Does Federal Law Prohibit Charging for Credit Repair Services?

Consumers can pay for credit repair services.

Credit repair companies may offer to help consumers improve their credit scores or dispute the incorrect and negative information listed in their credit files in exchange for a service fee.

The Facts

The Credit Repair Organizations Act includes several guidelines that credit repair companies must follow in their efforts to advertise, provide and obtain payment for credit repair services. Under this Act, credit repair agencies can charge consumers for their services as long as their services do not involve any illegal practices, consumers are informed of their rights and a written contract has been signed by the consumer.

Time Frame

Although federal law allows businesses to charge for credit repair services, it does not allow credit repair companies to charge consumers until the services have been rendered. Federal law also requires that credit repair organizations give their clients at least three days to cancel their written contract without charging any fees.

Contract Requirements

In order to comply with federal law, credit repair agencies are required to include details about their services and all related charges in their contracts. Contracts should include information about the total cost of the services, service guarantees, completion date for the services and the customer's right to cancel.

References

• Federal Trade Commission: Credit Repair Organizations Act
• Federal Trade Commission: Credit Repair-How to Help Yourself