Don’t Get in Trouble for Handling Client Credit Issues

You probably know that many companies that advertise credit repair services, may not all be above board. Although some are legitimate companies, the industry is fraught with companies that promise more than what they can actually (or legally) deliver.

That’s why the law puts a lot of restrictions on the industry and numerous regulations on how they can advertise, and receive payment, from customers.

Do You Have to Follow These Laws?

But you may be a law firm—certainly a company that is legitimately authorized to help clients with credit, and a company that knows what can and what cannot legally be done, aside from being bound by your professional ethics.

So do you have to follow all those laws that apply to traditional credit repair companies, if you’re not a credit repair company—you’re a licensed attorney or law firm?

It turns out that you do, and many law firms get in trouble for just this reason.

Law Firms Must Comply

Lawyers tend to be exempt from many regulations that govern other, non-legal industries, but that’s not the case when it comes to the Credit Repair Organizations Act (CROA). The CROA does apply to legal providers.

It applies, even if a law firm doesn’t primarily do or advertise credit repair services. Or if they are handling a “legitimate” dispute related to a credit case—that is, not just “cleaning someone’s credit.” Even if fixing or improving credit is just part of a larger case, or just a “side service” offered to a client that the law firm is doing other services for, the law firm has to comply with CROA.

And while it may be distasteful for lawyers to sue other lawyers, they can and do, when lawyers handle credit related services without complying with CROA.

The CROA Agreement

A CROA-compliant agreement needs to say more than what a normal retailer agreement for legal services would.

The contract must inform the client that he or she can get a credit report, and dispute items on their own. The contract has to detail what you are doing for the client and say what the services will cost. This is difficult for many attorneys, who are used to not working on flat fee agreements. And no, if a case gets more complex, the lawyer cannot go back and require more money from the client later on.

Lawyers also cannot collect any payment until the work is actually performed, and the agreement must tell the consumer that. Whether that includes taking a retainer to be held in trust, is an open question that has not been determined-although “setup fees” or “startup fees” or similar fees made before services are performed are illegal.

The contract must say that the consumer can sue you for damages, if the firm does not perform the services under the contract.

Were you defrauded by a credit repair agency, or any other company? We can help.  Call the West Palm Beach business lawyers at The Law Offices of Larry E. Bray today.

Sources:

ftc.gov/legal-library/browse/statutes/credit-repair-organizations-act

investopedia.com/terms/c/credit-repair-organizations-act-croa.asp