
For additional information about starting a credit repair company in [STATE] contact your state or an attorney.
A few states do require a surety bond. (At the time of this writing most states do not require a bond.) If your state does require a bond, you are required to secure you bond from your same state.
Bonds are a minimal expense (usually under a few hundred dollars) because you order them from a bond service and pay only a small fraction of the bond yourself. A Credit Repair Services Organization Bond protects you. For more information about Credit Repair Services Organization Bonds, contact BondsExpress.
If you get your bond through a bonds service, the amount you pay will generally be 2-3% of the total bond amount (this cost varies depending upon your credit).
Washington credit repair businesses must be knowledgeable about the statute of limitation governing debt in Washington because this will guide your business decisions and enable you to best help your clients. The statue of limitations essentially limits the time that a creditor can legally
Learn more about the statute of limitation laws for your state
We’re not aware of a state requirement for a “credit repair license” to operate a credit repair business in Washington. However, many find getting training and a certification useful because it:
The American Credit Repair Academy http://try.creditrepaircloud.com/academy/; offers training, resources, and credit repair certification
Use software to automate the tasks of a credit repair business in Washington:
All of this is available with Credit Repair Cloud
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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.