Credit reports represent financial responsibility and credit histories to potential lenders. Credit scores and credit report information affect interest rates and loan approval. Credit repair companies assisting consumers with their credit reports must follow California and federal laws regarding contracts, payment schedules and misleading information. If a disreputable credit repair company fails to complete contractual obligations or otherwise breaks the law, file a complaint with the California Attorney General's Office.
Licensing Requirements
Excluding exemptions, credit repair companies must be registered with and authorized to provide credit help by the California Attorney General's Office. Exemptions may include licensed credit lenders, FDIC-backed banks, non-profit organizations, attorneys, real estate brokers and business managers or licensed debt help agencies or proators acting within the scope of their license.
Time Frame
Credit repair agencies must complete agreed-upon services within six months of signing a contract. Agencies provide consumers with and keep a signed copy of an agreement detailing consumer rights regarding credit reporting and correction of inaccurate information. Additionally, California law requires all credit repair companies obtain and maintain a $100,000 surety bond for two years after the company stops doing business in California. The surety bond helps protect consumers from companies failing to fulfill a contract. Consumers retain the right to cancel an agreement by midnight of the fifth day after signing a contract.
Contract Laws
Credit repair companies must provide a written contract detailing services to be performed, the total cost of the service, availability of non-profit credit counseling and the consumer's rights to obtain and dispute inaccurate credit report information on their own. Companies are barred from collecting payment upfront or until the company fulfills contractual obligations.
Prohibited Practices
Agencies are prohibited from making false or misleading statements or advising clients to make false statements to credit reporting companies or creditors. Attempting fraudulent or deceptive practices or instructing consumers to engage in such activity is prohibited. Fraudulent practices may include attempting to remove accurate and non-obsolete credit information or instructing consumers to create a new identity or credit report to avoid negative credit information. Companies cannot dispute credit information or represent the client to a credit-reporting agency without the client's knowledge.
Federal Laws
Section 1679b under Title 15 of the United States Code prohibits misleading or untrue statements and actions by a credit repair organizations. Federal law also prohibits agencies from instructing consumers to engage in fraudulent activity such as altering identity to hide accurate negative credit report information. As with California laws, the U.S. Code prohibits credit repair companies from accepting payment until the services are complete.
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