Credit Repair Laws in Credit Repair Adding another layer of legality to this issue, let us understand the legalities that come into play when charging monthly fees. The Credit Repair Organizations Act (CROA) specifically states that credit repair organizations may not impose or collect fees until the services have been fully completed. This avoids any prepayment for services not yet rendered, thus making everything up-front fees or monthly charges illegal.
Legal Framework
The CROA aims to prevent consumers from being taken-in by some of the less honest credit repair schemes. Under the law, companies may not promise payment or issue of payment until you deliver the service that they promise. The idea was to prevent scams, in which consumers pay for services that are never provided.
Recent Enforcement Actions
The recent actions of the Consumer Financial Protection Bureau (CFPB) include practices that involved charging illegal fees by credit repair companies, which keeps recurring for a long time. Record-setting settlements have also been levied due to participation in illegal advance fees programs, such as those involving Credit Repair Cloud which resulted in massive penalties being paid by both the company and its CEO23. These enforcement challenges further show the essentiality of compliance with the CROA.
Consumer Awareness
Consumers should also be wary of credit repair companies who promise quick, easy solutions to consumers’ credit problems in exchange for up-front or monthly fees. The Federal Trade Commission notes that true credit repair does take time and effort (and indeed, provides some tips for those who want to try it for themselves ), but no legitimate company is making or can make guarantees of such specific results in short periods of time — if at all 1.credit repair (ad)
To put it all together, charging for services never rendered is a violation of CROA–a fact that consumers should be wary of other companies that seek to flaunt the rules.
