There are two Major Federal Credit Repair Laws you need to know
The Credit repair industry is the highest risk industry as far as all financial services go, but it’s a federally protected right. There are two main credit repair laws that guarantee consumers the right to correct errors in their credit report. Each state has its own laws credit repair companies must follow.
Credit repair is legal in only 50 states. The federal law guarantees consumers the right to dispute information in their credit report to have it corrected. The federal law also outlines how credit repair companies can provide services to consumers. These two laws basically set the foundation for how credit repair works in the United States.
Federal Law #1: Fair Credit Reporting Act (FCRA)
The Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681, is U.S. Federal Government legislation enacted to promote the accuracy, fairness, and privacy of consumer information contained in the files of consumer reporting agencies. This law created the industry of credit repair which started in 1970. Small private companies started providing consumer credit histories in summary reports to banks starting in the 1960s. The reports helped banks make lending decisions for local customers. But consumers found that these reports weren’t always entirely accurate. Since this affected people’s ability to qualify for loans, the federal government stepped in to regulate credit reporting.
Your Rights under the FCRA
The FCRA did not just give birth to the industry of credit repair, It also provided the following protections for consumers:
- It limits who can view your credit report. No agency, person or organization can view your credit report without your authorization.
- There are limitations to what a data furnisher can report on your credit report as well as how long it stays on.
- It guarantees the right to accuracy.
- There are strict criteria by the FCRA which determines what is accurate and what isn’t. If there is one inaccuracy on the report, you guessed it must be removed.
Rights to credit repair granted by the FCRA
When it comes to credit repair, the Fair Credit Reporting Act outlines the process credit bureaus must follow.
- Credit reporting agencies (CRAs) must accept disputes from consumers free of charge.
- They must respond within 30 days, but if there is any follow up then they have an additional 15 days to respond.
- The bureau must contact the lender or original provider of the information to verify it within 5 business days.
- The agency has a right to terminate a dispute if it’s deemed frivolous or irrelevant. If they do, they must inform you of the termination within 5 business days.
- If a disputed item cannot be verified, it must be removed.
- The CRA must then provide you with a free copy of your credit report so you can confirm the item is gone.
- If the item can be verified, the dispute gets rejected.
- If this happens, the consumer has a right to include a 100-word statement in their credit report. This explains your dispute to lenders reviewing your report. However, the negative information would still affect your credit score.