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What you must know to operate a credit repair business

Repairing inaccurate, misleading and unverifiable items off credit reports is perfectly legal. But some credit repair companies are not. Fraudulent companies make false promises and often mislead consumers. As a result, the Federal Trade Commission (FTC), who is responsible for enforcing consumer protection, developed the Credit Repair Organization Act (CROA). I know what you are thinking “one bad apple ruined it for the rest of us” but with a few simple tips, it will be smooth sailing. Several states have their own laws and regulations so you many want to do a search for what your states regulations are. For this article we will focus on the Federal CROA.

#1 – Don’t make deceptive claims
Do not make false representations or guarantees. It is important to understand there are no guarantees involved with Credit Repair. Just like in a court of law, an attorney could never guarantee a client that the judge or jury would find in their favor. It is also important that you do not lie or misrepresent your credit repair services. Honesty is the best approach. If you want to make claims about how successful your services are, give actual statistics and examples of what your other clients have experienced. “Our average clients see 4 – 10 items removed in 90 days” is a great way to pitch your service. Remember, you don’t have to lie or deceive to sell your service. The largest credit repair organizations out there are still in business because they are truthful.

#2 – Ask you clients which items to dispute
The second biggest violation credit repair companies make is disputing items that are known to be accurate. Although it is a rare thing to find credit reports “completely accurate” across all three credit bureaus, if the client indicates that “yeah, that is right” then you better leave that item alone. As Brad Elbein, Director of the FTC’s Southwest Regional Office says “no credit repair company has the right to remove accurate, current information from a credit report.” Stick with disputing items the client instructs you to. This is as simple as taking 10 minutes to run over the credit report with your client. Using DisputeSuite.com, you can input customer instructions, such as “My payment was never late”, into the software for each item.

#3 – Provide consumers with their rights
As a credit repair organization, you must provide a copy of the “Consumer Credit File Rights Under State and Federal Law” before you have your client sign a contract. You must also inform your client that they have a right to cancel your contract. Visit http://www.ftc.gov/os/statutes/croa/croa.shtm to get a copy.

#4 – Make sure you have a contract in place
If you don’t already have one in place, you must get a contract in place immediately. Make sure your contract hits these talking points:

  • The payment terms for services, including their total cost
  • A detailed description of the services to be performed
  • Any guarantees or refund policies (if offered)
  • Power of attorney
  • The expected time it will take to achieve results (use estimates)
  • A copy of the FTC’s “Consumer Credit File Rights”
  • A cancellation notice (in bold font). Clients have 3 business days afterwards to legally cancel.
  • Your company’s name and business address

You can find tons of sample credit repair agreements on the internet by Google’ing “credit repair agreement”. However, I recommend you have a lawyer look over the contract to ensure its legality. Make sure you have the client sign and date it (in ink). Make 2 copies of the agreement, one for the client’s records and one for yours. It is a MUST to keep copies of your clients’ contracts for a minimum of 2 years.

#5 – First perform then collect payment
That’s right, perform credit repair services then collect money. Seems like a backwards way of billing but the CROA states a credit repair organization is not allowed to collect payment for any services that have not been performed. The organization can only collect payment after they have performed their end of the deal. This is why I recommend monthly billing. (See my article on fixed vs. monthly billing.) With monthly billing, you are billing for work previously performed.
For a closer look, please visit www.ftc.gov. I recommend printing up the CROA and pasting it up on the wall for quick reference. It also lets your employees know you are serious about compliance.

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  1. Lon Dunn says:

    Ron, I think that there are some other places that actually list the Injunctions and Fraud cases brought against people who do not heed your advice. For instance, http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre38.shtm or another one, http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre26.shtm

    I agree entirely. The only way we are going to change the image of this industry is to practice moral, ethical and honest credit businesses, and participage in CHANGING OUR IMAGE!!

    Pls send your Presen and Template

  2. Damien Rufus says:

    Hey Mike, great article.

    I wish everyone in the industry could read this article. I find myself, after listening and watching the webinars, trying to help other CRO’s build a more reputable industry. It’s amazing how many organizations are out there still using deceptive claims in order to get clients in the door.

    Keep it up Mike! I really appreciate everything that you do to ensure our success.

    P.S. – I missed half of the webinar because I was busy taking care of the clients that came in because of all the wonderful methods you have made available.

  3. MikeN says:

    Your presentations was very helpful and informative. I’ve listened to other credit repair software companies and your on the right path…Helping people.

  4. Arnita says:

    Wow! One thing we must do is stay in compliant with the law. There are alot of companies out there that have pretty much tried to destroy the credit repair business reputation and I don’t believe this is always done on purpose, but because it is so easy to get in to. There is more to it than just disputing it is about educating. I believe some companies have gotten away from that. Over all, Mike today’s webinar was great! I feel soooo empowered and motivated. I have met some really cool people through your webinar’s and I can’t wait to attend the Boot Camp in October. I want to personally thank you and your affliates for sharing you guys secrets with all of those who are interested. Thanks again!!!!

  5. Dominic says:

    That is great that everyone is concerned about compliance! So we shall see everyone as a member very shortly? 🙂

  6. Reney DuBose says:

    Hi Mike,

    I really appreciate your articles and the webinars. I look forward to the webinar each week, particularly the resources you graciously provide. Unfortunately, I missed the first 35 minutes of the webinar dicussing the debt settlement letters. But I still learned a lot of information to help me with marketing to targeted professionals.

    Thanks again for all you do!

  7. curtis weaver says:

    Great article again , I would like to see more on what to properly charge, thanks alot

  8. Lonnie Stevenson says:

    Mike –

    In just the first few months I have become associated with your orginaization I can honestly say I’ve learned more from you than from another credit repair service I had been working with for the past 3-years. This article is another example of how far you go in making it crystal clear there is a right way, and a wrong way to do credit repair and your orginaization want’s nothing to do with the wrong way.

    Thank you for sharing all that you share with us.

  9. Troy Hitt says:

    Great Call. I caught the tail end but MAN what good energy! Ron and Angela are overflowing with knowledge. As always I am gonna take and run. Looking for a local AM station to get my foot in the door with the Credit Scoring presentation over the airwaves. Thanks again for this awesome forum Mike!

    Troy Hitt
    Houston “By God” Texas

  10. George Kennedy says:

    Great advice in this article regarding being compliant, which by the way, was also a part of today’s webinar. It ties well together with focusing on the customers wants and needs and helping them. This law of reciprocity results in the money will take care of itself. Anyway, the webinar was great. Especially with Angela and Ron offering great tips as well as dishing up some innovative marketing ideas to pursue. We always take notes and add to our marketing strategies with each webinar. Also, the importance of database and warm market referrals as opposed to hunting down new business. Seems obvious, but the statistics are certainly one sided in that regard. Ron’s tip regarding the Pod groups was another eye opener.

    Thanks Again!

  11. Kim says:

    Mike,

    As usual, I have grown from the knowledge gained. I only caught the end, but just that little bit was so powerful. These webinars always make me go back to review, revise, and restructure how we do business. You know its one thing to have done “Good” business, but its a totally different thing to continue to do “Good” business because you are still “In business”. Some companies in our industry can’t say that because they are not following the rules and either are loosing business or will be put out of business for not being compliant. So thanks again for the continuing education. Any time you have these available to listen to again please let me know.

  12. Jon says:

    Mike,
    I am in Florida, and although CROA says we cannot charge upfront, Chapter 817 Part III says we may provided we secure a $10,000 surety bond and a trust account, here is a link, its right on section 817.7005(1): http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&Search_String=&URL=Ch0817/SEC7005.HTM&Title=->2009->Ch0817->Section%207005#0817.7005

  13. Wow, I did not heard about this topic till now. Thanx!!

  14. Richard says:

    Can someone guide me on what I need to do to be compliant in California???

  15. Debbie Hower says:

    Mike you always give us such great information on our industry. Thank you!!! I look forward to more, it’s like an addiction but in a good way 🙂 I almost wish you had a school that teaches all of the ins and outs of this industry so graduates can be certain they are doing everything possible to help clients get the best accurate scoring.

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