A credit repair company cannot charge you before the work is done
15 U.S.C. § 1679b(b)
In plain words
Federal law bans credit repair companies from charging or taking any money for a service before that service is fully performed. A company that bills you up front, charges a "setup" or "first work" fee, or charges a monthly fee for work it has not done yet is breaking the law.
Who is protected
Anyone who pays a company (other than a bona fide 501(c)(3) nonprofit, a creditor restructuring its own debt, or a bank or credit union) to improve their credit record or advise them about it.
When it applies
- If the company sold to you by telephone, the FTC Telemarketing Sales Rule goes further: no fee until the promised results are achieved and shown on a credit report issued more than 6 months later (16 C.F.R. § 310.4(a)(2)).
What you can do
Refuse up-front fees and report them
Do not pay. Report the company to the FTC (ReportFraud.ftc.gov), the CFPB (consumerfinance.gov/complaint) and your state attorney general.
Open the Credit Health tool
Upload your free reports from AnnualCreditReport.com. The tool lists items you may want to check and explains your options. You decide what, if anything, to dispute.
Open the tool
Honest limits
- Some states let a bonded company take fees early, but federal law still forbids it.
- Anything a credit repair company can legally do, you can do yourself for free.
The law
- Federal lawCROA — no payment in advance
15 U.S.C. § 1679b(b)
What it says: No money for any service before that service is fully performed.
Read the official texthttps://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title15-section1679b&num=0&edition=prelim - Federal regulationTelemarketing Sales Rule — credit repair
16 C.F.R. § 310.4(a)(2)
What it says: For telemarketed credit repair, no fee until results are achieved and documented by a report issued 6+ months later.
Read the official texthttps://www.ecfr.gov/current/title-16/section-310.4 - Federal lawCROA — civil liability
15 U.S.C. § 1679g
What it says: You can recover at least what you paid, plus punitive damages and attorney's fees.
Read the official texthttps://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title15-section1679g&num=0&edition=prelim
Court cases
- Partial winSame topicTaggart v. Lorenzen
Taggart v. Lorenzen, 587 U.S. 554 (2019)
a creditor may be held in civil contempt for violating a bankruptcy discharge order when there is no fair ground of doubt that the order barred its conduct
- Homeowner wonSame topicJerman v. Carlisle, McNellie, Rini, Kramer & Ulrich, L.P.A.
Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich, L.P.A., 559 U.S. 573 (2010)
the FDCPA's bona fide error defense does not excuse a debt collector's incorrect interpretation of what the Act requires
- Homeowner wonSame topicKaltenbach v. Richards
Kaltenbach v. Richards, 464 F.3d 524 (5th Cir. 2006)
a person who meets the FDCPA's general definition of debt collector is subject to the whole Act even while enforcing a security interest
- Homeowner wonSame topicHeintz v. Jenkins
Heintz v. Jenkins, 514 U.S. 291 (1995)
the FDCPA applies to lawyers who regularly collect consumer debts, even through litigation
- Homeowner lostSame topicObduskey v. McCarthy & Holthus LLP
Obduskey v. McCarthy & Holthus LLP, 586 U.S. 466 (2019)
a business engaged only in non-judicial foreclosure is not a debt collector under the FDCPA, apart from the provision barring threats to take property without a present right
- Homeowner lostSame topicMidland Funding, LLC v. Johnson
Midland Funding, LLC v. Johnson, 581 U.S. 224 (2017)
filing an obviously time-barred proof of claim in bankruptcy does not violate the FDCPA
Related rights
Cancel a credit repair contract within 3 business days
15 U.S.C. § 1679e
You can cancel any credit repair contract, for any reason and without penalty, until midnight of the third business day after you sign it. The company must give you a "Notice of Cancellation" form in duplicate and may not start work during those 3 days. Some states give you 5 days.
Read this rightA written contract and a rights disclosure come first
15 U.S.C. § 1679c
Before you sign, a credit repair company must give you a separate written statement titled "Consumer Credit File Rights Under State and Federal Law." No service can be provided without a signed, dated written contract stating the total cost, a detailed description of the services, any guarantees, how long it will take, the company's address, and a bold cancellation notice next to your signature. Any waiver of these rights is void.
Read this rightYou can recover damages when the FCRA is broken
15 U.S.C. § 1681n
A credit bureau or a company that reports to one that willfully breaks the FCRA owes your actual damages or statutory damages of $100 to $1,000, possible punitive damages, and your costs and attorney's fees. A negligent violation owes actual damages and fees. The claim must be filed within 2 years of discovering the violation and no more than 5 years after it.
Read this rightA collection or charge-off must carry its real delinquency date
15 U.S.C. § 1681s-2(a)(5)(A)
A company that reports an account placed for collection or charged off must tell the credit bureau the month and year the delinquency began, within 90 days. That date sets when the item must come off your report, and it does not change when the debt is sold.
Read this rightDispute errors on your credit report
15 U.S.C. § 1681i(a)(1)(A)
If your credit report has something wrong or incomplete — like a payment reported late that you made on time — you can dispute it with the credit bureau for free. The bureau must investigate, usually within 30 days, and fix or delete information it cannot verify.
Read this rightPlace a free fraud alert
15 U.S.C. § 1681c-1(a)
If you suspect in good faith that you are, or are about to become, a victim of fraud or identity theft, you can ask one nationwide bureau to place a fraud alert for at least 1 year; it must pass the alert to the other two. Identity theft victims with an identity theft report can get an extended alert for 7 years. Either alert also entitles you to free copies of your file.
Read this right