CROA (Credit Repair Organizations Act)

The Credit Repair Organizations Act, 15 U.S.C. 1679 to 1679j, became federal law on September 30, 1996. Today it is one of the main laws behind lawsuits against debt relief and debt settlement companies. Courts have held that a debt program falls under CROA when the company sells it as a way to improve the customer's credit rating, even if the contract says otherwise.

The Act's core protections are simple. Under 15 U.S.C. 1679b(b), a covered company may not charge or receive any money for a service before that service is fully performed. It also cannot make false or misleading statements about its services, it must give a separate written disclosure of consumer rights before you sign, and the contract must be in writing. Under section 1679e, you can cancel without penalty before midnight of the third business day after signing. Any waiver of these rights is void.

The remedies are strong, which is why CROA drives debt relief class actions. Under section 1679g, a company that violates the Act is liable for the greater of your actual damages or everything you paid it, plus punitive damages and attorney fees. In Zimmerman v. Puccio (1st Cir. 2010), the court affirmed a $256.5 million class judgment against a debt management company that repeatedly told customers its program would improve their credit. You generally have 5 years from the violation to sue (section 1679i).

If you paid a debt settlement company that took fees early or promised a better credit score, keep your contract, account ledger, and marketing materials. See our debt relief lawsuits page and how to cancel a debt settlement program.