August 29, 2023 – Washington, D.C. – The Consumer Financial Protection Bureau filed a proposed settlement in Utah district court with companies representing the largest credit repair services in the U.S. Monday.
The settlement shows the importance of reining in firms that take advantage of consumers and impact the credit reporting system for consumers and creditors through federal and state legislation.
“ACA International has advocated at the federal and state level in support of legislation for credit repair firms to be transparent with consumers and creditors, and to only file valid claims within the parameters of the FCRA,” said CEO Scott Purcell.
In May, ACA joined industry trade groups in advocating for the modernization of the Credit Repair Organizations Act (CROA), which was passed in 1996.
In a letter (PDF) to House Financial Services Committee Chair U.S. Rep. Patrick McHenry, R-N.C., and Ranking Member Maxine Waters, D-Calif., ACA, the American Bankers Association, American Financial Services Association, Consumer Bankers Association, Consumer Data Industry Association, Credit Union National Association, National Association of Federally-Insured Credit Unions, National Bankers Association and the U.S. Chamber of Commerce stated, “Amending the CROA would help to prevent credit repair firms from inducing consumers to pay for services that are not provided and from clogging dispute systems with false claims.”
It also notes that regulators, including through actions such as this CFPB settlement and warnings from the Federal Trade Commissions, have made it clear that credit repair organizations present risks to consumers trying to improve their finances through potentially misleading language.
At the state level, Washington Gov. Jay Inslee signed a bill in April to protect consumers from the deceitful tactics of credit repair companies that was a significant focus of advocacy by the Washington Collectors Association.
The California Association of Collectors Inc. supported an amended version of the Credit Services Act of 1984 that passed last year because it provides transparency to the processes between credit services organizations, debt collectors and consumers. It also strengthens California’s regulation and oversight of credit services organizations, ACA previously reported.
“Halting actions of these large-scale groups nationwide is critical to protect consumers from being taken advantage of when they are trying to manage their debts, and financial institutions and their agents from the added costs from frivolous and duplicative claims,” Purcell said. “It helps ensure a fair and accurate credit reporting system for consumers and creditors that provide affordable access to credit.”
ACA International represents approximately 1,700 members, including credit grantors, third-party collection agencies, asset buyers, attorneys, and vendor affiliates in an industry that employs more than 125,000 people worldwide. Most ACA member debt collection companies, however, are small businesses.
ACA members play a critical role in protecting both consumers and lenders. ACA members work with consumers to resolve their debts, which in turn saves every American household, on average, more than $700, year after year. The accounts receivable management (ARM) industry is instrumental in keeping America’s credit-based economy functioning with access to credit at the lowest possible cost. For example, in 2018 the ARM industry returned over $90 billion to creditors for goods and services they had provided to their customers. And in turn, the ARM industry’s collections benefit all consumers by lowering the costs of goods and services—especially when rising prices are impacting consumers’ quality of life throughout the country.
ACA International (ACA), the association of credit and collection professionals, is the largest membership organization in the credit and collection industry. Founded in 1939, ACA brings together third-party collection agencies, law firms, asset buying companies, creditors and vendor affiliates, representing tens of thousands of industry professionals. ACA produces a wide variety of products, services and publications, including educational and compliance-related information; and articulates the value of the credit and collection industry to businesses, policymakers and consumers. www.acainternational.org.