Does the Federal Trade Commission Impose Regulations on Credit Repair Companies?


Yes, as part of its broad authority to protect consumers, the Federal Trade Commission (FTC) enforces the Credit Repair Organizations Act (CROA) which specifically relates to credit repair services. This act regulates the behavior of companies offering credit repair services to consumers.

What are Credit Repair Companies Required to do Under CROA?

The act has several requirements a credit repair company must meet prior to conducting any service. Prior to the execution of any agreement between the consumer and the credit repair company, the organization shall provide the consumer with a specific statement found in §1679c, which sets forth consumer credit file rights under state and federal law. This written statement must be signed in a separate document from any written contract between the company and the consumer. Additionally, services may not be provided by any credit repair organization unless:

  • There is a written, dated and signed contract including:
    • The terms and conditions of payment,
    • The total amount of all payments to be made by the consumer to the credit repair organization (or to any other person);
    • A detailed description of the services to be rendered by the credit repair company for the consumer;
    • The name and address of principal place of business of the credit repair company; and;
    • A conspicuous statement in bold face type, stating the following: “You may cancel this contract without penalty or obligation at any time before midnight of the 3rd business day after the date on which you signed the contract. See the attached notice of cancellation form for an explanation of this right.”
  • Or before the end of the three-business day period beginning on the date the contract is signed.

What Practices by Credit Repair Companies are Prohibited Under CROA?

The act sets forth prohibited practices under the act in §1679b. Under this section, credit repair companies as expressly prohibited from:

  • Making a false or misleading statement with respect to a consumer’s credit worthiness, standing or capacity to credit bureaus, creditors, lenders or the consumer themselves;
  • Advising consumers to make false or misleading statements;
  • Altering a consumer’s identity (or advise consumers to do so) as a way of concealing a consumer’s negative credit information;
  • Making false or misleading representation of the services provided by the companies;
  • Engaging in any course of business that would constitute fraud or deception;
  • Charging or receiving any money or other valuable consideration prior to the agreed upon services being fully performed.

What Happens When Credit Repair Companies do not Comply with CROA?

Any person who fails to comply with the Credit Repair Organization Act will be held liable for actual damages and punitive damages. When awarding punitive damages, the court will consider relevant factors such as the nature of the noncompliance and the extent to which noncompliance was intentional. Additionally, in the case of any successful action to enforce any liability under this act, the liable party will also be responsible for the prevailing party’s costs and reasonable attorney’s fees.

How is Compliance with CROA Enforced?

The administrative agency responsible for overseeing and enforcing compliance with CROA is the Federal Trade Commission. Additionally, a state’s attorney general or a state’s chief of law enforcement officer may bring suit if there is reason to believe the state’s residents are facing violations of the act. However, a state cannot make a claim under CROA if the Federal Trade Commission is already conducting an investigation on that credit repair company.

EPGD Business Law is located in beautiful Coral Gables, West Palm Beach and historic Washington D.C. Call us at (786) 837-6787, or contact us through the website to schedule a consultation.

*Disclaimer: this blog post is not intended to be legal advice. We highly recommend speaking to an attorney if you have any legal concerns. Contacting us through our website does not establish an attorney-client relationship.*

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Eric Gros-Dubois

Eric P. Gros-Dubois founded EPGD Business Law in 2013 and is the current head of the firm’s corporate, estate planning, and tax practice, and manages the firm’s Washington D.C. office. With a JD and MBA, and a specialization in finance, Eric is able to step back and view the legal world through a commercial lens while also acting as a trusted business advisor for his clients. He does his best to be solutions oriented, and tries to think like a business owner, not just a lawyer.


*The following comments are not intended to be treated as legal advice. The answer to your question is limited to the basic facts presented. Additional details may heavily alter our assessment and change the answer provided. For a more thorough review of your question please contact our office for a consultation.

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