Bipartisan Bill Aims to Eliminate Credit Repair Upfront Fees and False Score Promises

A bill targeting fraudulent credit repair organizations was recently introduced by U.S. Senators Chris Coons (D-DE) and Lisa Murkowski (R-AK). The bill, titled “Ending Scam Credit Report Act,” takes aim at credit repair organizations that exploit consumers with high fees and deceptive practices. 

The bill has several components, including prohibiting credit repair organizations from collecting payment until six months after they have provided proof that a consumer’s credit score has increased.

The bill would also require credit repair organizations to register in the state, increase civil penalties to $500 per violation, and require stronger disclosures for consumers.

In addition, the bill would prohibit “jamming,” a tactic where credit repair organizations flood financial institutions with duplicate disputes preventing legitimate credit issues from being addressed.

This jamming also impacts federal data since the Consumer Complaint Database at the Consumer Financial Protection Bureau gets jammed as well, ACA International reports.

“Americans are already stretched thin. Improving a low credit score is hard enough without having to navigate predatory companies seeking to lie to you and rip you off,” Coons said. “(This bill) would protect Americans trying to restore their financial foundation while making it easier for honest businesses to succeed.”

Taking Aim at Predatory Actors 

The bill targets credit repair organizations that use predatory tactics when working with consumers who are looking to improve their credit scores. 

“There are too many predatory operators in the credit repair industry exploiting financially vulnerable Americans with deceptive practices and exorbitant fees,” Murkowski said. 

“Rebuilding financial stability and improving one’s credit score is often a grueling, time-consuming process. This legislation establishes long-overdue guardrails and accountability to stop bad actors from profiting off those trying to get back on their feet.”

To curb the false promises of predatory credit repair organizations, the bill comes with a new disclosure requirement. Under the bill, credit repair organizations would be required to disclose that they do not provide any service that a consumer could not do themselves for free. 

Support in the House and From Banking Groups

Companion legislation also was introduced in the House by U.S. Rep. Sarah McBride (D-DE) and Rep. Young Kim (R-CA.) Eleven banking and consumer groups support the bill. The American Financial Services Association was among the banking groups applauding the bill. 

“As financial fraud becomes more sophisticated, AFSA supports bipartisan legislation … to combat credit-repair organization scams, which increasingly harm consumers by charging hundreds of dollars with no positive results,” said Michael Grimes, Vice President of Congressional Affairs at the American Financial Services Association.

A spokesperson from the American Bankers Association had this to say.

“Banks help customers build credit every day through transparent products, financial education and long-term support, and this important legislation reinforces those responsible pathways by targeting deceptive credit repair schemes,” said Kirsten Sutton, EVP of Congressional Relations and Legislative Affairs at the ABA.

FTC Sends Millions to Credit Repair Victims

The Federal Trade Commission (FTC) also has its eye on fraudulent credit organizations. The FTC is sending more than $10.9 million to consumers harmed by credit repair scams.  

In 2022, the FTC sued the company Financial Education Services, which goes by multiple names, for preying on consumers with low credit scores by promising an easy credit fix and luring them into a pyramid scheme.

The FTC is sending checks to 443,048 consumers impacted by the fraudulent credit repair operation. 

The Bottom Line

A bill introduced in the U.S. Senate targets the credit repair industry with a number of provisions. The bill would prevent credit repair organizations from collecting payment until six months after the company has provided proof that a consumer’s credit score has improved.

This  bill also would require credit repair organizations to register in the state, increase civil penalties to $500 per violation, and require stronger disclosures for consumers.

Another provision takes aim at the practice of jamming, which is when credit repair organizations flood financial institutions with duplicate disputes. This practice would be prohibited.