If you use the help of a credit repair company to improve your credit report or obtain credit, Ohio law provides you with some protection. Ohio's Credit Services Organization Act (CSOA) regulates credit repair companies that charge you for their services, and protects against certain potential deceptive or misleading practices by debt repair companies. CSOA supplements the protections provided by the federal Credit Repair Organizations Act (CROA).
Read on to learn what Ohio laws require and prohibit, who is covered by the laws, and what you can do if your rights are violated under the CSOA.
The Federal CROA
The federal Credit Repair Organizations Act (CROA) controls what debt repair clinics can promise and do for you. CROA was enacted to protect consumers from credit repair clinics that made false or misleading promises to “fix” your bad credit but then failed to deliver on those promises. The CROA:
- forces credit repair clinics to be honest about what they can legally do for you
- gives you a three-day right to cancel your agreement with a credit repair clinic
- requires credit repair clinics to fulfill their promises before getting paid, and
- requires credit repair clinics to make certain written disclosures to you about your rights and remedies.
To learn more about the CROA, see Federal Laws Governing Credit Repair Organizations.
Ohio's Credit Services Organizations Act (CSOA)
In 2004, Ohio enacted the Credit Services Organization Act (CSOA). Its purpose is to protect Ohio consumers from being taken advantage of by credit repair companies that charge fees for doing things that consumers could perform themselves to improve their credit, usually for free.
The CSOA provides practically the same protections as the federal CSOA, including the three-day right to cancel the contract. However, it provides some additional protections. For example, the CSOA also requires credit repair companies to be bonded. This bond is an important layer of insurance for consumers who are damaged by violations of the CSOA. In addition, it makes it easier for you to collect damages if a company violates the law.
What Is a Credit Services Organization?
The CSOA governs any credit services organization (CSO). A CSO is any person or agency that offers, performs, or promises to perform the following services in exchange for money or other valuable consideration:
- improve your credit record, history, or rating
- obtain a loan or other extension of credit for you
- help or give you advice about fixing your credit or obtaining credit
- remove negative but accurate credit information that is not outdated (more than seven to ten years old), and
- alter your personal identifying information to change your credit record, history or rating.
Who is Not Covered Under CSOA
A CSO does not include the following:
- creditors and debt collectors
- attorneys (unless they are offering to help you obtain credit or alter your personal information)
- mortgage brokers
- mortgage lender, credit union, or bank, and
- nonprofit budget and debt counseling service.
Registration and Bonding Requirements
All CSOs covered under the CSOA must be registered with the State of Ohio. This means that they must have a valid certificate of registration from Ohio's division of financial institutions. They must also maintain certain records of their transactions and services.
Every CSO is required to have a surety bond of at least $50,000. What this means is that a third party, usually the surety company, has agreed to pay up to $50,000 for any losses or damages that you suffer as a result of a CSO's violation of the CSOA. In that event, the surety company would be named as an additional defendant in a lawsuit, and is obligated to pay any court-awarded damages—except punitive damages--of up to $50,000.
What Credit Repair Companies Must Do
Under the CSOA, before entering into an agreement, a CSO must give you a written statement that contains the following:
- a complete and detailed description of the services it will perform, and the total cost of those services
- an explanation of your right against its surety bond, and the name and address of the surety bond company
- a complete and accurate statement of nonprofit budget and debt counseling services that are available to you
- a description of your rights under the Fair Credit Reporting Act, including your ability to dispute outdated or inaccurate credit information on your own, and
- a description of your three-day right to cancel any agreement with the CSO.
If, after reviewing and signing the initial written statement, you decide to hire the CSO, the CSOA requires the agreement to be in writing. The agreement must contain the following disclosures:
- your right to a free credit report
- your right to dispute inaccurate or outdated information directly with the credit reporting agency
- your three-day right to cancel the contract
- payment details (payment amounts, due dates, etc.)
- complete and detailed description of the services, including the time period in which the services will be completed but in no event can this be longer than 60 days from the date of the contract, and
- its performance history with its prior customers, in the form of a percentage of customers for whom it has fully and completely performed its services.
Prohibited Credit Repair Practices
A CSO cannot lie about or misrepresent what it is going to do for you, or engage in certain other practices with regard to your credit. Under the CSOA, a CSO cannot:
- charge or receive payment from you until it has completed all of the services it promised to perform for you within 60 days
- charge or receive a fee for referring you to a consumer reporting agency or potential lender (unless you obtained new credit as a result of the referral)
- make false or misleading statements about what it can do for you
- promise to remove negative but accurate and/or timely credit history items
- promise to get you a new loan or credit extension regardless of your credit history, unless it clearly tells you the credit eligibility requirements
- engage in any other unconscionable, unfair, or deceptive act or practice
- submit or offer to submit false or misleading credit information on your behalf to consumer reporting agency or potential creditor, or
- submit credit report disputes without your signed authorization
If the CSO Violates the CSOA – Lawsuits and Remedies
You have a private cause of action if a CSO harms you in violation of the CSOA. This means that you can file a lawsuit in Ohio against the CSO for damages. You have up to four years from the date of the agreement to bring a lawsuit. If you win, the court may award to you:
- damages of at least the amount you paid the CSO under the contract (there is no cap)
- potential punitive damages, and
- attorney’s fees and court costs.
The CSO may be subject to civil injunctions and criminal sanctions, enforceable by the local county prosecutor or Ohio attorney general. If you have a potential claim against a CSO, you can visit Ohio's Division of Financial Insititutions webpage at www.com.ohio.gov/fiin/CSAbout.aspx.
Getting More Information
For more details on what Ohio's CSOA does and does not cover, you can read Ohio's Credit Services Organization Act, General Statutes §4712.01 to 4712.99. To learn how to find state statutes, visit Nolo’s Legal Research Center.