Credit repair companies: what the law forbids them to charge you

It is the law regulating anyone providing assistance or advice to repair credit. It replaced Act 236-2004 and, with it, moved supervision from the Office of the Commissioner of Financial Institutions to the Department of Consumer Affairs, with a rationale the statement of motives explains: these entities do not offer financing services and are not financial institutions. The agency’s relationship with its clients is, by express text, fiduciary in nature: it must exercise its functions with the highest degree of diligence, care, loyalty and pecuniary benefit for its client. Before contracting, every attempt to contract must be preceded by a free, complete and efficient orientation about the services to be offered.

Any consumer considering or already contracted for these services. The law applies to any person, partnership, entity or corporation in the credit repair business, but expressly excludes anyone acting in their capacity as owner, partner, director, officer, attorney, accountant, agent or employee of law-authorized businesses such as banks, savings and loan associations and banks, trust companies, federal or Puerto Rico government agencies, retirement systems, federal savings and loan associations, finance companies, small personal loan companies, mortgage institutions, credit unions and similar entities whose main activity is lending. Nor does it apply to attorneys or accountants providing this service specifically as an incidental part of their business, nor to Financial Intermediation Businesses certified under OCIF and regulated by Act 214-1995.

Information pending verification.

• The written statement of consumer rights, in a document separate from the contract, printed in bold type no smaller than fourteen (14) points and previously approved by DACO.
• A good faith estimate, in a document separate from any other, with a complete and detailed breakdown of the services and their cost.
• The written contract, in a single document and in type no smaller than fourteen (14) points, dated and signed by you and by the authorized representative.
• The pre-printed duplicate form titled "Cancellation Notice", which must accompany the contract.

1. 1

   Step 1: Start with what cannot be erased

   The statement of rights the law requires them to hand you says it plainly: neither you nor any Credit Repair Agency has the right to have information excluded from your credit file if it turns out to be correct, accurate, current and verifiable. What does happen with time: the credit reporting organization must remove any negative information that, though accurate, is more than seven (7) years old, and bankruptcy-related information may remain for a maximum term of ten (10) years.

2. 2

   Step 2: Demand the three documents before signing

   The written statement of rights, in a document separate and independent from any other including the contract, in bold type no smaller than fourteen points and previously approved by the Department. The good faith estimate, also in a separate document, with a complete and detailed breakdown of the services and their cost. And the contract. The agency must keep a copy of the statement signed by you, acknowledging receipt, until two (2) years after the contract ends, and that copy is the evidence they handed it to you.

3. 3

   Step 3: Do not pay anything in advance

   This is the central prohibition. No Credit Repair Agency may request, receive or charge in advance the full or partial payment of any commission or fee for services to be rendered; it may only charge for work actually performed, accompanied by evidence confirming that work was done. The contract must tell you this expressly, and it adds that any action to the contrary could void the contract signed, and that any orientation given after the contract is signed and during its term forms part of it and may not be charged separately.

4. 4

   Step 4: You have seven calendar days to cancel

   The contract comes with a pre-printed duplicate form titled "Cancellation Notice", in type no smaller than fourteen points, which says: you may cancel this contract, with no penalty or obligation, within seven (7) calendar days of signing. To cancel, you mail or deliver a signed copy of that notice, or any other written notification, to the agency, no later than midnight of the seventh calendar day after the contract was signed.

5. 5

   Step 5: Count the six months and what was not achieved

   The contract must describe the services fully and in detail, including the estimated period to perform them, which may not exceed six (6) months, and their cost. At the end of that term, the licensee becomes entitled to collect any outstanding balance for services fully performed — but may not charge any amount for services not rendered, including accounts that were not repaired, eliminated or corrected within those six months. You may agree to continue for an additional six-month term for what could not be corrected or to include information not in the original contract, and in that scenario too they may not charge in advance.

6. 6

   Step 6: If they promised you a result, check the contract

   The law requires the contract to state clearly that contracting the services in no way constitutes a guarantee your credit will be restored, nor a guarantee of a favourable outcome. Among Article 17’s prohibited practices are: representing that they do or are empowered to remove accurate, current, real and verifiable information; creating, helping to create or advising you to create a new credit report using a different name, address, social security number or employee identification; making false representations to induce you to contract; submitting disputed information to credit reporting agencies without your prior authorization; conducting credit investigations without your prior authorization; using the credit reporting agencies’ phone system representing that the caller is you; and refusing to return any document prepared in the course of your engagement.

The Department of Consumer Affairs, and exclusively so: Article 23 provides that the Department shall have exclusive jurisdiction to handle consumer claims related to credit repair agencies, including claims about advertising campaigns promoting unrealistic offers that harm consumers. You may file a complaint there to vindicate the rights this law grants or for breach of contract. In addition, and in parallel, you may file a judicial action in the competent court seeking damages, specific performance of the contract, or both; if you prevail, you are entitled to claim costs and attorney fees.

• Paying in advance: the law forbids charging in full or in part before work is performed and evidenced.
• Believing correct, accurate, current and verifiable information can be erased, which is exactly what the law says it cannot.
• Letting the seven calendar days of penalty-free cancellation pass.
• Signing without receiving the statement of rights and the good faith estimate in documents separate from the contract.
• Accepting a contract with a service period longer than six months.
• Paying for accounts that were not repaired, eliminated or corrected within the term.
• Contracting without checking the Department licence: operating without one is Article 17’s first prohibited practice.
• Forgetting that you can dispute the information in writing with the credit reporting organization yourself.

These are the government pages this guide is based on.

• Departamento de Asuntos del Consumidor (DACO)

  DACO

  bvirtualogp.pr.gov

• DACO services

  DACO

  www.daco.pr.gov

• DACO online services

  DACO

  serviciosenlinea.daco.pr.gov