State of California California Department of Consumer Affairs

Credit Repair Services

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920-Credit Management/Credit Counsel

CREDIT REPAIR SERVICES

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In general, a person's credit report contains accurate information. Some information expires after a specified amount of time. Negative data can stay in a person's credit history for up to seven years. Information about bankruptcies remains for ten years. A credit repair company cannot remove these records or establish a new credit identity for an individual.


Consumers should follow procedures established by credit reporting companies and may desire to hire an attorney, or do it themselves when attempting to change credit records. A credit repair service (or consumers themselves) can research records for errors in billing or credit reporting to clear or delete incorrect information and repair credit in that manner but neither can remove negative data from the file if it is accurate.


The California Department of Consumer Affairs' Legal Office has prepared Legal Guide CR-9 for consumer information. (The following is a summary of pertinent points about credit repair services. Consumer may request a copy of this legal guide for complete definitions and explanations for credit repair services).



Statutory Coverage (C 1789.12, 1789.16)

Credit services organizations (also known as "CSOs" or "credit repair services") do not provide credit. CSOs offer to obtain loans or extensions of credit for consumers who have experienced credit problems or who want to correct or improve their credit record. The buyer of a CSO's services can cancel the contract, without penalty or obligation, within five days after signing it.



Statutory Purpose and Construction (CC 1789.11(b),(c)

While most credit services organizations provide consumers legitimate services, some have been known to accept payment and not provide any service, to provide inaccurate or misleading advice (e.g., referring consumers to potential creditors who would have granted them credit in any event), and to engage in questionable credit repair practices (e.g., disputing every entry on a consumer's credit report).


Most of the services performed by credit services organizations can be performed by consumers acting on their own behalf, exercising rights under the credit reporting laws and other laws.



Affirmative Requirements. Every credit services organization must:

1. File a registration application with, and receive a certificate of registration from, the Attorney General's office before doing business in California (CC 1789.25).


2. Obtain a $100,000 surety bond from an admitted surety in favor of the State of California for the benefit of any person damaged by any violation of the Act (CC 1789.18) (The bond must be maintained for two years after the CSO stops doing business in California.)



Prohibited Practices (CC 1789.13, 1789.17, 1789.19(a).)

1. Charge or receive any consideration solely for referring a buyer to a retailer seller or other credit grantor for an extension of credit, if the credit is, or will be, on substantially the same terms as those available to the general public, or on substantially the same terms as the buyer could have obtained with the CSO's assistance.


2. Make, or advise the buyer to make, any untrue or misleading statement to a consumer credit reporting agency, or to any present or potential creditor, such as untrue statements about the buyer's identification, home address, credit worthiness, credit standing, or credit capacity.


3. Remove, or assist or advise the buyer to remove, accurate and non-obsolete adverse information from the buyer's credit record.


4. Create, or assist or advise the buyer to create, a new credit record by using a new name, address, social security number, or employee identification number.



Requirements Relating to the Information Statement and the Contract (CC 1789.14,1789.15, 1789.16)

1. A CSO must give the buyer an information statement which contains a complete and detailed description of the services the CSO will provide, and the total cost or obligation to the buyer.


2. Notice of the buyer's right to proceed against the CSO's bond and the name and address of the surety company which issued the bond.


3. A complete and accurate statement of the availability of nonprofit credit counseling services.


4. A statutorily prescribed statement of consumer's rights under the state and federal credit reporting laws to obtain their credit reports and to dispute inaccurate information in them.



Lenders examine credit reports to determine if an applicant is a good risk but also to note how well he or she has met his or her financial obligations. When a person or business inquires about your credit, this will be noted in your file. In reviewing a file, a consumer should look for what has been reported as well as what has not. You may send each of the three major credit agencies a copy of a recent account statement and copies of your canceled checks or receipts showing your payment history and ask that the information be added to your file. You can build a positive image this way.


For information on the three major credit bureaus, Esperian, Equifax, and TransUnion, see Protect My Identity.


Credit repair service must register with Attorney General's office. Credit repair services must have a surety bond on file with the California Secretary of State's office. County or city business license is required for a business.

Department of Justice
Office of the Attorney General
1300 I Street
Sacramento, CA 95814
(800) 952-5225 (CA Callers)
(916) 322-3360 (Out of State)
(916) 323-5341 Fax
(800) 952-5548 (TDD in CA)
(916) 327-5564 (TDD Out of State)


The Federal Trade Commission provides do-it-yourself credit repair pamphlets for consumers, ways to build good credit, and offers information on credit repair scams to alert consumers.

Federal Trade Commission
Consumer Response Center
600 Pennsylvania North East
Washington, DC 2580
(877) 382-4357
www.ftc.gov


Credit repair companies must file a surety bond with the California Secretary of State:

Secretary of State
Special Filling
1500 11th Street, Suite 345
Sacramento, CA 95814
(916) 653-3984

Mailing Address:
PO Box 944225
Sacramento,CA 94244-2250
www.sos.ca.gov



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